4 January 2022

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  • HEADLINES: Soy futures rip to the upside on A American weather and falling yield potential; China short bought on forward soy needs; Argentine corn under stress.
  • Chicago futures are sharply higher at midday with corn, soybeans and soyoil the upside leaders. Fund managers from New York and London returned to the New Year with active buying from the opening Chicago bell. S American crop loss discussions are ongoing with farmers in Parana and MGDS suggesting that future rain will not make much of a difference on their soy/corn yield potential. Although it is only early January in North Central Brazil, the maturation of the soy crop makes it like late August in the US with the harvest to accelerate over the next 2-3 weeks.
  • A bullish tone prevails across Chicago with Brazilian soy crop losses of 10-15 million mt completely changing the longer-term outlook of the market. A sharply higher close is expected with any loss of 2021 US corn/soybean yield in the January crop report accelerating the rally late next week. Remember that Brazil comes into the harvest with limited old crop stocks, such that any production loss must be shifted to another world exporter, namely the US and Argentina.
  • Chicago brokers report huge volume into midday. Managed money has bought 15-17,000 contracts of corn, 10-12,000 contracts of soybeans, and 2,600 contracts of wheat. In the products, managed money has secured 3,200 contracts of soymeal and 4,200 contracts of soyoil.
  • We note strong demand for the oil share trade with soyoil’s contribution to crush margin falling to 40%. Oil share is at value near or below 40% with US renewable diesel demand ramping up at the end of the first quarter as new plants start production. That production total will grow to over 12 new renewable diesel plants by midyear. The key question for US soyoil supplies is whether new US crush capacity can come online fast enough to service the growing feedstock use by the renewable diesel industry. Soyoil should become a bull leader of the soy complex into June/July.
  • November/December weather was record dry across the southern third of Brazil with it being the fourth wettest on record across Northern Brazil. The acute dryness and budding heat took a huge toll on Parana corn/soy yield potential. Deral estimated a sharp fall in conditions with just 29% of their soybean crop rated good/excellent. Yield losses of 40-45% in soybeans and over 50% in corn appear reasonable.
  • Iraq tendered for January/February wheat. Iraq is looking at securing Australian/US/Canadian wheat as defined by their tender terms. US cash exporters report that US HRW wheat sales to Iraq have a good chance based on their demand for credit terms, and that Australia will have trouble meeting the gluten demand of the tender. Some EU cash traders argue that a cargo of Romanian wheat may be included. Traders report that Iraq is trying to secure 1.0 million mt of world wheat based on need from February into May. US wheat futures could be surprised by a US wheat sale of size to Iraq.
  • The midday GFS weather update is like the overnight run with dry weather conditions for Argentina for next 10 days with extreme heat with another 10-12 days of 90s/lower 100s. NE Brazil will stay wet with rains of 5-12.00”. The early Brazilian soy harvest will be slowed by near daily rainfall. The S American weather pattern is static, except for a modest southward shift that allows for 0.5-1.50” of rain across Parana and MGDS late week.
  • The loss of 12-15 million mt of Brazilian soy with stressful weather persisting across RGDS/Santa Caterina/Argentina shifts soy into a bullish demand rationing phase. China is short bought soy and missed the Brazilian weather woes. Crushers and the Government need to extend their forward coverage before the early February Lunar New Year Holiday.  We stay bullish with the first upside target being $13.95-14.15 Mar beans and $6.20-6.40 Mar corn. Much higher prices are possible depending on Argentine/Southern Brazilian weather in the last half of January.

