- HEADLINES: Row crops reverse overnight losses on drier Argentine forecast; Wheat continues to struggle.
- Chicago ag futures reversed overnight losses and hold in a choppy back-and-forth trend heading into Thursday’s USDA January Crop report. The overnight models reduced rainfall chances for Argentina which was the catalyst for the Chicago morning recovery. The forecast models are having trouble regarding extended S American weather. We note that the EU model is moving to a new supercomputer, but it is the GFS forecast that has been more volatile as of late. We would argue that the models are starting to see the dramatic weakening of La Niña but are having difficulty with rainfall amounts and locations across the drought areas of Argentina. It is the forecast uncertainty ahead of the USDA report and a 3-day weekend that is causing traders angst. We look for a mixed close with corn/soy futures back to adding weather premium back into price. Weather forecasts will be changeable in the 10–15-day period and until the rain is pulled forward in the forecast.
- Market volatility will be the theme of the market following the USDA report data release amid uncertain weather for the last half of next week.
- The lowest price offer to Egypt’s GASC was for 60,000 mt of Russian FOB wheat from Ashton, a large Russian exporter. The fob offer works back to around $308-310/mt, down slightly from prior sales. Traders have been watching Russian FOB wheat offers due to talk on rising Black Sea insurance rates. However, Ashton often uses its own boats in these transactions and may self-insure. The offer is competitive and reflects that Russia looks to stay aggressive in offering wheat in early 2023. Mother nature will have to intervene to slow Russian grain exports. We maintain that Russia will export 44-46 million mt of wheat in 2022/23, a record.
- US farmers are holders of old crop corn hoping for a rally like the past few years. Today’s rally has sparked some cash corn movement, but ethanol producers are hoping for improved movement to lock down supply and margin. We note that most farmers hope for a yield decline from USDA on Thursday. Our own view is that US corn yield will rise 1.0 bushels/acre to 173 due to diminished harvest losses and better than expected yields across the Eastern Midwest and Delta.
- India is claiming that it might produce a record large 2023 wheat crop as large as 112 million mt. We note that Indian farmers did seed record acres, but that it is last half of February/March weather that will determine final yield/production. A year ago, temperatures soared in March to 120 degrees plus to substantially reduce yield. The point is that that it is too early to declare the 2023 crop a record and close attention will be paid to daily high temperatures next month.
- The midday GFS weather forecast is wetter in eastern Buenos Aires in Argentina but is otherwise warmer and drier in Argentina and portions of Rio Grande do Sul in southern Brazil into Jan 25 relative to the model’s overnight solution. Scattered showers will impact Northern Argentina Fri-Sun and again next Wed-Thurs. But organized soaking showers are not indicated, which if realised keeps historically low soil moisture intact into the latter part of the month. The midday GFS forecast keeps max temperatures in Argentina in the 90s/low 100s as late as Jan 23.
- Heavy Brazilian rain will delay the harvest of early planted beans, but yield threats remain lacking. Soil moisture will be abundant for safrinha corn seeding in February/early March.
- Demand for US corn, soy and wheat remains concerning, but markets worldwide must contend with uncertain late Jan weather in Argentina and uncertainty over Sep-Nov residual corn and soy disappearance.