• HEADLINES: Chicago firm but off highs at midday; US export demand improves post-holidays; GFS weather forecast adds rain to Argentina in 11–15-day period.

• Chicago ag markets are firm at midday, with strength in beans cooling on the back of weakness in soyoil and March meal’s inability to trade above $365 chart resistance. Board crush margins have stabilised at $0.90-1.00/bu but have been unable to build upon mid-week strength. Volume has thinned ahead of the weekend, with all eyes on the duration of coming Argentine dryness. The midday GFS weather forecast is wetter in Central Argentina beyond Feb 1. Key is whether the EU solution follows this afternoon.

• US export demand recovered following the end of global holidays in late Dec/early Jan. US corn sales in the week ending Jan 11 totalled 49.3 million bu, vs. 19.2 million the previous week and the largest since early December. Wheat sales totalled 26 million bu, vs. 5 million the previous week and the largest since China’s flood of purchases in early Dec. Soybean sales totalled 29 million bu, vs. 10 million the previous week, and meal sales in the week ending Jan 11 totalled a 12-week high 395,000 tons.

• For their respective marketing years to date, US exporters have sold 1,241 million bu of corn, up 36% year on year, 592 million bu of wheat, up 4%, and 1,374 million bu of soy, down 18% from a year ago in mid-January. Pace analysis suggests USDA is unlikely to adjust its annual corn and soy forecasts in its February WASDE, while USDA’s 2023/24 wheat export target is still 15-25 million bu too low. Mexico was a large buyer of US corn last week. Wheat sales of 5.4 million bu were made to an unknown destination. Meal export commitments are a record large 8.34 million tons.

• Exporters also sold 297,000 mt of soybeans to China this morning, the first daily announcement since Dec 19. There is no doubt competition for world trade lies ahead in spring and summer, but our view is that the USDA’s 2023/24 soy end stocks forecast is 20 million bu too high.

• This afternoon’s CFTC report is expected to show managed funds’ net corn short on Jan 16 expanded to 252,000 contracts, vs. 237,000 the previous week, with funds net wheat short rising 9,000 contracts to 67,000 and funds’ net short increasingly slightly to 35,000 contracts, vs. 31,000 the previous week. We also estimate funds’ short in soyoil at a newer 5-year high 50,000 contracts. Funds are estimated to still be a long some 5-8,000 contracts of meal.

• Other fresh news is lacking. Iran and Pakistan have agreed to ease tensions following the volley of drone strikes this week. However, issues in the Red Sea persist, which is beginning to complicate the movement of Ukrainian grain.

• The GFS weather forecast has added rainfall to central Argentina in the 11–15-day period, which if realised will keep major crop stress absent from the core of Argentina’s ag belt. However, 10-11 days of dryness and warming weather lie ahead, and it is important that operational models maintain this pattern shift in Argentina on Feb 1 over the weekend. Otherwise, the outlook is consistent with morning output. Regular showers return to Brazil by mid-next week, with heavy cumulative 10-day totals of 2-5” forecast. Regional totals upward of 5-7” are advertised in northern Mato Grosso, Goias and Minas Gerais.

• Rampant fund selling has paused. Forming a base prior to the arrival of bulk yield data in Brazil makes good sense, while markets next week will pay much more attention to forward Argentine forecasts. Corn and soy still must reconcile with deeply oversold charts.

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Weekend summary 19 January 2024

• HEADLINES: Chicago bounces after early fund selling; Brazil weather forecast stays wet, Argentina dry.

• Chicago grain markets have been mixed through the morning, with large fund selling noted immediately following the morning open. Once that selling was filled, Chicago grain markets staged a recovery that has continued into midday, leaving corn, wheat, and soybean markets unchanged or a couple cents higher.

• The soy product markets have been mixed with a burst of fund buying in soybean meal after the morning open, which was accompanied by similar selling in soybean oil. Meal has held just below unchanged through the morning, and soybean oil has given back some of Wednesday’s gains.

• Market news remains limited, and Ag markets continue to struggle from a mix of technical damage left from last week’s USDA reports and another holiday short week. Outside market influences have been supportive, with US stock indexes, crude oil, and gold all trading with good gains. Treasuries have been weaker, and the US Dollar Index continues to recover.

• Chicago brokers estimate that following a burst of selling at the open, funds have been flat to light buyers of 1,000 contracts in the corn market, with similar trading in the wheat market, and have bought 2,000 contracts of soybeans. In the soy product markets, funds have been flat in soybean meal and have been light sellers of 2,000 contracts of soybean oil.

