• Row crops score new highs to end 2020; Argentina stays dry; below normal precipitation offered to Mato Grosso.

• Chicago ag futures are mixed at midday with the summer row crops following the overnight trend while wheat futures sag on profit taking. The volume of trade has been better than previous end of the year’s as investor interest in the grain markets is growing for 2021. We look for new managed money to be pushed into the raw material space as vaccinations end the pandemic and spirit return to the US and world economy. Moreover, amid the falling US$, the interest for an inflation hedge is real. Bullish price trends look to accelerate in 2021 amid growing demand and the opportunity provided by historically low interest rates in a world awash with liquidity.

• Corn, soybeans, soyoil, soymeal, bitcoin and the US equity markets look to end 2020 at historic highs, a highly unusual feat amid a pandemic that is still worsening. The commodity outlook for 2021 is bullish.

• US weekly export sales for the week ending December 24 were 19.1 million bu of wheat, 38.0 million bu of corn, and 25.6 million bu of soybeans. The soybean and wheat sales were above trade expectations. And the shipment data showed that the US exported 95.0 million bu of soybeans last week, well above inspections that were reported Monday. The shipment data argues for record large December soybean exports, a pace that seems unlikely to slow much in January.

• The US has exported a record 1,374 million bu of US soybeans to date and will reach over 1,400 million bu next week (through December). That is an amazing monthly export average pace of 350 million bu or 87.5 million bu/week. The market must force a dramatic slowing of US exports with China shipping out the beans quickly. We project January US soybean exports of 310 million bu or more than 1,700 million bu or 78% of the annual export forecast through January.

• For their respective crop years to date, the US has sold 755 million bu of wheat (up 63 million or 10% from last year), 1,700 million bu of corn (up 977 million or 135%), and a record 2,015 million bu of soybeans (up 935 million or 87% from last year). WASDE has a big chore on January 12 to increase 2020/21 US corn, soybean and even wheat export estimates while preserving historically tight end stocks. US soyoil sales were also sizeable at 60,700 mt which exceeded expectations. US soyoil is the cheapest vegoil in the world and it is starting to uncover increased world demand based on availability and price. We anticipate broadening world demand for US soyoil in early 2021.

• The S American GFS weather forecast at midday is drier in Central and Eastern Argentina but is otherwise consistent with morning output. Argentina rainfall in excess of 1″ will favour the very far western fringe of corn and soybean producing areas. The vast majority of Argentina’s corn and soy belt will see two-week accumulation of just 0.6-0.7″ or just 20-40% of normal. Net draws in soil moisture will continue. Note that the Buenos Aires Grain Exchange this week pegged soy conditions at 42% good/excellent, vs. 55% a year ago. Early planted corn in Argentina is rated at just 17% good/excellent, vs. 35% last year.

• Widespread rains returns to Brazil next week, which will be welcomed by producers there. However, we note soaking totals in Brazil will be confined to the Centre-East. Two-week rainfall in Mato Grosso will be just 50-70% of normal. January weather in S America is critical to row crop yields.

• US and world grain/oilseed markets have begun to better reflect the massive change in supply and demand that has occurred since late summer. The market’s next chore is to determine the price that eliminates/reduces soy demand and encourages incredible Northern Hemisphere acreage expansion in 2021.

• Wishing all readers a very happy, successful and prosperous New Year, we hope 2021 proves to be better than 2020.

• Today’s headlines: Chicago wheat Hits 6-year high; row crops steady on currencies, worsening Argentine soil moisture.

• Chicago ag futures are steady to higher at midday, with wheat today’s star performer. Recall Algeria will be making a sizeable purchase of wheat today. Algerian tender details are slow to find the marketplace, but there is some chatter that US wheat is at least an attractive option to EU origin. We expect Algeria to fill today’s tender with EU wheat exclusively, but this will act to boost EU fob prices, which in turn makes US wheat competitive on even modest declines in KC futures. Broadly, the theme of the market into early Jan remains that commercial end users will be there to absorb price breaks. Prying additional supply from the US farmer will be arduous moving forward. Our outlook stays bullish.