3 January 2022

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  • HEADLINES: Technical selling pressures wheat and drags down corn to key support; Stonex Brazilian soybean crop at 134.0 million mt.
  • Chicago markets are mixed at midday with corn/wheat values pushing lower while the soy complex holds higher as Chicago looks for its “sea legs” heading in the new trading year. Soybean futures are higher as private crop loss estimates for Brazil continue to grow. Corn loss estimates are only beginning for S America with the Brazilian first corn crop pegged at 28-29 million mt with a trendline yield. A 20% yield loss amounts to 5-6 million mt based on the arid weather pattern to date.
  • It is the Argentine corn crop that becomes more important with time amid export registrations that are well above commercial stocks. Volatility will be elevated in the months ahead.
  • We doubt that either corn or wheat have scored their annual or seasonal highs, but the charts must heal before short covering develops ahead of the USDA January Crop Report. WASDE is expected to do what it needed to in December and raise 2021/22 US corn ethanol demand by 50-100 million bu. The increase in demand makes the January US corn yield highly important or US corn end stocks will be sliding to historically low levels. Few will want to be bearish of corn if the S American weather pattern stays static.
  • StoneX Brazil estimated the 2022 Brazilian soybean crop at 134.0 million mt, down 10 million from the December WASDE estimate, and down 3 million from last year. The continued weather pressure on the crop has traders talking about a 2022 Brazilian soy crop of 130-132 million mt by the final count. StoneX dropped their estimate of the 2022 Brazilian corn crop by 2.5 million to 117.0 million mt. The StoneX Brazilian soybean crop loss was larger than expected.
  • There is no doubt that soy/corn crop losses in Parana and surrounding states are important and growing. On the weekend, the Parana ag minister estimated that the average Parana soybean yield would be off 38% from trend, which by itself would count for nearly 8 million mt of lost soy production. And 4-6 million mt has been lost in the nearby production states of S MGDS, Santa Caterina and RGDS. The big question will the soybean yields to the north help to offset the losses from the south. Currently, too much rain and disease threaten the Northern Brazilian soy crop. Harvested yield data is anxiously awaited.
  • US weekly export inspections for the week ending December 30 were 5.2 million bu of US wheat, 23.5 million bu of corn, and 43.8 million bu of soybeans. All were on the low side of expectations. For their respective crop years to date, the US has exported 444 million bu of wheat (down 107 million or 19%), 508 million bu of corn (down 91 million or 15%), and 1,113 million bu of soybeans (down 328 million or 23%). We do not look for the USDA to alter its 2021/22 corn/wheat export estimates on January 12, while US soybean exports could be trimmed 25-40 million bu depending on where WASDE sees the 2022 Brazilian soybean crop.
  • The midday GFS weather update is like the overnight run with ligh and widely scattered showers for Argentina with 10-day accumulations of 0.2-0.8” while heavy rain dogs the early soy harvest across Northern Brazil with rainfall of 5-10.00”. The early Brazilian soy harvest will be slowed by regular daily rainfall. The S American weather pattern is static, except for a modest southward shift that allows for 0.5-1.50” of rain across Parana and MGDS late week. Extreme heat persists across Argentina with numerous days with highs in the 90’s/lower 100’s into mid-January. Crop stress will be acute for S Brazil and Argentina corn and soybean crops over the next 2 weeks.
  • Brazil has no old crop soy stocks left, for each 1 million mt of lost production you must reduce its 2021/22 exports or crush by a like amount. This pushes demand to the US for late summer and autumn on soy products and soybeans.  The US export/crush gains could be as much as 200 million bu, which depletes US 2021/22 and 22/23 estimated end stock totals back to historically low 225-350 million bu. Stocks supports spot Chicago futures at $12-12.50/bu for months to come and produces an upside price target of $14-14.25 with the US needing extra soy acres in 2022.
  • However, corn has an equally bullish story as soybeans, but the market may have to get beyond the January USDA crop report to sustain a rally. It was the wheat selling that pulled corn lower today. We doubt that the world wheat cash market has forged an annual top and that support will be found under $7.50 March Chicago. The S American weather risks are real and growing.  Corn/wheat and soyoil futures are too cheap!