• China has approved a genetically modified soybean variety that was developed by a Chinese seed company and has been sold in Argentina since 2022. China also approved a glufosinate resistant seed variety developed by Corteva that was approved in the US in 2021. Additionally, the Agriculture Ministry approved 6 varieties of GM corn, 2 soybean, and 1 cotton varieties for domestic production.

• Weekly ethanol production on Friday is expected to show a slower weekly production rate amid bitter cold temperatures and slowed deliveries last week. Blender inputs likely bottomed the first week of January and are expected to move higher in the first half of the year. Board crush margins are near break-even, while average estimated cash crush margins are showing modest profits. Estimated soybean cash crush margins are holding at $1.60-1.90/bu.

• The midday GFS weather forecast maintains good rains for much of the Brazilian crop-growing regions over the next 10 days. Widespread cumulative precipitation amounts will reach 2-4” across much of the country with some isolated local forecast totals stretching up to 5-7”. It is the key growing regions of Southern Brazil and Argentina that look to be short on rain into the end of January. Limited rains are forecast in Southern Brazil, while the GFS forecast projects virtually no rain for vast areas of the Argentine crop-growing regions. It is unlikely that Argentina will fall into back-to-back devastating droughts, but rains are needed for young and recently planted crops.

• The bearishness of the January USDA reports looks to be fully digested, and market focus will be directed towards S American weather and crop potential, as well as US old crop exports. Corn and soybean futures are the most oversold since last May, while the latest CoT report shows that commercials now hold a rare net long in the corn market.

• HEADLINES: March soy tests last week’s low; Grain stable ahead of Egyptian tender result; Argentine forecast stays arid next two weeks.

• Chicago values are again mixed at midday with corn and wheat finding bids amid this week’s flood of wheat demand, and the absence of Bulgarian and Romanian offers to Egypt this morning, and as the Brazilian corn market rallies $0.10/bu to $5.85. The soy complex is mostly weaker as funds add to existing shorts as we estimate funds’ short in soy this morning at 35,000 contracts. This the largest since spring 2020, but funds’ soy short was in excess of 50,000 during the height of the US-China trade war. It is actual soy yields in S America that determine fair value, and the need or not for US acreage, in late winter and spring. Where Brazilian production falls within a range of 145-155 million mt is important, as is the duration of coming dryness in Argentina.

• A Canadian-based satellite firm joins the chorus in projecting a Brazilian soy crop below 150 million mt (at 149.2) and pegs yield in Mato Grosso 15% below trend. The midday GFS weather forecast has extended a pattern of dryness and warming temperatures in Argentina into Feb 1, which we doubt the market will pay attention to unless this pattern reaches deeper into February. Late Jan dryness in Argentina is unusual given the current strength of El Niño. The GFS forecast is very likely too hot, but Argentine temperatures reach into the 90s beginning next week.

• Macro guidance leans negative as spot WTI crude oil crude tests chart support at $70.50. The Dow at midday is down 95 points and since Jan 1 has fallen 450 points (1.2%). Yield on the 10-year t-note this morning has climbed to 4.1% the highest since mid-December. The US dollar index has built further upon this week’s recovery after breaking through chart-based resistance Tuesday. Fears of slowed US/global economic growth have again spilled into financial markets, spread across the media landscape today is confirmation of a second year of Chinese population contraction. China’s birth-rate in 2023 was a record low 9.02 million.

• There is not a lot of other fresh news available. EIA’s weekly ethanol/petroleum data is delayed until Friday following Monday’s federal holiday. FAS failed to announce any new export sales following recent days’ corn sales to Mexico. Brazilian fob soy cargo price is offered below US origin for March delivery, while the success of Ukrainian exports in the last month has boosted confidence in executing near-term trade there. War has not had much of an impact on the movement of Ukrainian vessels.

• The midday GFS weather forecast is wetter in Parana and southern Mato Grosso do Sul in Brazil but is otherwise consistent with morning output. The Brazilian outlook leans favourable assuming regular rains return to northern areas beyond Jan 24. Warmth/dryness blankets Central and Northern Brazil into the middle part of next week. There are hints of rain in far western Argentina beyond Feb 1, but the core of the country’s ag belt stays arid over the next two weeks.

• March CBOT soy’s RSI (Relative Strength Index) at 22.6 and March corn’s is at 26.3 are the lowest since May. It remains that a spark is needed to trigger fund short covering in bulk, but supply unknowns are abundant. We would reiterate that a vast majority of S American corn will pollinate between Feb and Apr.

• HEADLINES: Morning rally fades on US dollar strength; NOPA soy crush record large in December.