• The US$ has fallen to a new 32-month low, and currencies continue to add to the US’s competitive position in global ag markets. On the margin, the Aussie and Canadian dollars continue to add value. The Brazilian Real has turned lower after spiking on Monday. Recall Russia’s coming export tax is valued in €uro, with the €uro finding new rally highs this morning.

• US ethanol production through the week ending Dec 25 totalled 275 million gallons, vs. 287 million the previous week and a 10-week low. Note that production is seasonally weak in late Dec/early Jan. US ethanol stocks last Friday swelled 14 million gallons to 987 million despite production contraction. Current US ethanol stocks reflect nearly 4 weeks of use assuming no major change in driving patterns occurs in January. Biofuels will act as a weight on domestic corn disappearance throughout the winter months, but a downward revision to total industrial use in 2020/21 is not anticipated. Spot WTI crude is unchanged. RBOB gasoline is up $0.01/gallon at $1.40.

• Other news is lacking as the trade enters holiday mode. Central US rain/snow in the last 24 hours has matched projections. Moisture equivalent totals in excess of 0.25″ have been confined to the far E Plains, Midwest and N Delta. W KS and the OK/TX panhandles were left completely dry. Zero precipitation is offered to the western HRW Belt through Jan 14. NASS will release updated winter wheat crop ratings from select states next week. Little/no improvement from late Nov is expected.

• The midday S American GFS weather forecast is wetter in Central Argentina late next week, with accumulation of 1.0-1.5″ offered to major producing province Cordoba. Confidence so far out is lacking, and even if the GFS verifies much more will be needed over the next 30 days to stabilise soil moisture, which is rapidly deteriorating across Argentina’s primary crop belt. Also notice that areas of E Argentina will be left arid. The GFS also maintains max high temperatures in Argentina over the next 48 hours in the mid /upper 90s. A lasting break from La Niña-based dryness is not anticipated in January.

• Unusual dryness persists in Central Brazil through the weekend. A more normal pattern of shower activity follows Jan 5-14.

• The goal of the market in Q1 2021 is to significantly slow soybean/product use via demand destruction or substitution. Neither are occurring presently as crush margins stay elevated and amid uncertainty over Brazilian soy shipments in late winter. Corn shares in the need to slow consumption if outright drought develops in Central Brazil Feb-Mar.

• Firm energy prices and US$ weakness has pushed buying back into ags just after the morning opening. Soybeans’ reversal has spilled into all other world oilseed markets, with Canadian and EU rapeseed futures again perched near seasonal highs established last week. A ‘buy the break’ mentality will be the feature of Chicago unless a pattern of soaking rainfall between now and early February across Central and Northern Brazil can be confirmed. Our concern over S American weather stays elevated.

• A resolution to Argentina’s port worker strike is possible later today. Yet, exporters and producers still must contend with falling production potential and historically low river levels, which will act to keep the movement of grain and soy slowed. The 100 plus boats waiting at Argentine ports will be allowed to load/sail, but the message is that a strike resolution will not suddenly give the world marketplace access to more new supply. Also recall that Paraguay must use Argentine waterways for its own corn and soy export program, which have historically been worth 2-3 and 4-6 million mt, respectively.

• Spot Chicago ethanol has traded sharply lower at midday. The EIA’s weekly energy report on Wednesday is unlikely to show material improvement in ethanol production or gasoline consumption. However, so far in 2020/21 weekly US ethanol production has kept up with the pace needed to meet the USDA’s forecast. Ethanol production will stay weak, but the USDA’s forecast is simply too low. Our bet is that the USDA in its Jan WASDE report lowers US corn yield 0.3-1.0 bushels/acre, while boosting total consumption 100-150 million bu.

• Interior US corn basis continues to strengthen, with bids in Central IL up $0.08 for spot delivery. Elevators along the IL River are posting record basis levels for spring arrival (as of late Dec). Corn’s export demand pull will be incredible Feb onward. Any issues with Brazil’s safrinha crop in Apr-May will exacerbate this.