31 December 2021

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  • HEADLINES: Low volume mixed trade with debate raging as to the losses of the 2022 Brazilian soy/corn crops; Extreme heat ahead for Argentina.
  • Chicago futures are mixed in a modest reversal of Thursday’s trade in a thin volume New Year’s Eve session. The world is already celebrating the New Year and traders have closed their books on 2021. Futures trade will resume in 2022 on Sunday evening with a full week’s trade ahead. We look for a mixed Chicago close today, but price trends are higher and new fund monies are expected to be put to work across the commodity markets in early 2022. We doubt that this past week’s highs are important with corn/soyoil and KC wheat to be the upside leaders in early 2022. Remember that with world stock/use ratios of the major exporters are record lows, it does not require much of a production loss to generate a dynamic bull marketplace.
  • Brokers estimate that funds have bought 2,500 contracts of soybeans and 1,200 contracts of corn, while selling 1,400 contracts of wheat. In the soy products, funds have bought 1,900 contracts of soyoil and 2,300 contracts of soymeal. Chicago final open interest in corn, soybeans and wheat fell on Thursday’s decline, suggesting long liquidation. Amid a lack of resting orders, it does not take a large order to push the market.
  • The USDA is closed for the New Year’s Holiday. No daily sales reports today.
  • French wheat futures closed lower, and this is having a bearish impact on US wheat futures. March Paris wheat futures closed at €279.50, down €1.50/mt.
  • Very early Parana soybean yield data is highly disappointing with losses of 30-90% from trend. Thursday’s heavy rain occurred across the NC areas, but it missed the heart of the drought-stricken crop areas of the west. In another 2-3 weeks, any rain that falls will come too late to benefit either the first corn or soy crops. Traders will be closely following yields across N Brazil to gauge if they can make up for the losses in the south. The odds are increasing that the 2022 Brazilian soybean harvest will fall below 137 million mt (the size of the 2021 harvest). Such a crop would produce US export opportunities in late July/August and in the September-October timeframe. US 2021/22 and 2022/23 soybean export estimates are rising via the smaller Brazilian soybean harvest. We estimate Parana soybean production losses of 7-9 million mt.
  • Although Argentina will enjoy a few light showers over the next 5 days (low coverage of just 20% each day), the heat will be unrelenting into mid-January. Highs in the upper 80’s to lower 100’s will continue to quickly deplete soil moisture. Crop stress will be increasing. Farmers have yet to seed 19% of their soybean and 29% of their corn crops. A year ago, rains started to fall across S Argentina around Jan 8 and pushed northward through the state into late month. The January/March rains saved the 2021 Argentine corn/soy crops.
  • The “big-short” in the world soybean market is China as it has fallen behind on its soy purchase pace amid the sharp Chicago December rally. China will have to step up its purchases of Brazilian soybeans in January before the nation enjoys its weeklong Lunar New Year in the opening week of February. China will be the bid under Chicago, should additional weakness develop.
  • The midday GFS weather update is like the overnight run with light and widely scattered showers for Argentina with 10-day accumulations of 0.2-0.8” while heavy rain dogs the early soy harvest across Northern Brazil with rains of 5-12.00”. The early Brazilian harvest will be slow and waterlogged with seed damage to rise during January. The overall pattern is static, except for a modest southward shift that allows for some 1-2.00” of rain across Parana and MGDS. Extreme heat persists across Argentina numerous days with highs in the 90’s/lower 100’s.
  • 2022 promises to be extremely volatile year with drought plaguing S America, the Central US, and portions of Ukraine. We anticipate China will return as a sizeable US corn buyer in Q1. US ethanol/crush industries are flush with margin and cash basis bids are strong. Chicago breaks will be sharp/short and unable to carry through. Renewable diesel feedstock demand doubles in 2022 with tightening world vegoil stocks ahead.

30 December 2021

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  • HEADLINES: Liquidation pummels Chicago on charts/Parana rain; Downside price targets close in corn, KC wheat and soyoil; New ag inflows in 2022?
  • Chicago grain futures are sharply lower at midday with soybeans/soyoil leading the decline on liquidation tied the overnight rain that fell across portions of Parana and Mato Grosso Do Sul, with the forecast offering additional showers during the last half of next week. Chicago is extracting weather premium in a correction. Chicago had rallied $1.35/bu off the December 4 low, and the drop of $0.50-0.55/bu is corrective.
  • Corn/wheat have been followers with March corn futures pushing back below $5.95 and March KC wheat testing $8.00-8.10 support. The downside price risk in corn, wheat and soybeans is becoming limited below today’s low with light volume expected on Friday ahead of 2022. Most of the world will be on New Year’s holiday tomorrow with Chicago open for a full trading session. Chicago returns to normal trading Sunday evening.
  • Chicago brokers estimate that funds have sold 9,600 contracts of corn, 7,200 contracts of soybeans, and 3,600 contracts of Chicago wheat. In soy products, funds have sold 4,200 contracts of soyoil and 3,500 contracts of soymeal. Managed money has been on the sell side of the market this morning.
  • US export sales for the week ending December 23 were 7.3 million bu of wheat, 49.1 million bu of corn, and 19.3 million bu of soybeans. The wheat sale total was disappointing with corn/soybeans in line with trade expectations. China continues to secure most of the US sorghum crop taking another 7.2 million bu in a known/unknown basis.
  • For their respective crop years to date, the US has sold 582 million bu of wheat (down 173 million down 23%), 1,604 million bu of corn (down 96 million or 6%), and 1,521 million bu of soybeans (down 486 million or 28%). Soybean and corn are slowly making up for lost ground vs the 2020/21 crop year. It is now the size of the S American corn/soybean harvests that will determine if WASDE 2021/22 US corn and soybean exports are too high or low. We don’t expect that WASDE will alter their 2021/22 US corn export estimate, but they could lower soybeans by 20-35 million bu to account for the slow export pace to date.
  • Unfortunately, S America crop sizes continue to decline with the early yield results suggesting that the Parana soy crop could fall 35-50% or 7-10 million mt from the initial forecast. The overnight rain will marginally help crops seeded after October 5 as drought has pushed Parana crop maturity.  Soy/corn yield/crop losses are also reported in MGDS, Santa Caterina and RGDS which could raise the total Brazilian soy crop loss over 12 million mt. Northern Brazilian soy yields could be better, but the point is that Brazilian soy production could fall under 137 million mt, less than last year’s harvest.
  • The initial first Brazilian corn crop is estimated to be down 5.0-6.5 million mt from an original size of 29 million mt or crop of 22.5-24.0 million. The total 2022 Brazilian corn crop (3 harvests) has been cut from 119 million mt to 114-116.0 million range. Additional winter corn seeding will occur if enough rain drops across Parana/ MGDS to restore soil moisture when planting starts in February.
  • The midday GFS weather update is slightly wetter than the overnight run with improved rain chances for Parana/MGDS starting mid next week. RGDS/Santa Caterina rains will be more limited. Argentina will have a few widely scattered shower chances across the north, but otherwise the forecast is arid.  Argentine crop condition/seeding progress will be available later today. The recent extreme heat/dryness has taken a toll on the first Argentine corn yield and a below normal rain trend will persist into mid-January.
  • Thin holiday volume exacerbates Chicago rallies/declines amid a lack of resting orders. A S American weather pattern change is not indicated with considerable yield damage already assessed to S Brazilian crops. We see today’s break as a buying opportunity in soyoil, corn and KC wheat. Rumours abound that Iraq will now be returning Monday for HRW wheat, which could include a US purchase based on valuations following today’s decline.  This is no place to be turning bearish.

