- HEADLINES: Chicago soybeans/soymeal soar on Argentine weather, massive oil/meal spread unwind; Grain markets sag on lacklustre US export demand.
- Chicago values are again mixed at midday, with soybeans/meal extending Monday’s rally on massive spec buying, wheat continuing to sag on a lack of pushback in the global market and corn caught in between. January soybeans traded through its 100-day moving average on the soymeal strength with next resistance perched at $14.78. FAS announced US exporters this morning sold 240,000 mt of beans to unknown destination and 264,000 to China. Pace analysis suggests USDA will leave its 2022/23 US soy export forecast unchanged at 2,045 million bu. The midday GFS weather forecast leaves in place a pattern of unwanted warm/hot ttemperatures and dryness in Argentina into Dec 20.
- Weight continues in US/global grain markets amid sluggish export trade. US census corn exports in October totalled 82 million bu, vs. 104 million in Sep, slightly below expectations as last year’s discrepancy between Census and USDA/FGIS data narrows considerably. US corn is non-competitive in the world market. Official US Oct corn exports of 82 million bu are up just 6 million from FGIS’s reported total, which underscores the absence of Canadian demand. Recall a year ago official US corn exports in Oct were nearly 30 million bu (20%) above FGIS’s total. US corn is struggling to find market share amid strong Gulf premiums and S American shipments to date.
- Chicago brokers estimate that the managed money has bought 12,000 contracts of soybeans and soymeal (each), 3,000 contracts of soyoil, and 4,500 contracts of corn. Funds have sold 2,300 contracts of wheat as they continue to press the short side of the marketplace.
- Soymeal/soyoil open interest in Chicago continues to rise suggesting that fund managers have not liquidated meal/oil spreads as indicated in prior days. These funds are caught the wrong way on the spread and are placing GMO (Get Me Out) orders. This liquidation along with new chart-based buying has sparked the big rally in soymeal/soybean rally this morning. Note that Chicago soyoil is not following meal/soybean rally which indicates Argentine dryness is not the big focal point of the market just yet. Argentine farmers are still planting soybeans, but the arid forecasts mean that farmers could switch soybean acres to second crop corn if rain does not fall soon in abundance. This is a reason why the corn market appears to be unable to sustain much of a rally.
- WTI crude oil futures have fallen sharply with losses of nearly $3.00/barrel to $74.00. Crude is at the lower end of $74-76.00 support. The crude market is reacting to weaker prices for Russian offers due to the weekend cap placed by NATO members.
- The midday S American GFS weather forecast is like the overnight run with limited rain for Argentina into December 15. A few spotty showers of less than 0.50” could fall across Northern Argentina, but southern crop areas will be missed. The extended range 11–15-day period does offer increased rainfall, but the confidence this far out is low.
- The Brazilian weather forecast is drier for RGDS with adequate rains for Central and Northern Brazilian crop areas. Brazil is on track to produce a record soy crop of 150 million mt plus, but better rains across S Brazil is welcomed. La Niña is in fast demise, which should produce improved Argentine and Southern Brazilian rainfall, it is all a question of timing.
- Grain prices are holding in downtrends, while soybeans/meal are catching bids on Argentine heat/dryness. A Chicago top forms when Argentine rains return as La Niña dies. We see US wheat futures as undervalued relative to fundamentals, but the market has not found a chart bottom yet. March Chicago wheat may have to fall to $7.20 for a secondary seasonal low. Traders will monitor the EU weather model going home for hints of Argentine rain in the week two forecast.