• FAS failed to announce new export sales today, but China is expected to return to the US soy market in January ahead of its Lunar New Year, which begins Feb 12. Additionally, China has on the books 7 plus million mt of Brazilian origin beans scheduled to ship in February. Latent crop development is a concern, and dryness across far Northern and Southern Brazil, areas closest to ports, will sustain the ongoing battle between domestic end users and exporters. This is especially true as Brazil’s soy end stocks fall just 1.5 million mt.

• FAS will release its export sales report this week on Thursday.

• The details of the GFS S American weather forecast at midday are drier in Argentina and drier in pockets of Mato Grosso do Sul and Goias in Central Brazil. However, the overall pattern is similar to prior output in that a 5-6 day period of complete dryness returns to Mato Grosso and Goias before scattered showers return next week. La Niña’s grip on Argentina persists, with little/no precipitation offered to the country’s primary corn/soy belt into Jan 10. Net soil moisture draws in both countries will work to elevate temperatures, with max highs in the next 72 hours to reach into the low/mid-90s. Argentine crops are in trouble if the pattern fails to change beyond the next two weeks.

• This bull market is rather structural in nature and record Northern Hemisphere crops are required to resolve supply issues. Thus far the rally in beans has been based on the need to ration US supply. The rally will likely accelerate in Jan without soaking S American precipitation.

• Soybeans/soyoil have paced the Chicago rally while wheat sags in the Christmas Eve Day trading session. The volume of trade has been curtailed by the coming holiday and the fast-approaching end of the year. Just 4 trading sessions remain in 2020 and fund managers are not willing to take more risk. However, fund managers are also so bullish on Chicago that they do not see a reason to pare back existing positions.

• The Santa Claus grain rally is based on a need to ration US soybean demand amid a lack of cash connected selling. US and S American farmers are so heavily sold, that new sales are not expected until the 2021 S American crop sizes are known. Brazilian farmers are concerned that 60-65% sales could turn out to be 70-85% depending on weather during January and early February. US farmers have sold 80-85% of their 2020 soybean crop. Basis, futures, and spreads are all working in tandem to find the price that moves the last 15-20% of the crop as record large demand chews through the 2020 harvest. US corn export demand is preparing to soar in January as Chinese purchases load. Chicago corn/soy futures are “demand led” bull markets.

• Chicago brokers estimate that fund managers have bought; 3,400 contracts of corn, 2,100 contracts of soybeans, while selling 1,900 contracts of wheat. In soy products, funds have bought 1,900 contracts of meal and 3,200 contracts of soyoil. The entire soy complex has scored another round of contract highs.

• We are questioned on whether a potential resolution can occur in the 15-day Argentine port/crush strike next week. Although either side can move on their demands, the parties are so far apart that a settlement seems unlikely. The Labour Unions are requesting that their workers be paid at the Blue Peso rate (Black Market peso rate vs. US$), or said another way, in US$. The Blue Peso rate is said to be at 140 to 160 vs. the official rate that stands at 83:1 this morning. This would be a request for an 80-100% raise in wages paid so that workers can keep up with coming inflation. Such a huge wage increase is unlikely. And what is surprising is that Government is behind the Labour Unions and their elevated wage demands. So, it is unlikely that they will intervene. Research fears that the strike could last into 2021, because paying employees on the Blue Peso (dollar) rate is so revolutionary, pretty soon Argentine farmers will also want to be paid in the Blue Peso rate also.

• Cash rumours abound that China has added to their US 2020/21 soybean/corn purchases in recent days. FAS daily sales announcements will be watched early next week for confirmation. Exporters indicate that China booked corn for May.

• The midday weather forecast shoved the bulk of next week’s Argentine rainfall to the western half of the country. This is like the EU model which would leave half the country waiting on a rain to finish summer row crop seeding. The GFS’s forecast is for 0.50-2.00″ of rain next week for W Argentina and 0.15-1.00″ for E Argentina which is far too light.

• A new drying trend is noted for Central and Northern Brazil after the holiday weekend. The below normal weather trend for N and C Brazil is worrisome with the crop in its reproductive stage. The long range forecast holds the Northern Brazilian dryness into mid-January. The S American weather pattern is concerning amid expanding dryness.