29 December 2021

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  • HEADLINES: USD ethanol grind stays hot on fat margins; South Central Brazilian weather forecast drier at midday; Egypt’s GASC secures 300,000 mt of wheat.
  • After a lower opening, Chicago grain futures roared higher with wheat/corn being the upside leaders. Liquidation ahead of January delivery pressured soybeans/ soymeal, but we do not expect that any large amount of deliverable supply will be tendered Friday. Commercials will hold fast to deliverable Chicago soy supplies amid ongoing US export demand and a Northern Brazilian soy harvest that could be delayed by excessive rain and saturated soils.
  • Also, concern is building on the soyoil content of N Brazilian soybeans amid the regularity of cloudy days and mostly below normal temperatures. Early harvest results from Mato Grosso have been highly variable with commercials complaining that 5-8% of the early cut bean seeds are damaged due to the lack of sun/excessive rainfall. The cloudy/wet weather has talk emerging that N Brazilian soybeans will not have their usual elevated oil content that is desired by Asian importers.
  • Wheat is bouncing as GASC secured French (and Ukraine/Romanian) wheat in today’s tender. The EU is selling and exporting wheat much too quickly with a Russian export tax of $95.10/mt. EU wheat sales need to be slowed or halted by rising EU wheat prices. The EU wheat export pace is much too fast, and the market has a major task ahead.
  • Chicago brokers estimate that managed money has bought a net 1,500 contracts of corn, 1,400 contracts of wheat, and 2,100 contracts of soyoil.  Managed money sold 2,200 contracts of soybeans and 3,100 contracts of soymeal. Managed money was an early seller across Chicago but has returned to the buy side.
  • The US weekly ethanol grind amounted to 311 million bu, 2 million bu above last week and 24 million bu larger than last year. The US only needs to average 295.5 million bu grind per week to reach the WASDE annual US corn ethanol grind forecast. With the weekly grind averaging 13-17 million bu above this total, we would maintain that WASDE is too low by 150 million bu in its 2021/22 US corn ethanol use estimate. A large portion of this corn grind increase should occur in the January 12 USDA report, which would suggest that US 2021/22 corn end stocks could fall near or below 1,300 million bu with a modest 0.5 bushels/acre decline in yield. Fund managers talk that last year spot Chicago corn futures reached $7.75/bu with 2020/21 US corn end stocks at 1,236 million bu. Sub $6.00 corn futures appear to be too cheap amid threatening S American weather. The world cannot lose any portion of the Brazilian or Argentine corn crops during January. US ethanol producers are enjoying hugely profitable $1.99/bu margins.
  • Egypt’s GASC secured 300,000 mt of wheat including 60,000 mt of French, 180,000 mt of Ukrainian, and 60,000 mt from Romania. GASC was willing to pay up $8.00/mt to take the Romanian wheat for late February. The French wheat sale at $330.50/mt was the first time that GASC secured world wheat cheaper than a prior tender since late summer. However, it is just one data point for now.
  • The midday GFS weather forecast is slightly drier across Parana/MGDS than the overnight forecast. Rain totals across Parana/S MGDS were cut by 0.5-1.50” to 0.5-2.00”. The rain reduction will harm maturing soy/corn. Argentina/RGDS holds in an arid 2-week weather forecast with extreme heat forecast over the next 5 days with highs in the mid 90’s to the lower 100’s. The S American weather pattern is static with a deepening drought across S Brazil and Argentina. Equally as worrisome is the heavy rain that will fall across N Brazil with rain totals of 5-11.00”.
  • S America looks to have lost 6-9 million mt of soybeans and 5-6 million mt of corn to date. A deepening drought across Argentina/S Brazil will add to these loss totals. We remain bullish on new investment flows into ag and declining S American crop sizes. Any Chicago decline is a correction with March corn under $5.90 being too cheap. We see sizeable weather risks ahead for S American and the US Plains in early 2022.