• We would like to take the unusual step of including (verbatim) a Reuters report released today as follows:

• SAO PAULO, Jan 16 (Reuters) - An association representing thousands of grain farmers in Brazil projects production of 135 million metric tons of soybeans in the 2023/24 cycle, according to a statement on Tuesday that mentioned extreme weather as hurting the outlook for the crop as the season progresses.

• Aprosoja Brasil’s estimate is lower than private forecasters’ projections that start at around 143 million tons of production.

• It is also way below Brazilian crop agency CONAB’s expectations of 155 million tons of production and a USDA projection putting the crop at 157 million tons in the world’s largest supplier of soybeans. 

• Both CONAB and the USDA released their figures last week.

• “The publication of data that does not match reality has caused a downward trend in prices,” Aprosoja Brasil said. “Farmers, in addition to having reduced yields, have to deal with prices that are incompatible with reality.”

• The Brazilian farmer group said its estimate is based on information collected from Aprosoja branches in 15 states.

• Benchmark soy contracts traded in Chicago reflect Brazil’s crop outlook but also factor in expectations of much larger soy harvests in Rio Grande do Sul state and Brazil’s neighbor Argentina, where drought slashed output in 2023.

• Aprosoja Brasil said water stress in Center-Western states such as Mato Grosso, Goias and Mato Grosso do Sul and the excess rainfall in certain areas of these same states are disrupting grain harvesting that is underway. It said this may lead to even greater losses to farmers this year.

• “There are also reports from farmers in the south of the country, mainly in the state of Parana, who suffered from excessive rainfall at the beginning of planting and are now facing a lack of rain in areas where soybeans are in the reproductive phase, which compromises crop yields,” Aprosoja Brasil said.

• Due to climate risk, Aprosoja Brasil said its crop forecast could be revised lower if the weather does not improve.

• This report, if proved correct, has the potential to ignite a significant move higher.

• Chicago values are mixed at midday, with soybeans and meal slightly higher, wheat down 9-17 cents on US dollar strength and corn caught in between. The speculative community so far has been hesitant to add to large existing short positions in row crop markets but is adding to bearish wheat bets following short covering in that market in late Dec/early Jan. March Chicago wheat’s inability to trade above its 20 and 50-day moving averages last week is noted. March Paris milling wheat has fallen to newer contract lows, and a continuous basis is mirroring settlements at/near Sep and Dec expiration.

• NOPA crush in December was an all-time record 193.5 million bu, slightly above trade expectations and up 16 million (9%) from Dec 2022. Sep-Dec NOPA crush sits at 738 million bu, up 6% year on year, vs. USDA’s projected annual increase of just 4%. Work suggests USDA’s annual forecast is 40-50 million bu too low, and while spring/summer export disappearance will be a function of S American production and cash prices there, domestic soybean consumption will be expanding into late 2024 as new plants are brought online.

• The spot futures-based crush margin has stabilised at $0.90-1.00/bu. Margins in the Central Midwest cash market remains perched above $2.00/bu. Incentive to expand remains in place.

• Soyoil stocks on Dec 31 totalled 1.36 billion lbs, also slightly above trade guesses and up 146 million lbs from late November. Builds in oil stocks between Oct and Dec are rather seasonal in nature. NOPA oil stocks have stabilised at 22-26% below year-ago levels, though we note soyoil disappearance in December was a record for the month by 148 million lbs. Key in Q1 is whether renewable diesel plants boost output following a drop in stocks in mid-autumn. Work maintains that higher oil prices are needed to sustain enlarged soy crush in the long run.

• The chaotic nature of S American crop estimates continues as Argentine estimates approach or reach a new record. The Rosario exchange this morning indicated that a 60+ million mt crop, vs. USDA’s projected 55, is possible. Favourable late Jan/Feb weather is needed. Brazilian corn and soy estimates continue to erode, with respected agronomists now projected a sub-150 million mt soy crop, vs. USDA’s 157, and a Brazilian corn crop of 115, vs. USDA’s 127. IMEA in Mato Grosso estimates soy production there at 39 million mt, vs. 45 last year. IMEA estimates Mato Grosso’s safrinha corn production at 43.8 million mt, vs. a record 52.5 las year. Deral in Parana this morning pegged soy good/excellent ratings at 64%, vs. 81% a year ago in mid-Jan.

• Gains in Argentina, assuming normal weather, are still offsetting but Brazilian soy production loss of 15-17 million mt relative to initial expectations and Brazilian corn production loss of 20-22 million mt from last year are important.