• An acute need for US soybean demand rationing along with potential dryness for E Argentina and N Brazil are rallying soy/corn futures to fresh contact highs. And the Buenos Aires Exchange indicated that 23% of its soybean and 39% of its corn crop have yet to be planted. This raises the importance of E Argentine rain in January before the planting window closes. Chicago price trends are up, but the bulls are hoping for a year end correction to offer the next purchase opportunity.

• Chicago is sharply higher at midday. Corn and the soy complex have scored new contract highs with the wheat market reversing overnight losses on fresh buying. The holiday looms, but based on the volume at the Chicago, few would imagine that Christmas is just 36-48 hours away. Chicago volume is active today on a need for soy demand rationing and what lies ahead after the long holiday weekend. Key for next week’s trade will be S American weather, Chinese demand and the ongoing need for the rationing of US soybean demand. Hopefully, Thursday’s session (Christmas Eve Day) will be less active. A profit taking turnaround is expected tomorrow.

• Chicago brokers estimate that fund managers have bought; 7,000 contracts of corn, 7,000 contracts of soybeans, and 6,600 contracts of wheat. In soy products, funds have booked 3,200 contracts of soymeal and 4,000 contracts of soyoil. Fund managers are on the buy side of the marketplace all morning long. There just is not much for sale above the market, however the fund buying is slowing at midday which could produce a correction near the close.

• FAS/USDA did not announce any new daily sales of corn, wheat, soybeans, or soy products today.

• US Weekly Export Inspections for the week ending December 17 were 14.5 million bu of wheat, 25.6 million bu of corn, and 13.0 million bu of soybeans. The weekly soybean sales were a marketing year low. The diminished sales totals were widely expected, but US soyoil sales were a solid 20,900 mt with meal at 233,700 mt. The ongoing US soy product export sales helps maintain the US crush rate and prevent demand rationing from this sector. China booked another 500,000 plus mt of US soybeans last week. We now estimate that China has secured 35.5 million mt of US soybeans in 2020/21 on their way to taking 40 million.

• China booked another 2-3 cargoes of US soybeans this morning off the PNW for February, which helps confirm talk that China looks to roll 1-1.5 million mt of February purchases to the US due to late seeding dates. We are also hearing that China continues to seek new crop US cargoes, quietly.

• For their respective crop years to date, the US has sold 736 million bu of wheat (up 55 million or 8% from last year), 1,663 million bu of corn (up 961 million or 137%), and 1,990 million bu of soybeans. The US has sold a record 90.5% of their annual export estimate, which we believe is far too low. WASDE needs to raise their 2020/21 US soybean export estimate by some 150-200 million bu with corn up 50-100 million bu. The increasing US export sales position makes it difficult for the January USDA crop report to be bearish.

• For the first time, the price of wheat and corn within China are the same. Dalian corn and domestic wheat are both around $10.40/bu. This may be based on China’s elevated auction of old wheat stocks, but the Government sales have not pressured corn. Dalian May corn closed at $10.33 overnight.

• The midday is wet for Argentina. The model indicates 0.50-2.00″ of rain early next week. However, a new drying trend is noted for Central and Northern Brazil. The below normal weather trend for N and C Brazil is worrisome with soy in its reproductive stage. 1-3.00″ of rain will drop across N and C Brazil during the holiday weekend, before the drying trend develops. The long-range forecast holds this dryness into mid-January.

• The Chicago rally is based on the acute need for US soybean demand rationing. Current prices are now accomplishing that feat. In Argentina, labour unions and the port authorities will talk this afternoon, but a settlement is not expected. Workers are demanding to be paid at the Blue Peso rate, a wage increase of 80%. We hold a bullish stance, but a Chicago correction could unfold early next week for a new buying opportunity. Any $0.15-0.25 cent decline in soybeans and $0.05-0.10/bu in corn is a buying opportunity in our view.