28 December 2021

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  • HEADLINES: Chicago wheat falls to chart support, drags soy/corn along in sympathy; Midday GFS weather forecast slightly drier for S Brazil/Argentina.
  • Chicago trade is mixed at midday with corn/soy trading either side of unchanged while wheat prices sag on active wheat/corn spread unwinding. It is Tuesday in a full week of futures trade. The charts show that soymeal, soybeans, and corn futures are overbought. Amid overbought chart conditions, futures either consolidate or decline (or a little bit of both) before returning to trend. Our bet is that the overbought technical condition is resolved with a few days of sideways/choppy trade. Fund managers have additional grain purchases to make in early 2022.
  • The price trend of corn, soybeans and wheat are higher with key support offered at $8.25 and below KC March wheat, $6.09 March corn, and $13.42 on March soybeans. January soybeans and soy products are deliverable on Friday. We see soymeal as the most overbought and against weekly chart support at $422/ton basis spot Chicago futures. A short-term meal top should be formed just before delivery as the shorts are forced out. We see the next upside price target for March soybeans resting at $13.86-13.95.
  • It is S American weather and crop sizes that will determine how high is high with new crop availability and determining the severity of the drought across S Brazil and Argentina being key in the weeks ahead.  We believe that the Southern Brazilian and Argentine drought is just beginning with heavy rainfall battering Northern Brazil with flooding through January.
  • Chicago brokers estimate that funds have sold 1,500 contracts of corn and 5,500 contracts of wheat, while buying 3,500 contracts of soybeans, 4,200 contracts of soymeal and 1,400 contracts of soyoil. The managed money has been on both sides of the Chicago markets with the selling in the grains and buying of the complex. Sinking wheat values have pressured Chicago corn.
  • Parana’s Deral will not release crop condition estimates for corn/soybeans this week due to the holidays. Condition rating reporting will return next week Tuesday. Early soybean harvest starts in 2 weeks with yields feared to be 10-20% lower due to the ongoing drought. However, early edible bean yields are off as much as 40-60% which could precede a worse soy/corn yield decline. Rains are promised for Parana around January 4, but they are too late to aid first crop seeding. Parana farmers are active chopping corn for silage due to the lack of grain. Basis bids on the Paranagua Corridor will be rising amid building crop losses and their shortened export season.
  • Wheat traders are watching for Iraq/Egypt’s GASC to return with tenders on the market drop. The Iraqi tender was pushed forward by a week in the hope of a price correction. Should either importer gauge the market at a desirable level, a new tender will be set. The Russian wheat export tax at $95.10/mt holds through the holidays. Russian wheat traders often celebrate Orthodox Christmas which runs into mid-January. Russia will be a slow wheat seller/exporter into late January, with the new export quota to be set on February 15 at 8 million mt. Russia’s wheat export availability is in seasonal decline.
  • Asian traders are awaiting China’s activation of TRQ import licenses in 2022 for corn/wheat. Private Chinese buyers/importers can make purchases and import cargoes, but the TRQ only becomes active upon the vessel’s arrival in China. US corn is the cheapest source into China while in wheat it is Australian. China 2022 TRQ’s are set at 7.2 million mt of corn and 9.4 million mt of wheat.
  • The midday GFS weather forecast is slightly drier across Parana/MGDS and through Argentina than the overnight run. Limited rain looks to drop across Argentina/RGDS in S Brazil for another 2 weeks. The S American weather pattern remains static with a cold front to produce rain of 0.25-1.50” across Parana/MGDS mid next week. Argentina is hot/dry for the next 10 days. And flooding rains will drop across the northern half of Brazil. S American crops are declining.
  • The S American weather forecast is a touch more threatening at midday and is static with La Niña now projected to hang on well into mid-2022. US ethanol/soy crush margins are strong which maintains record large US domestic demand. We see Tuesday’s drop as corrective in a bull market. Corn and soyoil should be the upside leaders in early 2022.  This is no place to turn bearish.

