- HEADLINES: Soybeans shed risk premium on projected Brazilian rainfall in mid-Dec; Wheat rallies on confirmation of Chinese demand.
- Chicago ag markets are mixed at midday with Jan beans lower and falling below its 200-day moving average while wheat surges on confirmation of sizeable demand from China for US SRW. Corn is stuck in between but is adding modest premium following the spot market in Brazil reaching $6.00/bu. Long soy-short grain spreads are being unwound as physical corn exports begin their seasonal increase and as extended range forecasts in Brazil offer some measure of climate normality. Whether extended range forecasts pull elevated rainfall totals into 5 and 7-day forecasts is important.
- FAS announced that US exporters this morning sold 267,044 mt of corn to Mexico and 440,000 mt of SRW to China. Mexico’s demand for US corn remains record large, and this morning’s SRW sale to China puts total 2023/24 US SRW export commitments at 124 million bu. This accounts for 85% of the USDA’s forecast with nearly half the crop year remaining. Conservatively, final US SRW exports are likely to exceed USDA’s forecast by 10-15 million bu, which trims end stocks a similar amount.
- The US SRW balance sheet tightens meaningfully again in 2023/24 if acreage is reduced and yield drops from last year’s all-time record 77.6 bushels/acre.
- US export inspections in the week ending Nov 30 included 46 million bu of corn, vs. 16 million the previous week, 41 million bu of soybeans, vs. 58 million the prior week and 11 million bu of wheat, vs. 10 million the previous week. Corn shipments were above all trade expectations and featured 11 million bu to China, the largest in six months. Cumulative corn inspections at 332 million bu are up 27% year on year.
- The pace of physical soy shipments has slowed seasonally, and a bit earlier than normal. Outstanding sales are large (511 million bu), but that Brazilian bean exports have been extended into late autumn is noteworthy. We view Brazilian crop risks today as more centred on harvest dates, which have been pushed into second half of Feb/early March, but there is little doubt Brazilian exporters will be active in the global market come spring.
- French wheat seeding is just 82% complete, 74% a week ago and vs. 95% on average. Snow blankets much of central Europe, and additional unwanted rain is forecast across northern France over the next 10 days. The planting season has all but ended, and regional winter wheat acreage loss will be 10-20% year on year in parts of France and Germany. Weather adversity remains a theme in the world of agriculture.
- ABARES overnight pegged Australian wheat production at 25.5 million mt, vs. USDA’s 24.5. Australian barley production is forecast at 10.8 million mt, vs. USDA’s 9.7. Stats Can raised its Canadian wheat production forecast to 32 million mt, vs. USDA’s 31 and lifted canola production to 18.3 million mt, vs. USDA’s 17.8. Wheat and rapeseed/canola markets have shrugged off relatively dull government forecasts, but USDA in Friday’s December WASDE will likely loosen its world wheat, barley and canola balance sheets.
- The midday GFS weather forecast is similar to the morning run in projected widespread heavy rainfall across Central Brazil Dec 11-18, but keeps net boosts in soil moisture regional/scattered this week. It is clear near-term Brazilian forecasts have trended drier, while longer term outlooks have trended wetter. Near-normal rain is projected in Argentina.
- Soybeans are extracting risk premium following mediocre export shipment data and favourable 8–15-day outlooks in Brazil. Grains are adding premium amid logistics issues in the Black Sea, Chinese demand for wheat and as, unlike beans, S Hemisphere corn supplies won’t be replenished until summer. It is critical that above-normal rainfall occurs in Central and Northern Brazil in Dec and Jan.