• Chicago is mixed at midday with corn, soy and wheat futures trading either side of unchanged. A push to new rally highs uncovered profit taking from the bulls ahead of the holiday with a slight improvement in the rainfall forecast for Argentina and S Brazil in the last few days of 2020. Traders are prepared for disappointing sales numbers from FAS on Wednesday morning as large daily sales totals were not announced. But when the US has already sold 90% of the annual US soybean export forecast, any sales are large. We doubt that you can keep soy futures down amid rumours that China is now seeking new crop US soybeans and is worried about Brazilian abilities for late February export executions amid a delayed crop. There may be as much as another 1 million mt of Brazilian February soybean demand that is shifted to the US. The problem is that with US 2020/21 soybean end stocks at just 170 million bu, there is no room for any new buying.

• Chicago soybeans, corn and wheat futures can ease, but additional soybean and corn demand rationing is needed. This should have the bulls back buying after the Christmas holiday. Traders want to be long heading into the January 12 USDA report as a further fall in US corn/soybean yields is feared.

• FAS/USDA did not announce any new daily sales of corn, wheat, soybeans, or soy products today. Traders are trying to understand how much (if any) Argentine soy product or corn demand has switched to the US. Argentine exporters fear that the strike will persist into 2021. There are 100 vessels waiting to load, and for each day the strike continues, the cost for exporters/end users and the Argentine Government is dramatically growing. Both sides are entrenched in their position, and it seems for now both seem unmovable.

• Chicago brokers estimate that fund managers have sold 5,200 contracts of soybeans, 3,500 contracts of corn while buying 3,200 contracts of wheat. Funds have sold 2,900 soymeal and 2,400 contracts of soyoil.

• China soybean imports to date suggest a 102-104 million mt all origin import pace for 2020/21. China’s westernised hog production model (following ASF) and rapid growth in its sow herd argue for a sizeable increase in Chinese soybean imports into 2023. Some forecast that China could take 107-109 million mt of all origin soybeans in 2021/22, a 5-7 million increase from the current crop year.

• The point is that China is again growing its soybean demand which suggests that the WASDE baseline soybean import estimate for 2021/22 is too small at 2,175 million bu. Analysis of world soybean trade and Chinese demand argues for a total closer to 2,325 million bu, 150 million bu larger. The problem is that such exports virtually deplete 2021/22 US soybean end stocks, even if US 2021 soybean seeding rises to a record 90.5 million acres. The soybean bull is a multiyear event which demands above trend 2021 US yields before it ends.

• CIF Gulf corn/soy values are up 2-4 cents at midday as exporters reach for supply from the producer. The problem is that US producers show no willingness to part with stored supply until the New Year. The US farmer has a tax issue for 2020 amid US Government Covid support amid autumn rising grain values. Chicago corn/soy spreads will continue to continue to gain on the need for cash grain.

• The midday S American weather forecast is wetter than the overnight run for Cordoba and the western half of Santa Fe. The model indicates 1.50-3.00″ of rainfall. However, the midday GFS Ensemble was unchanged and did not follow the wetter GFS forecast. The Euro model is just starting to run, but “other” model verification is needed for us to buy into the wetter GFS solution. The extended range forecast maintains a classic La Niña pattern for S America and we are worried about the return of dryness for N Brazil in January

• Firming Gulf CIF values have rallied corn spreads and flat price this morning. Buying the last 15-30% of the 2020 crop is not going to be easy. Most farmers want to make sure that a S American weather problem is avoided. We stay bullish looking for better than expected export sales early Wednesday. Any corrections should be modest as this is demand rationing rally.

• Chicago summer row crop futures have recovered from the overnight (mutated) virus jitters with dryness across Argentina and S Brazil in focus. Soybean and meal futures have scored new contract highs while soyoil sags in relation to the $2/barrel fall in crude oil futures. The corn market crawled back to unchanged with wheat in tow. The volume of Chicago trade has been hefty with end users and funds using the overnight break to add to their growing length. We look for a mixed Monday close with the soy complex outperforming the grains.

• We have been asked if there was any news at this ,morning to spur a quick 21 cent rally in soybeans. We cannot find any fresh fundamental news, but we hear that someone bought 7,000 contracts of soybean futures in a 4-minute window to push values sharply higher. There are few resting sell orders above the market as the US and Brazilian farmer have oversold his crop comfort level. The lack of farmer cash selling exacerbates Chicago rallies and reflects bullish price trends. The risk in a S American weather market is to the upside, not the downside, until the 2021 crop is made in February/March.

