• Chicago futures are mixed at midday with soybean futures turning back higher as the early morning break uncovered limited speculative selling. US and S American farmers have virtually shut down their cash selling over the past 2 weeks. And if Chicago futures are to weaken, it must be based on speculative liquidation. We note that cash corn/soy markets in the Midwest, Central Brazil and Argentina are strengthening on the need for supply. The basis gains are being noticed by sold out futures traders.

• End users/importers are using breaks to extend their forward coverage while US farmers have already sold more than 85% of their soybeans and at least 70% of their corn. Brazilian farmers have also parted with record sales of soybeans which is nearing 68% of their soy crop. The point is that on Chicago rallies, limited selling rests above the market which makes a close above last week’s USDA December Crop Report high ($11.78 basis January soybeans) important. Moreover, January soyoil futures are perched just below its contract high.

• Wheat futures are higher as GASC faces purchasing their highest cost wheat in over 5 years while the corn market is awaiting Chinese demand and clarity on Argentine weather as the first crop has started pollinating. Brazilian and Argentine corn crops both have a downward bias with the persistence of below normal rainfall. We would argue the same based on the coming heat to Northern Brazil including Mato Grosso.

• The FAS/USDA daily sales report did not report any new purchases.

• Egypt’s GASC secured 235,000 mt of non-Russian wheat in a first half February shipment tender. The sales consisted of 120,000 mt of Romanian and 115,000 mt of Ukraine wheat. The prices ranged from $269-271/mt basis fob with $12.37-14.35/mt for freight. The paid fob wheat price was the highest since 2015. Russian wheat offers added the $30/mt due to the tax which made their offers non-competitive.

• The November NOPA crush was a record large 181 million bu with member soyoil stocks rising to 1,558 million pounds. The NOPA crush was slightly above industry estimates of 180 million bu and works back to a daily processing rate of 6.03 million bu /day. NOPA November soyoil stocks were 71 million pounds larger than October and 110 million pounds above last year. The November soyoil yield was 11.63lbs/bu, down 0.04lbs from October. The US soyoil industry feared larger US soyoil stocks which produced early day Chicago selling. We see the NOPA November Crush Report as reconfirming that the US is utilising the 2020 soybean crop too quickly. Demand rationing via price will be required in early 2021.

• The midday GFS weather forecast has reduced rainfall totals for Argentina and looks to be coming more in line with EU model. The GFS forecast still has rain of 0.25-1.25″ with totals above 1.00″ forecast for La Pampa and Buenos Aires. The Northern Brazilian forecast shows no change with another 6-7 days of dry weather with rising temperatures. Highs are forecast to rise to the 90′s to lower 100′s which will add to crop stress. Argentine high temperatures will range from the 80′s to middle 90′s. Both N Brazil and Argentina will endure well below normal rainfall, extending a trend that goes back to early September. Subsoil moisture levels are limited, which provides no water reserves for crops should new periods of heat/dryness emerge.

• The industry is expecting that Chicago markets will be choppy /sideways into the holidays on a lack of cash leadership. Yet, record large US soybean demand and tightening us corn stocks will produce short covering and end user pricing on breaks. And potentially bullish January WASDE reports loom with potential new cuts in US corn/soybean yields. Amid a lack of selling on the breaks, the path of least resistance is higher for the Chicago. It is just a question of day-to-day timing.

• Chicago futures are mixed at midday with the grains weaker while soy futures hold in the green on threatening S American weather and active US soy product demand. Chicago wheat has been the downside leader on $30/mt Russian export duty rumour, a 17.5 million mt export quota, with both starting on Feb 15 . We hear that although the Russian rumours are strong, the Government appears to have not decided on the duty, its start date or tonnage in the quota. Russian wheat traders are fearful of a January 15 start date with the export quota being cut to 15 million mt. The current proposal does not do enough to pressure domestic Russian wheat to 14,000 Rubles/mt as argued by the Economics minister. We anticipate a mixed Chicago close with the complex holding while wheat sags and corn is caught in between. Note that December futures contracts expire today.

• Chicago brokers estimate that funds have sold; 7,000 contracts of wheat, 4,300 contracts of corn, and 4,200 contracts of soybeans. In soy products, funds have sold 2,200 contacts of soymeal while buying 1,900 contracts of soyoil.

• The FAS/USDA daily sales report did not report any new purchases.