• The midday GFS weather forecast is drier in Mato Grosso and Mato Grosso do Sul in the 11–15-day period, with short-term concern still centred on the recent lack of precipitation and heat in MGDS in Parana. The overall pattern keeps below normal rain in place across central and northern Brazil into Jan 24. A more active pattern of rain resumes thereafter. The GFS forecast is somewhat dry in Argentina throughout the next two weeks, which is not an issue today but needs monitoring.

• Momentum remains negative today as bond markets become less optimistic over near-term lending rate cuts and the US dollar trades above initial chart resistance. A more two-sided market is forecast as Brazil’s soy harvest expands and as corn, soybeans and meal remain oversold

• HEADLINES: Record US corn yield a bearish surprise at 177.3 bushels/acre; US 2023/24 soybean stocks nudge higher on yield hike with USDA’s Brazil soybean crop at 157 million mt.

• Chicago values are sharply lower following the USDA January Crop Report. The report raised US corn and soybean yields and cut harvested acres. 2024 US winter wheat seedings fell 2.3 million acres to 34.4 million acres. The biggest wheat class drop occurred in US SRW seeding which was down 13% to 6.86 million acres with Michigan wheat seeding at a record low. The report is bearish on the extra old crop supply due to higher than expected yield. Spot Chicago corn slipped below the $4.50 support level that held since September while spot Chicago soybean futures test $12.00. The report is seen as bearish with Chicago prices falling to reflect the extra US crop and record large S American production.

• US combined 2023/23 corn, soybean and wheat stocks rose 55 million with corn up 31 million bu, soybeans up 35 million bu while wheat was down 11 million bu. The biggest surprises of the report were larger 2023 US corn/soy yields. The market is in decline to stimulate demand and curtail future production.

• NASS raised the US 2023 corn yield to 177.3 bushels/acre, a new record. Harvested acres were adjusted downwards by 700,000 acres to 86.5 million. The US produced a record large corn crop of 15.34 billion bu. WASDE adjusted demand upwards by 75 million bu which produced a stock rise of 31 million bu and end stocks of 2,162 million bu. US Dec 1 corn stocks at 12,169 million bu are the largest since 2018. The report opened an additional 15-25 cents of downside price risk with March corn futures projected to drop to $4.30-4.40.

• The 2023 US soy yield was raised 0.7 bushels/acre with harvested acres reduced 400,000 acres which raised the total crop to 4,165 million bu, a 24 million bu gain from November. WASDE left US demand unchanged and including a 4 million bu fall in old crop stocks, the net result was a 35 million bu increase in 2023/23 stocks to 280 million bu. We note that WASDE forecast 2023/24 US soyoil stocks at 1,577 million pounds, the same as November, with biofuel demand raised 200 million pounds to 13,000 million while food was cut 100 million, exports cut 50 million and imports were raised 50 million. The average cash price for US soyoil was estimated at 54 cents.

• The 2024 Brazilian soybean crop was lower by 4 million mt to 157.0 million while Argentina’s crop was raised 2 million to 50 million mt with world 2023/24 soybean end stocks holding steady at 114 million mt. World corn stocks were raised 10 million to 325 million mt with world wheat stocks rising 2 million to 260 million mt. The additional of 12 million mt to world grain stocks is bearish but does not reflect full Brazilian crop losses.

• NASS’s wheat data leans supportive, with 2023/24 carryover trimmed 12 million bu, 2023/24 end stocks lowered slightly and as winter wheat seedings last autumn fell 2.3 million acres year on year.

• Dec 1 US wheat stocks were 1.41 billion bu, right at trade expectations, and which implies no meaningful change to 2023/24 disappearance. Jun-Nov US wheat feed disappearance is calculated at 184 million bu, up 57 million bu (44%) from the previous year. USDA’s annual wheat feed/residual use of 120 million bu is viewed as being within 5 million bu of reality. 2023/24 US wheat end stocks were trimmed 11 million bu to 648 million. Stocks/use of 34% justifies a range of $5.90-6.60, basis spot Chicago, into spring.

• Winter wheat seedings totalled 34.4 million acres, vs. 36.7 million the prior year. HRW seedings are down 1.7 million at 24 million. SRW is down 0.5 million at 6.9 million. Assuming normal weather/trend yield, we project 2024/25 SRW end stocks to drop to 90-95 million bu, vs. USDA’s projected 107 million in 2023/24. HRW stocks expand 30-40 million to 310-320 million bu. Chicago will gain on KC wheat into early summer.

• EU wheat end stocks were lifted 2.5 million mt on larger imports and lower exports. This was largely expected, but exporter and global end stocks were increased slightly.