• FAS/USDA did not announce any new daily sales of corn, wheat, soybeans, or soy products today. US exporters report of the daily interest in the switching soy product and corn cargoes to the US Gulf that are caught up in the Argentine crush/port strike. Exporters are looking for prompt US Gulf soymeal. But as the strike goes on through the holidays, soyoil and corn will also be booked. The Argentine strike is now 12 days old and there are no talks planned into the Christmas Holiday. Argentine sources are fearing that the strike could persist into early 2021.

• US weekly export inspections for the week ending December 17 were massive for soybeans at 93.1 million bu with last week’s sales revised upwards to 90.3 million bu. China shipped out 44 million bu from all US ports. We estimate that on a known and unknown basis, China has bought 35 million mt of US soybeans. China is clearly on their way to securing 38-40 million mt of 2020/21 US soybeans, a record. The US has shipped out 1,275 million bu of soybeans through December 17 with total Census exports forecast to be 60-80 million bu larger.

• US weekly corn inspections were 30.0 million bu with wheat at 14.4 million bu. Crop year corn inspections are 501 million bu (up 200 million) with wheat equal to last year’s pace at 520 million bu.

• Chicago brokers estimate that since the Chicago reopen, funds have bought 9,000 contracts of soybeans, 5,500 contracts of corn and 3,200 contracts of wheat. Funds have bought 3,100 soymeal and 1,400 contracts of soyoil.

• The midday GFS weather forecast is little changed from the overnight run with a general drying trend forecast for Argentina and Southern Brazil for the next 10-12 days. If any meaningful showers develop, they will be located over W Argentina, close to the Andes Mountain range.

• The extended forecast maintains a classic La Niña pattern for S America with dry Argentine and Southern Brazilian weather while daily showers fall across N Brazil. The showers will stabilise the crop but will not repair yield losses that were suffered amid the historical dryness from September 15 into December 20 across N Brazil. A one-two punch of N Brazilian and Argentine losses could be magnified with the passage of time. The overall S American weather pattern is threatening with Argentine temperatures to warm into the mid 90′s over the Christmas weekend.

• The soy complex must endure a dramatic demand rationing phase with US soybean exports/crush record large. A rally to $13.50-14.00 March is justified with normal S American weather. The loss of any S American soybean (or corn) crop only exacerbates the bull market. January soybean options expire on Thursday with FAS’s weekly Export Sales report due Wednesday. Funds will likely return to their buying ways right after Christmas with the January WASDE report in the market’s sight on 12 January.

• Chicago summer row crop futures are higher at midday on fresh speculative buying and a lack of resting sell orders overhead. March corn is testing its November 30 high at $4.30 while the soy complex has scored new contract highs with January soyoil futures rising to 40.28 cents and March soybeans reaching $12.23. March soymeal futures have exceeded the 2018 top at $404.90 with the 2016 high the next upside target at $432.00.

• Chicago has a bullish feel with traders noting that if the market settled at midday values, bullish breakouts will have occurred on the weekly and monthly charts. We look for a higher Chicago close with S American and US farmers show no interest in selling today’s Chicago rally.

• Wheat is the midday laggard with Chicago and KC futures slightly Lower. Unmoved Russian fob offers, and the availability of E European wheat has capped an early rally. Wheat is being used as a short leg vs. soybeans/corn this morning now that the Russian tax is decreed. March Chicago has been unable to break a key chart point which is Monday’s reversal high at $6.22.

• FAS/USDA did not announce any new daily sales of corn, wheat, soybeans, or soy products this morning. Active interest continues for US corn amid its competitive position in world trade. We should be aware that next week’s USDA Weekly Export Sales report will be released Wednesday due to the Christmas holiday and everyone should be prepared for its early release.