• US weekly export inspections for the week ending December 10 were: 34.9 million bu of corn, 87.0 million bu of soybeans, and 9.6 million bu of wheat. Last week’s US soybean export estimate was raised 11 million bu to an impressive 95 million bu. Based on vessel counts, we are looking for a 10-14 million bu upside revision in US soybean exports next week. For the US to be exporting nearly 100 million bu in early December speaks to the strength of Chinese and world demand. Argentina has not exported a soybean cargo in over 7 weeks, while just 1 boat sailed from Brazil last week. The US has a stranglehold on world soybean demand through mid-February.

• For the crop year to date, the US has exported 469.8 million bu of corn (up 185 million or 65%), a record  1,178 million bu of soybeans (up 493 million or 72%) with US wheat shipments at 505 million bu (up 7 million or 1%). The US is on pace to export more than 2,400 million bu which is 200 million bu above the WASDE forecast. ADM’s repairs on its Reserve Terminal, one of 3 that ADM owns in the Gulf, has been going favourably and that a reopening is possible before the end of the year. The reopening will add an additional 45-50 million bu of loadout capacity per month which will be a boost to the coming US corn export program. US Gulf elevations soared to record highs this autumn on massive demand by China for US soybeans. A record large US corn export program will be underway in January.

• The midday GFS weather forecast is little changed from the overnight forecast into December 24. A below normal rainfall trend is forecast for both N Brazil and Argentina. The midday GFS forecast is further south with Argentine rain (vs the overnight on the weekend) with the moisture outside of the primary crop belt. The next chance of showers is a weak frontal pass during the Christmas holiday weekend.

• High temperatures hold from the 70′s to the lower 90′s across Argentina while warming produces 90′s to lower 100′s in N Brazil, and 80′s to mid-90′s in E and S Brazil. The drier than normal forecast is threatening to S American crops following months of below normal rainfall.

• The wheat market is sagging as the rumoured Russian export duty will not be enough to shift world wheat demand to the US. But a final Government decree has not been decided on by Putin and a harsher outcome is a possibility. The S American weather pattern is deficient in rain for another 2-3 weeks which demands regular rains during late December and January. Soyoil futures are breaking out to the upside on the charts, while the early corn rally was capped by wheat. We remain bullish, this is no place to sell either corn or wheat.

• Soy futures rose 6-8 cents to end the week, led by a strong rally in December soyoil ahead of next week’s expiration. Spot soybean oil stopped just short of $0.40/lb and traded the highest price since July 2014.

• FAS made a rare soybean meal export sales announcement of 130,000 mt of soybeans to the Philippines. Thursday’s Export Sales report showed that cumulative meal exports are now above last year and the highest since 2013/14 at 2.4 million mt. Outstanding sales of 3.5 million mt are down slightly from last year, but the lowest since the 2012 drought. World end users have light coverage.

• However, the USDA raised its annual soymeal export forecast by 500,000 tons to 14 million mt or nearly unchanged from last year’s record export pace.

• The rapidly expanding soybean meal export program highlights the looming battle that will take place between US exporters and the US processors for the 2020/21 crop. We remain bullish as current prices are not rationing the tight US soybean stocks. We see 2020/21 US soybean end stocks at just 30-65 million bu demanding acute rationing via higher prices.

• March Chicago corn rallied 2.5 cents as wheat futures break through chart-based resistance. Corn’s own fundamental input remains bullish. Near complete dryness will persist across Argentina through the end of December. Brazil’s interior market has rallied slightly following CONAB’s 2.3 million mt cut to first crop production. Rising global wheat prices will ensure record global corn feed consumption.

• The Buenos Aires Grain Exchange on Thursday pegged early planted corn’s crop rating at just 24%. This compares to 35% last week and 45% on the same week in 2019. We nte that if the two-week weather forecast verifies, Dec 2020 will be noticeably drier than Dec 2017, the last year of major crop loss. An immediate pattern change is needed to prevent a further 7-8 million mt reduction in Argentine corn supply.

• Managed fund net length on Tuesday was 270,000 contracts, near unchanged from the prior week. Speculative buying resumes next week if weekend Argentine forecasts go unchanged.

• March Chicago wheat rallied 20 cents amid reports that the Russian government is indeed considering placing a sizeable levy on wheat exports to quell food inflation. The issue for markets worldwide is that with respect to a tax, rather than a new quota, the government has the ability to implement one immediately and even retroactively. Any tax will slow both farmer and exporter sales. Interior Russian flour prices this week are unchanged and still record high. Fresh policy news may be published over the weekend.

• We estimate Jul-Dec Russian wheat exports at 25.2 million mt. This implies that the USDA’s global trade matrix features Jan-Jun Russian shipments of 14.8 million mt, the second largest on record. We have no way of knowing just much of this will be left in Russia via policy. Yet, amid record global wheat consumption, some measure of demand will be shifted elsewhere, potentially including to the US.