27 December 2021

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  • HEADLINES: Chicago sharply higher on threatening S American weather and supply loss; Iraq rumoured to push back wheat tender.
  • Chicago futures are sharply higher at midday on a combination of fresh investment demand and growing concern regarding S American weather. European rapeseed and rapeseed oil are sharply higher to limit up. The story in tightening world vegoil supplies is ongoing with Canada crushing its 2021 canola crop too quickly. The risks are growing that Canada could deplete its domestic canola supply without acute demand rationing. Amid the shortage of sunoil/rapeoil and canola, US soyoil became just too cheap ahead of the Christmas holiday. US Gulf soyoil is offered at 6 cents over January futures with Brazil’s offer at 8.5 cents over. US soyoil is the “cheapest source of world vegoil supply which is maintaining an active US export sales pace. The US has already sold 75% of the WASDE soyoil export estimate and it is only the end of the first quarter of the crop year. Soyoil price must limit US export sales as 3 renewable diesel retrofitted refineries start production in Q1 2022. h soyoil pushed above its 200-day moving average which has accelerated the investment fund buying. The bullish outlook for US soyoil and world vegoil prices has returned with the next upside price target being $0.60-0.615 basis March soyoil futures.
  • The USDA reported the sale of 266,240 mt of US corn to an unknown buyer in 2021/22. Speculation has the buyer being Mexico or Canada.
  • The 2-week S American weather pattern shows no sign of meaningful change. Limited rain will fall across S Brazil/Argentina over the next 7-8 days with high temperatures ranging from the mid 80’s to the lower 100’s. The midday forecast has reduced rainfall totals for Central Brazil in the last half of next week while regular heavy rains persist across N Brazil. The midday forecast is drier than the overnight run for Parana and MGDS. Crop sizes are shrinking across S America based on adverse weather. The early Northern Brazilian soybean harvest will begin between January 5-10 and sunshine and drier weather is desired.
  • There is talk that the Iraqi wheat tender has been delayed until next week. Confirmation on the rumours is awaited from the Iraqi Government.
  • US export inspections for the week ending December 23 were; 28.3 million bu of corn, 58.0 million bu of soybeans, and 10.0 million bu of wheat. All export totals were down from the previous week due to the pending holiday.
  • For their respective crop year to date, the US has shipped 473 million bu of corn (down 83 million or 15%), 1,063 million bu of soybeans (down 313 million or 23%), and 437 million bu of wheat (down 97 million or 19%). Research argues that WASDE is too low with their US 2021/22 corn export estimate.
  • Chicago brokers estimate that funds have bought 4,200 contracts of corn, 9,100 contracts of soybeans, 4,500 contracts of meal and 4,500 contracts of soyoil. The only Chicago grain where funds have been sellers is wheat selling 1,500 contracts. The CFTC will release their weekly CoT report this afternoon.
  • The midday GFS weather forecast is slightly drier across Parana/MGDS than the overnight run. Limited rain looks to drop across Argentina/RGDS in S Brazil for another 2 weeks. The S American weather pattern is static with a weak cold frontal pass late next week to produce rain of 0.25-1.00” across Parana/MGDS. This amount will be well under what is needed to replace more than a few days evaporative loss. Argentina is hot/dry for the next 10 days with a new round of extended dryness slated into mid-January. And too much rain will fall across N Brazil that will slow the early harvest pace as localised flooding is a worry.
  • A bullish outlook is maintained as S American corn/soy crops are in retreat. Parana’s Deral will not release crop conditions tomorrow due to the holiday. Chicago setbacks are only temporary unless a S American weather pattern change occurs. The forecast stays threatening into January 8.