• US exporters are reporting a daily interest in the switching of soy product and corn cargoes that are caught up in the Argentine crush/port strike. Already, it is being estimated that the Argentine soybean crush rate has been cut by nearly 2 million mt through today. We hear that Argentine exporters are looking for prompt US Gulf soymeal, soyoil or corn to replace Argentine cargoes that are being held hostage by the 10-day crush and port stevedore strike. The longer the strike goes on, the greater the US export interest will be.

• US exporters report that China has started switching Brazilian cargoes for February back to the US on the doubt that Brazil will be able to fulfil sales on a timely basis due to dry weather which has delayed the development of the 2021 N Brazilian soy crop. Estimates vary, but exporters suggest that the US could pick up an additional 750-900,000 mt of Chinese soybean demand for February. The problem is that the US can ill afford to sell soybeans to anyone with US end stocks nearing zero based on record large crush and export rates through the end of December. The marketplace must reach price levels that really starts to cool US crush/soy export demand.

• The midday GFS weather forecast is little changed from the overnight run. Spotty showers will impact Central Argentina on the weekend while heat and abnormal dryness persist through Northern Brazil. The rains will start to fall across the Mato Grosso, Goias and Bahia on Tuesday with daily shower chances forecast into yearend.

• The extended forecast maintains a classic La Niña pattern, in which complete dryness resumes across Argentina Dec 20-January 1. The models offer warming temperatures to the mid 80′s to the mid 90′s late next week. The weekend Argentine rain does not look to be plentiful enough to reverse the acute drying trend that has prevailed since October 1. Argentina/S Brazil drought concern is rising amid the arid weather pattern and a warm pool of Atlantic Ocean to the east of Argentina that could produce a high-pressure ridge.

• Chicago has started a demand rationing rally to slow crush and exports. However, based on the Argentine port and crusher industry strike, US nearby demand is increasing. There is an acute need to curtail record large US soybean demand. Moreover, Argentine and S Brazilian weather forecasts look drought-like into early January which makes rain in the FH of January critical to finish seeding and for filling corn. Our concern for Argentine weather is rising.

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Weekend summary 18 December 2020

• Chicago ag markets are steady to higher at midday, with export sales and long-range Argentine weather forecasts driving activity. Prices have cooled from morning highs, but meaningfully bearish input remains tough to find.

• Through the week ending Dec 10, US exporters sold a net 76 million bu of corn, vs. 54 million the previous week and well above trade expectations. Weekly soybean sales were 34 million bu, vs. 21 million the previous week. Wheat sales totalled 20 million bu, vs. 23 million the previous week. Meal sales were a sizeable 261,000 mt.

• For their respective marketing years to date, exporters have sold 1,637 million bu of corn, up 142% from mid-Dec a year ago, 1,978 million bu of soybeans, up 89%, and 722 million bu of wheat, up 10%. Soybean commitments now account for a full 90% of the USDA’s forecast, with 8 months remaining in the crop year. Bean sales moving forward must average just 7.6 million bu per week to hit the USDA’s target, which is clearly too low. Corn sales must average only 29 million bu. Even weekly wheat sales must average only 13 million per week to meet the USDA’s 2020/21 forecast.

• China through the reporting period secured one cargo of US HRW, 13 million bu of sorghum and 9 million bu of US corn on a known basis. US sorghum export commitments now sit at 196 million bu, or 71% of the USDA’s forecast. The US cash sorghum will continue rationing supply via high price/slowed feed consumption.

• The lack of daily sales announcements from FAS last week was a poor indicator of actual demand.

• Global crude oil prices have scored new rally highs on hope for a return to near-normal driving/travel patterns by mid-2021. Rising energy markets are helping to boost biofuel blending incentive and is also working to strengthen currencies in Russia, Canada and Australia. This is turn is keeping global fob grain prices elevated when valued in US$. Additionally, US$ weakness is funnelling money into the €uro, which is acting to increase the US$ value of Russia’s wheat export tax, which we believe is set at €25/mt. The impact of Russia’s export tax will be determined by price movement in Russia’s interior wheat market over the next 30 days. A relatively strong Ruble will further hinder any decline in forward Russian wheat fob offers.

• NOAA’s updated Jan-Mar US climate forecast is slightly wetter than its outlook in November. Yet, above normal temperatures are probable in all regions into early spring. Plains drought over the next 90s days is projected to expand eastward and envelop the whole of KS and OK.