• The wheat outlook has turned more bullish as Russia aims to cap exports for the first time in years. Not until large N Hemisphere winter wheat crops are confirmed will the market relax.

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Weekend summary 11 December 2020

• Chicago values have shifted to mixed at midday following the USDA December Crop Report. The report tends to be a non-event for the marketplace, this year’s report did not disappoint. The pullback in Chicago futures is on profit taking as the USDA did not produce a bullish surprise in the last report of 2020.

• WASDE did not raise US 2020/21 soybean exports even though the US has sold a record 88.5% of its annual forecast through December 3. WASDE left its export forecast unchanged at 2,200 million bu. Surprisingly, WASDE raised the US 2020/21 crush estimate by 15 million bu to 2,200 million. The US crush increase was based on strong export demand for US soybean products, and the record large September/October crush pace. NOPA will be out next week with their November crush, and another record monthly record total is forecast. Currently, there is no sign of US demand rationing. WASDE will have hard choices ahead with US soybean export inspections to remain elevated into mid-February.

• US 2020/21 soybean end stocks declined 15 million bu to 175 million with the average farmgate price raised to $10.55/bu (up $0.15). We see increase in US soybean crush (not exports) as bullish as it highlights the demand struggles that are ahead. Exiting a US soybean sales export contract is not going to happen with the spread between the US/ Brazil fob values relatively tight. China is said to be bidding for US Gulf soybeans for July/August on attractive US Gulf offers. We now estimate 2020/21 US soybean end stocks at just 50 million bu, which is less than pipeline supplies of 100 million bu (92 million bu was the low stocks of 2012/13).

• WASDE cut their 2021 Argentine soybean crop estimate to by 1 million to 50 million mt while leaving the Brazilian crop at 133 million mt. WASDE (like CONAB) was loath to cut Brazilian soy production with the key reproductive period ahead. However, Brazilian sources confirm that 2020 has been one of the most challenging in modern history amid acute spring soil moisture shortages.

• WASDE made no change in the US 2020/21 corn balance sheet leaving stocks at 1,702 million bu. Although the US corn export sales pace is record large, WASDE decided to leave US corn exports at 2,650 million bu with China imports being raised to 16.5 million mt as Ukraine corn shipments to China are advancing.

• WASDE cut 2020/21 Argentine corn production by 1 million to 49 million mt while leaving Brazil at 110 million mt. This was contrary to the December CONAB estimate of 102.6 million mt, which was 7.4 million lower. World 2020/21 corn stocks fell 2.5 million to 289 million mt. China’s 2020 corn crop was left unchanged at 260.0 million mt.

• US 2020/21 wheat end stocks declined 15 million bu to 862 million on a 5 million bu cut in imports to 120 million bu, and 10 million bu hike in US wheat exports to 985 million bu. US wheat export sales suggest an annual total of 1,000 million bu, with final 2020/21 US wheat end stocks closer to 850 million bu.

• 2020/21 World wheat stocks fell 4 million to 316.5 million mt, the first fall in world wheat stocks in months. The 2020 Russian wheat crop was raised 500,000 mt to 84 million mt, while the Australian crop was pegged at 30 million mt, up 1.5 million. 20/21 Australian and Canadian wheat exports were raised 1 million to 20 million mt and 26.0 million mt, respectively. World wheat trade was increased 3 million to 193.6 million mt. Whether Russia will export 40 million mt depends on its coming export policy.

• The USDA did not provide any bullish surprises which caused Chicago futures to relax from opening gains. However, S American weather stays concerning, and any Chicago break will uncover new end user and importer buying. A lasting Chicago decline is unlikely to be sustained. A “marching” rally should unfold that pushes soybeans above $12.00 and corn above $3.30 resistance into early 2021. Few traders will want to be bearish ahead of the January crop report with US soy/corn stocks tightening.

• Chicago values are higher at midday with soybean futures the early upside leader. Corn and wheat futures have been followers, but the tone of the market is more positive than recent days. Traders are looking to secure any intraday breaks.

• Tuesday’s final Chicago open interest data showed a decline of 25,601 contracts in soybeans reflecting that large fund managers have decided against rolling their long January positions forward (ahead of the looming end of the year). Chicago corn/wheat open interest were down only slightly, suggesting that Tuesday’s break was just “risk off” selling. Fund managers have enjoyed several months of broad trading profitability and do not want WASDE to “mess-up” a good year. There is only 1 full week of trading remaining in 2020.

• We look for a higher Chicago close with the third day of the index fund roll occurring at the close. After the USDA report, traders will have more confidence to again press the long side of Chicago amid threatening S American weather. The market risks are tilted to the upside.

