- HEADLINES: Chicago soybeans recapture prior day losses; Volume horrible amid the US holiday; China buys US/Brazilian soybeans.
- Chicago grain futures are higher with soybeans gaining as crude oil prices surge amid cold US weather forecasts and the sharp fall in the value of the US dollar. The falling greenback has offered a peg of support to a host of commodity markets after being ignored by the grain markets on Thursday.
- Soyoil prices are rising in tandem with the $3/barrel gain in crude, which is causing the recovery of January soybean futures above $14.50. Oil/meal spreading has been active as oil share increases to 48%. The approaching summer highs near 50% is the initial upside price target. There is talk of the allowance of refined Canadian canola oil to be used on renewable diesel, but traders argue that such talk is based on soy oil’s recent sharp rise. The new crop soybean/corn ratio has pushed out to 2.30, which is still not high enough to encourage record large US soybean seeding in 2023. It is the relationship between energy/soyoil that will prove to be so important going forward. The net result will be the US’s near total loss of soyoil export demand.
- Chicago brokers report that funds have bought 5,400 contracts of soybeans, 4,800 contracts of corn, and 1,900 contracts of wheat. In the soy products, funds have bought 5,900 contracts of soyoil and 2,200 contracts of soymeal.
- Russia announced that it is planning to place a duty on fertiliser exports when prices rise above $450/mt, to aid their domestic farm industry. Russia accounts for 13% of the world fertiliser production on an annualised basis. Current export prices would cause such taxes to become immediately active with world fertiliser prices rising amid tightening supplies. The tax looks for further raise prices to world farmers.
- Tunisia booked 100,000 mt of wheat and 100,000 mt of durum wheat in a tender that concluded overnight. The price on the soft wheat is estimated at $377.34/mt basis CIF for shipment between December 5 and January 25.
- The Brazilian Real has gained back some of yesterday’s sharp losses (5.28:1 US$) as the market awaits news on President elect cabinet choices and future budget proposal. Lula has a history of excessive Government spending which if continued could cause additional Real weakness. We note that farmgate prices for soybeans jumped sharply today with the rise in Chicago and yesterday’s fall in the Real. Farmers are rewarding the market with sales. And the encouragement of profitability could inspire additional spring seeding. CONAB expanded their 2022/23 Brazilian soybean area estimates yesterday. We estimate spring soybean seeding at 65-70% completed.
- China is rumoured to have bought 5 cargoes of US soybeans (300,000 mt) for January and 5 cargoes of Brazilian for March. There is also talk that China has booked 2 cargoes of Argentine soybeans on basis for May. We estimate that China has covered 85-90% of December and 60-70% of their needs for January. China shifts their buying to Brazil starting in February.
- The midday S American weather forecast maintains a wet forecast for most of Brazil/Argentina for the next 5-6 days with rain totals of 1-3.50”. The moisture will be timely with high temperatures ranging from the 80’s to lower 90’s. The Argentine forecast is drier following Tuesday which must be monitored. A La Niña climate is still hanging around and Argentine soil moisture needs to be replaced following months of drought.
- Open interest has risen a hefty 66,000 contracts in Chicago soyoil futures in the past month with speculators placing bullish bets on renewable diesel. The large December open interest of 94,000 contracts places the market in liquidation risk. Weekend headline risk exists on the Ukraine export corridor amid the Geneva negotiations.