- HEADLINES: Corn, wheat break through initial resistance on Black Sea headlines; soy complex struggles.
- Global ag markets are higher at midday, with corn and Chicago having broken through initial technical resistance. Paris milling wheat is up €4.50/mt (and more) as that market continues its recovery from oversold levels, and solid closes this afternoon turns charts more near-term supportive. Ukrainian President Zelenskyy’s visit to Washington today underscores the US’s commitment to aiding Ukraine, including the delivery of the US’s Patriot air defence system. Putin stated peace talks would be off the table if Zelenskyy did visit the US, and a general escalation in conflict is probable during the winter months. Black Sea grain is flowing today, but amid funds’ sizeable net short in Chicago wheat, the market will be incredibly sensitive to bullish headlines. Jan soybeans have again failed at $14.90 resistance.
- Ukraine’s Ag Minister this morning pegged 2022/23 corn production at 22-23 million mt. This compares to the USDA’s forecast of 27 million, which was lowered 4.5 million mt in early December. If true, Ukrainian exports will be capped at 18-19 million mt, vs. USDA’s 17.5, and stocks drop to a normal 1-2 million mt. Ukraine’s Ag Min also suggested planted area in 2023 would contract even further. Close attention will be paid to the pace of weekly/monthly Ukrainian corn loadings as a sizeable portion of this year’s crop will be left in the field over winter.
- Crude oil has extended its overnight rally slightly on a further tightening of US supplies. US crude stocks less strategic reserves last Friday fell to 418 million barrels, down 6 million from the previous week and down 1% year on year. The loss of supply occurred despite another 4 million barrels of reserve stocks being released into the marketplace. Reserve stocks are now the lowest since 1984. Total US crude stocks, including reserves, sit at 797 million barrels, down 22% from last year. Reserve re-stocking is planned in early 2023, but there is just no easy way to fix tight US supply and demand.
- US ethanol production in the week ending Dec 16 totalled 303 million gallons, down 9 million from the previous week. A further seasonal correction in output is anticipated into mid/late February. US ethanol stocks are more than adequate at 1,011 million gallons, which reflects just over three months of consumption.
- The midday GFS weather forecast is a bit wetter in E CO/W KS, where 2-day snow accumulation is projected at 0.50-2.00”. The coverage of snow associated with this week’s winter storm is critical. Frigid temperatures spread south and eastward Thursday million.
- The S American weather forecast is wetter in fringe producing areas of western and northern Argentina but is otherwise similar to the morning run. Brazilian precipitation expands into all but Rio Grande do Sul in the far south next week and beyond, while the core of Argentina’s Ag Belt stays arid into Dec 31. Another 48 hours of abnormal heat blankets Argentina before a cooler temperature profile is established. Net soil moisture loss will be ongoing throughout the next 10 days in Cordoba, Santa Fe and Entre Rios. Rain is needed in January.
- Corn/wheat action today is largely political in nature as risk premium is added due to future uncertainty over Black Sea grain flows. Geopolitics rallies since last spring have lacked follow though.