- HEADLINES: Chicago extends rally on rising crude, supportive corn, wheat chart patterns; GFS weather forecast goes wet in Argentina.
- Chicago futures have extended overnight gains amid supportive macro input. Spot WTI crude is testing $80/barrel. The Dow at midday is up 130 points. The dollar index is weaker, and commodity indexes look to end higher for a second week. The Brazilian Real this week has quickly rallied to a 6-week higher. Brazilian corn futures have moved higher in spite of currency strength, with March Brazilian corn at midday quoted at $7.60/bu.
- FAS this morning announced that exporters sold 150,000 mt of corn to Mexico for old crop delivery along with 124,000 mt of soybeans to unknown destinations.
- However, most important is that the midday GFS weather forecast has trended much wetter across Central Argentina in the 8–15-day period. The S American jet stream will enter an alignment directly aloft the core of Argentina’s Ag Belt, and a pattern of moderate but continuous rainfall is forecast to produce cumulative rainfall of 2-3” in Cordoba, Santa and Fe and Entre Rios, the driest areas of Argentina currently. Market confidence in Argentine forecasts beyond 5-7 days is low amid model disagreements and poor performance since early January. But guidance in recent days has attempted to boost Argentina rain chances, which coincides with evidence to support a dying La Niña. S American weather stays central to long term fair value.
- Paris milling wheat futures have surged to gains of €6-8/mt despite strength in the €uro today. Paris corn futures have extended this week’s recovery as more attention is being paid to rising S American basis levels and possible logistics challenges in Ukraine. We believe that EU feed stocks today are more than adequate, but imports will be needed before new winter wheat crops are gathered in Jun-Jul.
- Other news is lacking. A host of global holidays will keep participation thin into mid-January. Christmas and New Year will be followed by Orthodox Christmas Jan 6-7, and soon thereafter China’s Lunar New Year begins on Jan 22. And throughout this period critical S American weather updates and NASS’s Dec 1 stocks report will sustain volatility.
- The Argentine weather forecast is wetter beyond Jan 1. The Brazilian forecast is consistent with the morning solution in calling for an expansion in Brazilian rainfall into the drier areas of the south in the 6–10-day period. Soaking rain in Argentina must materialise, but the 10-day forecast today is viewed as favourable/improved. Whether the EU solution follows the GFS’s boost in Argentine rain chances will be monitored closely.
- Supportive wheat and corn chart patterns have fuelled moderate speculative buying/short covering. It is difficult to be bullish corn above $6.70-6.80 and soy above $14.90 if Argentina’s climate does indeed begin to shift in the next two weeks. Wheat is forming a base, with upside to hinge upon the exact rate of Black Sea exports and geopolitics.