• The performance of corn and soy yields nationally despite regional weather issues has been the US market’s bearish catalyst since late summer, and NASS confirmed the absence of short-term supply issues. Corn, soy, and meal are deeply oversold, but a new supply spark is needed to trigger bulk/lasting short covering. Focus turns to Brazilian soy yield data in the weeks ahead. The range of Brazilian crop estimates is wide. Chicago has been in decline for months; this is no place for new sales.  We await rallies amid managed money positions that are massively short.

• HEADLINES: Chicago mixed in pre-report positioning; Midday GFS weather forecast drier for SC and N Brazil; US weekly export sales were poor.

• Chicago values are mixed with profit taking noted in long grain/short soy spreads ahead of the January USDA report tomorrow. Trade volume has been more active this morning due to pre-report positioning. The January USDA report is the most important of the winter and several large funds wait until after the report to engage in new (yearly) positions. The January report sets the Chicago price tone heading into March. We look for USDA to cut Brazilian corn/soy production with a modest 1 million mt Argentine soy crop increase. Unless there is a big surprise in US corn or soybean yields, it is hard to see how the USDA report can be overly bearish following the early week selling.

• There is little fresh news available outside of the horribly slow weekly export sales data. The poor sales pace produced early Chicago selling and is capping rallies. Chicago brokers report that managed money has sold 2,000 contracts of wheat, 2,700 contracts of corn, and 1,000 contracts of soybeans. In the products, funds have sold 1,000 contracts of soymeal and 1,200 contracts of soyoil. Managed money will go through the report a net short.

• The US December CPI reading was hotter than expected due to sticky housing costs. The December CPI at 0.3% produced an annual inflation rate of 3.3% which pushed back the chance of any US Central Bank rate cut until April. We would anticipate 2 rate cuts in 2024 due to a US labour market that is still expanding and supporting the US economy. The US dollar bounced higher after the CPI report.

• FAS reported that for the week ending January 4 the US sold 4.7 million bu of wheat, 19.2 million bu of corn, and 10.3 million bu of soybeans. The US sales pace was horrible due to the New Year’s holiday. For their respective crop years to date, US wheat sales are 565 million bu (up 12 million or 2%), 1,192 million bu of corn (up 326 million or 37%), and 1,353 million bu of soybeans (down 276 million or 17%).

• Cold temperatures and low-price bids are keeping US farmers from making new cash sales. This is starting to raise Midwest cash basis bids. US farmers report that a bearish USDA report would not cause panic or alter their stored crop marketing plan. US farmers keep pointing to a smaller Brazilian soybean crop as a reason for their future price optimism.

• Brazilian fob soy export premiums fell 5-15 cents/bu yesterday as the harvest gains speed. The trade remembers the logistical and storage issues of last year when Brazilian fob soybean basis went from $3.00 over in January to $5.00 under during the gut slot of harvest in March. The $8.00/bu soy basis decline was the largest on record reflecting the lack of investment in Brazil’s storage and transportation. Brazilian traders will be more cautious in 2024.

• The midday GFS weather forecast is drier for N and NC Brazil compared to the overnight solution. The GFS forecast is starting to look more like the EU weather model with rain totals being cut by 0.5-1.50” over the 10-day period. The model offers more abundant rain in the 11-15 day forecast period, which is too far out for confidence. We should pay more attention to the 7-day Brazilian weather forecast due to dramatic differences in the week 2 forecast timeframe. Rain is in immediate need across the dry areas of Parana, MGDS and Soa Paulo in the next 2 weeks. Soybeans here are podding and corn is pollinating, it is critical that soil moisture levels are restored/improved to preserve 2024 Brazilian soy crop potential.

• The USDA January report looms with the trade expecting it to be a non-event. Our lean is that US 2023/24 wheat end stocks will rise, while corn and soybean stocks hold steady. The trade is looking for a 20 million bu rise in US soybean stocks, so a US soybean stocks total of 225 million bu would be supportive. Key thereafter is N Brazilian soy yields following the record dry Sept through December. Technically, a close above $0.49 in March soyoil futures turns the outlook bullish on a weekly reversal.

• HEADLINES: Chicago bounces on Tuesday on short covering; Oil/meal spreading featured along with short soybeans/long grains; GASC tender results awaited.

• It is Turnaround Tuesday following some early day speculative selling in soybeans/meal shortly after the opening. Managed money is liquidating a stale/unprofitable soymeal position which tugged March soybeans to a new low at $12.34. We estimate that funds are 29–32,000 contracts of soymeal long, which they are trying to get out of to cut their losses. As such, soymeal has fallen back to test the early October low at $360/ton basis spot futures.

