- HEADLINES: Chicago similar to overnight trade at midday; US dollar extends decline; Midday GFS weather forecast unchanged in South America.
- Chicago ag markets have carried overnight themes into midday with corn and wheat up 3-5 cents and March soybeans down 10. Weather premium is being extracted from the soy complex as rains fall across key areas of Mato Grosso this morning. The midday GFS forecast is unchanged in calling for light/moderate but steady rainfall into the week, with Thurs-Sat cumulative totals pegged at 0.75-1.50”. The GFS forecast remains drier than its EU/Canadian counterparts, but actual precipitation measurements matter most now. The market’s reaction to Brazilian precipitation is occurring in holiday-thin volume. Price moves remain exacerbated. We also note FAS’s daily reporting system failed to include new US business for a second day.
- Export sales in the week ending Dec 14 included 39 million bu of corn, vs. 56 million the previous week and at the lower end of expectations. Wheat sales totalled 12 million bu, vs. 55 million the previous week but still 4 million above the pace needed to meet USDA’s forecast. SRW sales were 3 million bu. Total SRW commitments of 155 million bu account for a record 89% of USDA’s forecast, and so USDA in January is expected to hike its SRW/all wheat export target 10-15 million bu. China last week also purchased 9 million bu of US sorghum.
- Weekly US soybean sales were a larger than expected 73 million bu, vs. 40 million the previous week and the highest since early November. China/unknown secured 55 million bu, with demand from Spain worth 7 million bu also noted. Soybean export commitments are rising counter seasonally amid concern over Brazilian harvest dates in late winter. Soy sales in mid-Dec a year ago were only 21-26 million bu.
- For their respective crop years to date, the US has sold 1,109 million bu of corn, up 37% year on year, 546 million bu of wheat, up 3%, and 1,299 million bu of soybeans, down 16% from mid-Dec 2022. Overall soy demand has struggled as Brazil’s 2023 export season has been extended into December, but US soy commitments sit at a more normal 74% of USDA’s forecast. A downward revision in January is unlikely.
- The US dollar has extended overnight weakness and a close below 101.7 opens downside potential to summer 2023’s lows. Treasury yields continue to drop, with the 10-year treasury yield at 3.87%, the lowest since July. US equity markets have shrugged off Wednesday’s late-day collapse entirely and have posted new all-time highs at midday, financial markets are ending 2023 more optimistic on US economic performance. We view the US dollar performance as important given index funds between April 2022 and now have liquidated 492,000 contracts of combined corn, wheat, soy and livestock length, due mostly to rising lending rates and strength in the dollar. The flow of money gets adjusted if rates enter a lasting downward trend.
- The midday GFS weather forecast is unchanged from this morning with steady rain to linger in Northern Brazil into Saturday. The intensity/coverage of rainfall there diminishes Dec 24-30, but a normal pattern of precipitation resumes thereafter into early January. The forecast, if it verifies fully, is non-threatening. Later planted soy fields will benefit. However, the debate over final Brazilian crop size will remain unsettled until harvest nears. We would note that updated verification data continues to confirm model guidance has been too wet this growing season.
- Downside risk in grains remains limited as US corn export potential stays elevated. Soybean price determination centres on where Brazilian production falls within a range of 150-158 million mt. Regular rain is needed in Brazil well into early February.