23 December 2021

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  • HEADLINES: Soyoil export sales massive; Iraq seeks wheat; Extreme heat probable in Argentina.
  • Chicago futures have turned higher at midday in thin holiday-reduced volume. Increasingly, markets cannot ignore stagnant S American weather forecasts, which most likely stay unchanged through the long weekend. We have previously highlighted the development of heat in Argentina and Southern Brazil, where high temperatures will be consistently in the mid/upper 90s or higher, which will accelerate soil moisture loss into early Jan. Brazilian corn for March delivery has rallied to $7.22 per bushel, a new 4-month high, while palm oil and minor vegoil markets surge this week. It is just tough to find bearish fundamental input.
  • US corn sales through the week ending Dec 16 totalled 39 million bu, vs. 77 million the previous week. Wheat sales totalled 15 million bu, vs. 24 million the previous week. Soybean sales were 30 million bu, vs. 48 million the prior week. All were broadly within trade expectations, but the details of FAS’s weekly report lean supportive. China secured another 16 million bu of US sorghum, bringing total US sorghum to sales to China to 151 million bu. Canada through Dec 16 has purchased a record 110 million bu of US corn.
  • We would note that Canadian corn purchases from the US now account for 93% of the USDA’s annual Canadian import forecast. USDA must raise Canadian corn imports by 500,000 plus mt, which will raise total world corn trade.
  • US soybean oil export sales were a massive 241 million lbs, the largest for any week since 2010. US soyoil sales to India were known by the marketplace, but soyoil sales to non-Indian destinations were an impressive 125 million lbs. US meal sales were 300,000 tons, a level that has only been exceeded 6 times in history. Total 2021/22 US soy export commitments now sit at 76% of the USDA’s forecast with a full 41 weeks remaining in the crop year. US soy crush must be maximised amid rising product demand, but whether crush capacity in excess of 2,200 million bu exists is unknown. US soyoil stocks will be trending downward.
  • Iraq has tendered for a nominal 50,000 mt of US and/or Canadian origin wheat. We look for Iraq to ultimately purchase 300-500,000 mt, and neither the US nor Canadian balance sheets can afford a period of sustained enlarged export demand. The USDA’s Mid-East 2021/22 wheat import forecast is still 2-3 million mt too low. US export input today is positive.
  • Operational weather models have extended a pattern of complete dryness across TX, OK, KS and CO into Jan 7, with temperatures there to stay 7-15 degrees above normal over the next 10 days. This week’s drought monitor featured another expansion in dryness across the principal HRW Belt, with important sections of TX, W OK and E CO now experiencing severe to extreme drought.
  • Spot WTI crude at midday is up $0.90/barrel at $73.65 and has rallied $7.50 from Monday’s low. March Paris milling wheat is down €2.25/mt at the time of writing . Spot EU rapeseed continues to soar and at midday sits at a new record high €756.50/mt ($857/mt). EU rapeseed’s premium to spot Chicago soybeans has widened to 78%. It is clear there remains global rapeseed/rapeseed oil supply issues, which bodes favourably for continued US soyoil export demand.
  • The midday GFS weather forecast is wetter in Southern Brazil Jan 5-7 but confidence so far out is low. Additionally, the midday Canadian model does not support this change and instead lasting warmth and dryness is most probable in Argentina and Southern Brazil throughout the next two weeks. The GFS’s 10-day forecast is little changed with near complete dryness to be ongoing in Argentina/S Brazil through the period. Rapid soil moisture loss will continue. Northern Brazilian crop areas enjoy continued above-normal rainfall and near-normal temperatures.
  • Changeable S American forecasts are possible over the long weekend but breaks into mid-winter will be only corrective in nature. The bigger risk is that forecasts do not change, and that S American corn and soy production will be trimmed more rapidly by the trade in early Jan.

22 December 2021

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  • HEADLINES: S American weather forecast static/drought like; Ukraine discussing limits on milling wheat exports; US cash corn movement increased with $6.00 offers.
  • Chicago futures are higher at midday based on the bone dry Southern Brazilian and Argentine weather forecasts with increasing heat noted ahead of the Christmas holiday. Corn/soybean futures have pushed to new rally highs and broken out to the topside of a longer-term consolidation pattern. Wheat has followed with KC March testing key resistance at $8.50. The morning volume of trade has been active (better than expected) with funds adding to their market length. A higher close is expected with the midday GFS forecast maintaining the arid overnight forecast with just a few spits of rain for S Brazil and Argentina into January 1.
  • However, the bulls see the last few days of rally as a “windfall” and accepted partial profits ahead of a pending 3-day holiday weekend. This has produced the midday correction off the highs. The chance for a S American weather forecast change is accentuated over the long holiday weekend. However, if the forecasts stay arid on the market’s restart on Sunday evening, additional weather premium will be quickly added based on the ongoing sharp fall in S American crop sizes. In the weather business, the trend is your friend.
  • Chicago brokers estimate that funds have bought a net 5,500 contracts of corn, 3,900 contracts of wheat, and 7,100 contracts of soybeans. In the products, funds have bought 2,100 contracts of soyoil and 3,900 contracts of soymeal.
  • There is strong cash talk that Iraq has or will soon launch a tender for 500,000 mt of HRW wheat. And like Iran, a follow up tender for a like amount of wheat is expected next week. Iraq has a wheat shortage due to a dire summer drought last summer, and the US could fill some of the wheat demand. World freight rates continue to drop which is providing the US with an improved export opportunity to North Africa and the Mideast.
  • Reuters is reporting that their Ukraine sources indicate that the Government is considering placing a more restrictive export duty on milling wheat amid their 27% gain in wheat exports to date. Food inflation throughout much of the Black Sea is running 6-9% per month and Governments are becoming concerned about their fast grain export pace. A decision on the Ukraine milling wheat export duty is expected by mid-January.
  • The latest weather forecasts suggest that S American drought will have longevity and worsen in the months ahead. It is worth watching closely to gauge the importance of the coming hot/dry weather. Our concern over a deepening S American drought is growing.
  • US farmers were moderate sellers of cash corn on the push of spot futures above $6.00 March. This was the highest spot cash corn price since July and a new contract high for 2021.
  • Parana’s Deral indicated that its soy crop has lost 12% of its yield due to the deepening drought. The Parana soybean crop was forecast at 20.6 million mt with a 12% yield loss amounting to 2.5 million mt. RGDS soybean crop was forecast at 20.9 million mt, so a like yield loss causing a 2.5 million mt of decline. Including the southern half of MGDS, S Brazil was forecast to produce 50 million mt or 35% of the expected 2022 Brazilian harvest. Current drought losses are pegged at 5.0 million mt.
  • The midday GFS weather forecast is like the overnight solution with little or no rain for S Brazil/Argentina for 12 days. The GFS forecast hints a rain for S Argentina in days 12-15, but is too far out in the forecast for any confidence. Brazil stays hot/dry.
  • The charts are turning up and the forecast is hot/dry for S Brazil/Argentina into Jan 1. We stay bullish with Sunday’s forecast likely to produce a sharply higher start or a modest corrective fall. Real crop damage is being assessed, and rains are needed immediately across S Brazil.  A continuance of this pattern would cause sizeable, short covering heading into the January USDA Crop Report on January 12.