• The midday GFS weather forecast is little changed from the overnight run. Spotty showers will impact Central Argentina on the weekend while heat and abnormal dryness persist into the middle of next week across 45-50% of Brazil’s Soy Belt.

• The extended forecast maintains a classic La Niña pattern, in which complete dryness resumes across Argentina Dec 20-Jan 1. A more normal pattern of rainfall evolves in major soy producing states Mato Grosso, Mato Grosso do Sul and Goias in Brazil beyond Tuesday.

• Our primary concern remains worsening drought across Argentina, which will have a major impact on corn and soy product markets if dryness lingers into the middle part of January.

• The impact of current moisture deficits in Brazil on soy yields will be unknown until mid-winter. However, the need for global oilseed rationing remains. Corn export demand will stay at impressive levels through the foreseeable future. Even a modest jump in US wheat export demand is anticipated beyond winter. Our outlook stays bullish.

• Chicago futures are mixed at midday with summer row crop futures higher while wheat futures sag on profit taking of the recent Russian tax related rally. Chicago volume has sagged from yesterday’s active trade with traders being more cautious ahead of the holidays. Research looks for a mixed Chicago close with March soybeans unable at rise above $12.00 (the 2016 high) this morning.

• However, this is the fifth test of $12.00 and history shows that when a market tests key resistance this many times, the odds grow for an ultimate penetration. The sag in soybeans of the $12 high is due to soyoil which was unable to build on the new contract high that was scored overnight.

• Chicago brokers estimate that funds have bought 700 contracts of soybeans and 300 contracts of corn, while selling 3,900 contracts of wheat. In soy products, funds have bought 3,200 contracts of soymeal while being flat in soyoil. Funds were net buyers of soyoil overnight but have since sold back most of those purchases. Fund managers appear to be content to hold net long Chicago positions into 2021 amid threatening S American weather forecasts. Funds were buyers of corn and soybeans overnight and then sellers this mornig which leaves them as a modest buyer of a few hundred contracts.

• FAS/USDA did not report any new US sales through their daily reporting system.

• The Brazilian Senate late Tuesday approved a Bill that would allow foreign individuals and corporations to own Brazilian land, including farmland. The Bill is expected to pass the Lower House and be signed by President Bolsonaro in late 2020 or early 2021. The ability of foreigners to own Brazilian land has been a long time coming and will be a bullish jolt to Brazilian agriculture. Interest is already being expressed by China and other large investment funds in farmland. The legislation maintains the expansion of arable land across N Brazil. This is a big deal for Brazilian agriculture.

• EIA reported that the US produced 281 million gallons of ethanol last week. Down 10% from last year, but down only 10 million gallons from last week.

• US ethanol stocks soared to 964 million gallons or up 5% on last year. Since late October, US ethanol stocks have grown by 12% or 100 million gallons. The US ethanol industry appears to be preparing for the return of more normal US driving activity in Q1 as more than 100 million Americans are vaccinated.

• The weather forecast has reduced rain totals for Argentina from Friday into the weekend, with hot/dry stressful weather for Mato Grosso and Mato Grosso do Sul. Yet, the forecast holds onto near to above normal rain for E Brazil of 4-6.00″. This is abnormal December S American weather which is having an increasing adverse yield impact. In fact, following the weekend rain chance for Argentina, the forecast is arid into January. The shortage of rain is becoming critical for Argentine crops. And Argentine temperatures will rise to the upper 80′s to mid 90′s late next week. The extended range 10-15 day forecasts have been wetter for weeks with that moisture not being pulled forward in the forecast for either N Brazil or Argentina. The overall dry weather pattern is concerning.

• The Argentine dock/crush industry strikes along with abnormal S American weather will keep Chicago corn/soybean prices in an uptrend. Even Chicago wheat will not be able to fall too far below $5.80 March Chicago support. Other Chicago analysts are forecasting sideways trade through the holidays. However, based on threatening Argentine weather, our bet is for a marching bull market that reflects declining S American crop potential.