• Soymeal futures rallied $100/ton in October/November and fell $100/ton in December/January. Spot Chicago soymeal is at its cheapest price since late 2021 due to the recovery in the 2024 Argentine soy crop and the addition of 200 million bu of US crush capacity in the last half of 2024. The combination will spark an export fight for world soymeal market share between Argentina and the US. Soyoil values must increase to prevent a deeper drop in US soy crush margins.

• Soyoil (oil share) has rallied from its late October low of 35% to 39.4% and is likely to continue to rise into mid-2024. The hard question is whether soyoil rallies or soymeal declines (or both) to achieve a point where soyoil’s contribution of margin is 45-50%.

• Chicago brokers estimate that managed money has sold 3,700 contracts of soybeans, and 3,300 contracts of soymeal. Managed money has bought 1,100 contracts of soyoil, 3,100 contracts of Chicago wheat and a net 2,100 contracts of corn. Funds were sellers of 4,000 contracts of corn early day and have come back to buy over 6,000 contracts sparking the midday rally.

• NASS will be updating the past 5 years of US production, yield, and stocks data this afternoon in an effort that we call “statistical housecleaning”. We doubt that the revisions will be large enough to be an impact on the market, but it is something that traders will be watching for going home. 2024 is a year for NASS to offer revisions for US crop years from 2017-2022.

• US Census November soybean exports were far larger than expected by 30 million bu vs the monthly FGIS. The bigger November export program suggests that NASS could drop 2023 December 1 US soybean stocks by an additional 30 million bu, or 70-80 million less than last year if the 2023 US soybean crop is not adjusted. If US 2023 soybean area or yield is adjusted downward, the December 1 stocks data could yield a bullish surprise. US November Census corn exports beat FGIS by 24 million bu with wheat up 2 million bu.

• CONAB will release their 2024 Brazilian corn and soybean crop estimates early tomorrow morning. We look for CONAB to drop their soybean crop estimate to 154-155 million mt and total corn to 117-118 million mt. Early yield data from Mato Grosso continues to reflect disappointment with yields off 30-60% from last year.

• The midday GFS weather forecast is drier across South Central and Northern Brazil compared to the overnight release.  However, the 10–15-day forecast is slightly wetter in this area, so the net result is little changed. In fact, a few showers are noted across Parana and Santa Caterina with rainfall totals yet to be reported. Daily shower chances will be centred on Northern Brazil with 10-day totals of 1.50-4.00”. Rain amounts will be closely followed across Paraguay, MGDS, Parana and Soa Paulo in the next 2 weeks due to 3 weeks of acute dryness. RGDS and Argentina will see at least normal rainfall with varied temperatures that favours crop yield.

• Soyoil has been the bullish stalwart with traders watching to see if March can rise above $49.00 (last week’s high) and create a weekly reversal. The other soy product, soymeal, continues to sag on long liquidation which is capping soybean rallies. Egypt’s GASC looks to secure Russian/Romanian wheat due to low price offers. Parana’s Deral dropped their crop estimate for soybeans to 71% good/excellent, 25% fair and 5% poor. Rain is in immediate need across South Central Brazil with crops in reproduction. CONAB crop sizes directs Chicago prices early Wednesday.

• HEADLINES: Key chart support is tested in corn/soyoil; March soybeans below $12.50 support; Index funds start rebalancing on the close.

• Chicago grains are sharply lower at midday with corn, soybeans, soymeal and soyoil scoring new lows for the decline. March corn futures are targeting $4.50, the delivery low of December futures, while March soybeans fell easily below $12.50 chart-based support amid ongoing fund selling. China remains absent as a cash buyer of Brazilian soybeans and the market is pushing lower as traders return from holiday with bearish trends intact.

• Chicago corn open interest has risen 63,000 contracts in the first 4 trading sessions of 2024 on renewed selling by managed money. We note that the index fund roll/rebalance will start at the close today which could produce some fireworks, but due to TAS (trading at settlement), the fireworks will be controlled. We calculate that index funds will secure 80-83,000 contracts of Chicago grain contracts through Friday. Look forward to closing Chicago support coming from Index funds.

• Chicago brokers estimate that managed money has sold 17,400 contracts of corn, 5,700 contracts of soybeans, and 6,300 contracts of wheat. In the products, money managers have sold 3,500 contracts of soyoil and 1,600 contracts of soymeal. The fund selling was active in the first 30 minutes of the day.

• There were cash connected rumours on Friday that China was asking for offers to another batch of US SRW wheat, which we cannot confirm. On today’s break today, there are rumours that China is washing out of US wheat purchases and shifting the sale to France. Once again, cash connected wheat traders say, “not me” and there is no confirmation. We are doubtful of this rumour also.

