- HEADLINES: Chicago soy, wheat recover; Corn preps for Dec delivery period.
- Corn futures continue to lag, but Chicago soybean/wheat futures are higher at midday. Soybeans/soyoil continue to pace the rally on concerning Brazilian weather and declining crop prospects. Brazilian ag consultant MB Agro estimated the Brazilian soybean crop at 155 million mt, down 10 million from an early forecast due to the drought across Northern Brazil. The firm also cut Brazil’s 2024 soybean export forecast to 96 million mt from just over 100 million previously. Many traders argue that Argentina will make up for any Brazilian soy crop losses in 2024 and in crush and soy product exports that will be the case. However, it is Brazilian crop size and exports that directly impacts US soybean exports, which has a more direct impact on Chicago soybean futures than crush margins or soy product pricing.
- Liquidation is ongoing in December grain contracts in Chicago as traders get positions down before first notice day. There are over 2,950 grain certificates registered and 4 contracts of corn that could be delivered as of this morning. It is expected that corn registrations could increase before Thursday.
- We note that the market needs to get beyond first notice day before any sustained recovery can occur.
- The USDA announced the sale of 123,300 mt of US soybeans to an unknown destination which helps confirm that China booked 3-5 soybeans yesterday. We believe that China is asking for February US soybean offers this morning, but no new purchases can be confirmed.
- Chicago brokers report that managed money has sold 2,500 contracts of wheat and 4,600 contracts of corn, while buying 2,900 contracts of soybeans. In the products, funds have bought 1,500 contracts of soymeal and 2,100 contracts of soyoil.
- CONAB late Monday pegged Brazilian soy planting at 75% complete, vs. 86% a year ago in late November. The drought across Northern Brazil is worsening with 13.8% of the crop flowering, and 3.1% of the crop in the pod formation stage. Understandably, the 2023/24 Northern Brazilian soy crop is now being pushed by abnormal warmth. Producers in the south are still trying to seed with additional rain further slowing the process. Another 1.00” of rain fell across Passo Fundo in Rio Grande do Sul today which pushed the total since September 1 near 60.0”. RGDS soy planting is only 37% complete, vs. 65% a year ago. We also note Brazil’s first (summer) corn crop is only 55% seeded, vs. 69% last year. Major delays persist in Bahia and Goias.
- The midday GFS weather forecast is like the overnight forecast across Northern Brazil with limited rainfall for at least the next 5 days. The model offers a better chance of rain on Monday with increased afternoon thunderstorms. Rain accumulations increase to 0.25-1.50 from Monday through Wednesday of next week. High temperatures range from the upper 80’s to the lower 100’s which is 4-9 degrees warmer than seasonal averages.
- Southern Brazilian weather stays wet with rains of 2.5-6.00” that fall every 2-3 days. The overall S American pattern stays the same. Better Brazilian rain needs to be pulled forward in the forecast as forward model guidance in Northern Brazil has been too wet thus far in the growing season.
- Record domestic US soybean demand, expanding renewable diesel production and Argentina’s absence from the global meal market until spring 2024 lean supportive of global oilseed markets. Possible Brazilian soy crop loss adds to upside potential in Q1 2024. Corn and wheat lack a compelling story today, but strength in the Russian wheat market is important. US corn is the world’s cheapest, whilst profitable domestic ethanol production margins remain intact.