21 December 2021

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  • HEADLINES: Midday forecast is wetter for the second week in Parana/MGDS; Midwest cash moving in soybeans; Deral crop ratings fall.
  • Chicago futures have rallied into the midday hour on threatening S American weather and diminished concern regarding the Omicron virus, and that the Biden Administration will not shut down the economy. Soybean futures have pushed to new rally highs with March futures reaching $13.17 while corn/wheat follow. The corn market should be the upside leader on potential crop loss as the Southern Brazilian crop is in pollination, but US producer selling near $6.00 is acting to cap the advance. US/S American hedge related selling is modest in soy futures. We look for a strong close with the market adding weather premium for the threatening S American forecast.
  • Soybean/corn futures are either at or above key chart-based resistance.  A close above $13.00 in March soybean futures will argue for test of $13.50-14.00 in early 2022 while the weekly corn chart turns up with a second close above $5.90 spot futures resistance. The more bullish chart patterns in soybeans, soyoil and wheat should allow for additional investment flows into yearend. January options expire on December 23 Thursday with Chicago closed on Friday.
  • Chicago brokers estimate that funds have bought 9,700 contracts of corn, 3,900 contracts of wheat, and 10,400 contracts of soybeans. In the products, funds have bought 2,300 contracts of soyoil and 5,200 contracts of soymeal.
  • India has reduced its import duty by 5% to 12.5% for refined palmoil to calm inflationary food prices. The cut makes refined palmoil more economic that crude palmoil for import. The refined palmoil would be able to flow immediately into India and will boost demand. If food inflation does not subside, India could lower import taxes on crude palmoil/other vegoils in 2022.
  • Some analysts have lowered Brazilian corn and soybean production estimates due to the worsening drought with Brazilian first corn crop estimate down to 23.7 million mt (down 4.8 million) with the soybean crop pegged at 141 million mt (down 3 million). The total 2022 Brazilian corn crop is estimated at 113 million mt. A deeper reduction is possible in early 2022 if the static weather pattern persists.
  • Iran has tendered for another 180,000 mt of world wheat following a recent purchase of 500,000 mt last week. Cash traders expect that 400-500,000 mt will be purchased in this tender for January/February shipment. Iran has said that it needs to import 8 million mt of world wheat to meet demand in 2021/22. However, Iran has struggled with payments amid existing US economic sanctions.
  • Parana’s Deral lowered their weekly crop condition ratings for corn/soy crops.  Deral dropped good/excellent soy condition ratings by 14% to 57% and corn ratings by 14% to 63%. The weekly ratings drop was the largest in years and in both cases, crop condition ratings are the lowest in years. Without rain, next week’s Deral crop ratings could be record low for late December.
  • Chicago will not close early for the New Year’s Day holiday as has been past tradition. Chicago will trade 5 days and hold normal hours next week. The trade-off is that Chicago has added a 2022 holiday, Juneteenth, on June 20. The Juneteenth holiday allows for a 3-day Father’s Day weekend.
  • The midday GFS weather forecast is wetter than the overnight run with 1.00” plus totals offered for Parana/MGDS in the tenth day of the forecast. Otherwise, limited rain is offered for the crop areas of S Brazil and Argentina. High temperatures ranging from the mid 80’s to the lower 100’s this week. Northern Brazil stays well-watered with rains of 3.50-8.00”.
  • Fund buying on chart considerations amid dry Southern Brazilian/Argentine weather has sparked a strong rally. We hold to a bullish view.  However, the rain for Parana and MGDS 9-10 days from now has to be closely monitored. It could produce a correction following the Christmas holiday. Coming forecasts will help in this determination.