• However, there is Asian talk that China may be preparing to start auctioning off reserve soybeans to rotate stocks. Tonnages have not been offered, but Sinograin is said to be a cash seller of reserve soybean stocks which may be the reason why they are not securing Brazilian soybeans on the break. New US exporter demand is needed to form a Chicago soybean/soymeal bottom. US soymeal is getting cheap enough that it may entice a new round of world demand. Note that world soymeal demand is strong, it is just that with normal Argentine weather, the competition for world soymeal trade will be acute. Argentine soymeal exports are not expected to seasonally ramp up until April.

• US export inspections for the week ending January 4 were 33.7 million bu of corn, 24.7 million bu of soybeans, and 18.0 million bu of wheat. For their respective crop years to date, the US has shipped out 504 million bu of corn (up 111 million or 28%), 372 million bu of wheat (down 72 million or 16%), and 879 million bu of soybeans (down 232 million or 21%).

• Based on a 2024 record US corn yield of 179 bushels/acre and late December fertiliser, seed and equipment and fuel costs, we calculate that the breakeven cost for a Midwest corn farmer at $4.73/bu to produce a bushel of corn. December 2024 corn futures are priced at $4.88/bu or some $0.15/bu above breakeven. If the market wants to pare back corn seedings in 2024, it will have to drop below this breakeven price during February, the insurance revenue determination month. This will cause new stress for US ag bankers.

• The midday GFS weather forecast is wetter in the week 2 forecast compared to what was offered overnight for South Central Brazil, MGDS, Parana and Sao Paulo. Needed rain is centred on Northern Brazil with totals of 1.5-3.50” amounts with heavy rain focused on far NE Argentina and SW Brazil where forecasted amounts reach upwards of 6.00”. The remainder of S America sees near normal rain with any extreme heat focused on Paraguay and South-Central Brazil where high temperatures reach into the 90’s to the lower 100’s.

• Soyoil has been able to recover from the opening lows as cash soyoil prices are below yellow grease (used cooking oil) for the first time since 2017. Tallow prices are also starting to rise. Soyoil is bottoming against the May lows at $0.45/pound. March corn is bottoming against $4.50 support with key support offered $5.80-5.90 in March Chicago wheat. CONAB and the January USDA report will determine price direction with the markets closed next Monday for Martin Luther King Day.

• HEADLINES: Funds sell soybeans on chart considerations; Wheat rallies on arctic cold and Black Sea weather forecasts; Midday GFS weather forecast stays wet across N Brazil.

• Chicago grain futures are mixed at midday with the grains higher while soy futures sag to fresh lows. A drop in crude oil and negative mentality regarding future US soybean export demand has sparked the fresh fund selling.  Moreover, an open chart gap left from Tuesday has not been filled which is allowing fund managers to add to short soybean positions with limited risk. A close above the chart gap or a recovery late day would underscore that a trading bottom has been found (seasonal price patterns argue for a soy rally in the next few weeks). Otherwise, the market is on a mission to liquidate fund meal length that could pull March soybeans to long term support at $12.50.

• The US dollar is slightly weaker, but most trading desks are loath to start macroeconomic positioning ahead of next week’s USDA January Crop Report. Chicago trading volume is slow to fully recover from the holiday which exacerbates hourly price moves. Moreover, Chicago corn/soy option values/premiums reflect that few are worried about a bullish or bearish USDA report next week. We would argue statistical uncertainty regarding US December 1 corn/soybean stocks that could produce market fireworks.

• Chicago brokers estimate that that fund managers have sold 5,100 contracts of soybeans, 3,700 contracts of soymeal, and 2,900 contracts of soyoil. Funds have bought a net 3,700 contracts of corn and 3,200 contracts of wheat.

• The USDA did not announce any new daily export grain sales.

• US weekly ethanol production was 308 million gallons, up 24% from last year but down 5% from the prior week due to the holiday. US ethanol stocks rose 3 million gallons to 991 million which was down 4% from last year. US gasoline consumption was up 6% year on year at 7.95 million gallons per day. The US ethanol grind is likely to be raised 25 million bu by the USDA as demand continues to be strong and producers have locked down profitable forward margins.

• Ukrainian corn exporters are getting swept up in the Red Sea shipping conflict amid rising insurance costs or a pure lack of insurance which is forcing vessels to take an extra 2 weeks to push southward around the Horn of Africa. The lengthy voyage raises the cost to importers by $19-22/mt. Ukraine corn exports were just coming back to normal before this new logistical snarl. The extra cost means that US Gulf corn is in a more competitive export position.

