- Chicago markets are trading lower into the close at the start of the holiday week as grains lead the way down, albeit modestly. Some early buying was fund short covering inspired and once filled farm selling pressure from both N and S America prevailed. Improved rainfall prospects for Brazil in the 10-15 day window added to downward pressure and it seems funds have joined the sellers in today’s last hour or so of trading.
- When all said and done the potential loss of 1-3 million mt of soybean output in the Mato Grosso and Goias regions of Brazil is now accepted to be of limited significance and unlikely to change the overall bearish outlook. It would take an extended and widespread drought across Brazil to make such a change. On the other hand too much rain may create a fungal rust problem that could lend support, however neither position is tenable at this time but we maintain a “watch Brazilian weather” position to ensure timely decisions can be, and are, made.
- January’s WASDE report may well contain firework inducing data as has been the case in previous releases. Soybean imports by China in December based upon vessel loadings and lineups will fall (sharply) from last year at 4.9 million mt. We know Chinese imports tend to bottom seasonally in January and then increase through to July however the December slowdown (if validated) will keep WASDE from increasing their estimates in January’s report. It appears that China has all but filled its Jan/Feb requirements from the US at this time.
- Market action in Argentina is slow, and it is estimated that their farmers could well be sellers of 8-10 million mt in the next quarter. Once exchange rates for the Peso normalise it is expected that farmers will become regular sellers in the New Year, which will likely reduce early demand (and price support) for Brazilian soybeans.
- Of note, and worth watching, is the lack of snow cover across much of the Black Sea wheat growing region. With cold temperatures forecast the potential for winterkill could be greater than normal. That said the GFS weather model for all of Europe and Russia remains warmer than normal.