• The midday GFS weather forecast is wet across Northern Brazil as the forecast keeps a pattern of near daily showers in place. The 10-day outlook is consistent with the overnight run offering monsoonal rainfall of 2.50-6.50”. Drier weather occurs across S Brazil and Argentina with rains of 0.5-2.50”. The Argentine rain is enough for early crop development, but greater rain will be required in February/March when corn and soybeans are reproducing. Any heat will be located across Paraguay and Northern Argentina with highs in the 90’s to lower 100’s.

• Funds are adding to their shorts in soybeans and exciting meal length. Chicago wheat values are higher as key chart support held as the Black Sea endures a round of arctic cold that produces winterkill worry. It is the length of the Black Sea chill and whether ice will form following that will determine crop losses. Corn is unable to decline, but few want to chase a rally ahead of next week’s USDA Crop Report. We look for additional choppiness.

• HEADLINES: Soybeans/corn bounce amid energy price rise; Mideast geopolitical tensions rise; GFS weather forecast stays wet for N Brazil offers arctic cold for central US after January 15.

• Chicago grain futures are mixed at midday with wheat weaker on sliding EU values while soybean/corn futures rebound on improving demand. End user pricing in soy products has been featured with soyoil finding support following yesterday’s chart-based bullish reversal. And WTI crude oil futures rallied 3% on local protests that closed Libya refinery that produces 300,000 barrels of products per day and a growing worry surrounding Mideast geopolitics. The combination of continued attacks across the Red Sea and growing political tensions within Iran is adding to the upside risk of world energy values. The kettle of world energy is coming to the boil as the Israeli war against Gaza/Hamas rages on. Geopolitical risk is growing in seriousness and should be followed.

• Corn and soyoil futures are rising as heating oil futures have rallied 9 cents which is raising profit margins for US renewable and bio diesel producers. We look for a mixed Chicago close with soy gaining on wheat and Nov soybean futures needing to secure acres for spring seeding by holding above $12.00. However, trade talk of a sizeable decline in US SRW 2024 wheat seeding is noted.

• Soyoil as a feedstock for green diesel is competitively priced against tallow, cornoil and even yellow grease, which is encouraging bottom picking in soyoil futures. Cheaper S American soyoil will not enter the US based on it not being eligible for carbon credits along with a US import duty of 19%. And US cash meal is priced well above Chicago March futures, but the return of Argentina as an important exporter from April onward will limit a return of sizeable US export demand. Argentina is offering 46% soymeal for April/May at $15.00 under Chicago vs the US Gulf at $25.00 over. The $40/mt cheaper Argentine offer will entice world meal importer demand with normal growing weather for their developing crop. Oil share will continue to perform in the coming months.

• Chicago brokers estimate that that fund managers have sold 5,000 contracts of wheat and 2,000 contracts of soybeans, while being flat in corn. Fund managers have bought 1,900 contracts of soybeans and 3,200 contracts of soyoil. As of yesterday’s close, we estimate that funds are net short 54,000 contracts of soyoil, not that far away from the record fund short of 80,000 contracts.

• The USDA did not announce any new daily export grain sales. US corn remains competitively priced through July, but Brazilian soybeans are $0.85/bu cheaper from mid-February onward which will limit future US sales much like last year. We hold to a 1,725 million bu 2023/24 US soybean export estimate with the smaller Brazilian crop and larger crush due to the soyoil inclusion of 14% of their diesel supply adding to Brazil’s crush rate. This opens a window of export opportunity for US soybeans in the late summer and autumn.

• We want to highlight that China is preparing to issue 2024 TRQ import grain licenses. We are not expecting that the import licenses will be larger than prior years. It is just that new private Chinese demand could be found in the grains depending on US values and import profit margins. China looks to import 9.5-10.5 million mt of wheat and 25-28 million mt of world corn in 2023/24.

• The midday GFS weather forecast is wet across Northern Brazil as the forecast keeps a pattern of near daily showers in place there into Jan 18. The 10-day outlook is consistent with the overnight run offering monsoonal rainfall of 4-6.50”. Drier weather occurs across S Brazil and Argentina without any lasting heat. February and March are the key weather months for yield determination across Argentina/RGDS in S Brazil. So far, weather conditions have been crop favourable in both areas.

• US wheat futures are enduring new fund selling based on technical considerations, while soy/corn futures bounce as improved Northern Brazilian rain is now digested. The question of Brazilian soy crop size hinges on actual harvest yields across Mato Grosso/Goias in mid to late January. Early soy yields are disappointing to producers. We look for Chicago choppiness into next Friday’s USDA report with a short covering top due in the US dollar by Friday.