• Chicago brokers report that funds have bought 3,200 contracts of corn, 4,500 contracts of soybeans, and a net 1,200 contracts of wheat. In the soy products, funds have bought 2,100 contracts of soymeal and sold 1,400 contracts of soyoil. Funds were sellers of wheat overnight and have now covered those sales and are net buyers on the day.

• The USDA/FAS indicated that Mexico booked 257,071 mt of corn overnight. We note that US fob Gulf corn for March is 0$.60/bu cheaper than Ukraine corn and $0.40/bu that Argentine corn including downriver loadout costings. It makes no sense to us why US Gulf corn has to be priced so aggressively in a world that is short feed grains. Based on price, the US will be picking up non-traditional corn export business to N Africa, the Mideast and Mediterranean.

• There are fresh rumours that China is booking US Gulf/PNW corn for May with Hong Kong Millers seeking US spring wheat for February/March. Last week there were like rumours that have not been confirmed by FAS daily sales reports. Thursday’s US Weekly Export Sales Report could hold some China buying clues.

• The US ethanol corn grind recovered to 291 million gallons vs 286 last week, and an average of 284 million to reach the USDA’s annual forecast. US ethanol stocks recovered to 928 million gallons, up 36 million. The US ethanol industry could be building up its stocks for enlarged export programs to both Brazil/China in early 2021. Rumours abound that China is seeking/booking US ethanol, but confirmation will have to wait until the December Census Trade Report that will be released in February. Brazilian ethanol prices are rising amid a smaller sugar crop due to the recent acute dryness across N Brazil.

• The 10-day weather forecast is like the overnight run for NW Brazil with rainfall chances into the weekend before a lengthy dry pattern returns. The best rain chances for the Mato Grosso and Goias are Friday/early Saturday with 10-12 days of hot/dry weather following. This will produce a new round of crop stress for soybeans/first crop corn. The Argentine forecast is dry with just a few showers over NE Argentina with highs in the 90′s into the weekend. The Argentine dryness is worrisome, but no extreme heat is forecast beyond Saturday. Our concern over S American weather stays elevated.

• USDA/CONAB will release their reports Thursday morning with neither expected to produce any fireworks. Research argues if there are surprises, it is WASDE raising its 2020/21 soy export estimate by 50-100 million bu on sales on the books and that US soy loadings will be massive into February. US corn export sales are building while traders await confirmation of Chinese buying. Stay bullish on Chicago breaks as the regular rains that S American crops demand is not developing and few will want to be bearish into the January USDA crop report.

• Chicago values are lower at midday with soybeans pacing the decline on fund long liquidation. March soybean futures are back to testing key support at $10.40-10.50 with March corn’s support noted below $4.15. KC March wheat has support below $5.35. Buying has been limited to short covering, but commercial expectations are that China will make new purchases before yearend to pad their Phase One purchase pace heading into 2021. China remain intent on being a “good actor” of the Phase One agreement, not so much for political reasons, but due to strong economic growth and the dramatic increase in their hog herd. Research sees soybeans, corn and wheat as nearing strong support (value) with the further downside potential with call options offering value. US and S American farmers have halted cash sales which is starting to firm basis bids.

• Chicago brokers report that funds have sold 9,000 contracts of corn, 7,200 contracts of soybeans, and 3,200 contracts of wheat. In the soy products, funds have sold 3,200 contracts of soymeal and 5,500 contracts of soyoil.

• The USDA/FAS did not make any new sales announcements this morning.

• The Brazilian Real is trading at 5.09 vs. 1 US$ at midday. The Real has slid from 5.50 just a few weeks ago. The decline in Chicago and the rally in the Real has harmed farm cash soybean bids by as much as 16-19% depending on the location. The dramatic cash bid price fall along with less rain than desired has shut down Brazilian farm selling of both soybeans and corn. The Real is expected to keep rising which longer term will diminish Brazilian farm expansion if Chicago does not keep rising. The rise in the Real and the Russian Ruble are going to make it more difficult to stimulate cash selling.

• China has vowed like retaliation against the US for its travel ban against the 14 key Chinese Government officials in its law-making body. China criticised the move and summoned the US Ambassador to protest. The Trump diplomatic financial sanctions are not expected to impact US/China trade. The US continues to condemn China’s National Security Law over Hong Kong, which China will openly criticise, but it is unlikely to cause major trade harm.

• The average end stock forecast by analysts is for US 2020/21 corn end stocks of 1,691 million bu (down 9 million) with soybean stocks at 168 million bu (down 22 million). No change is expected in US wheat end stocks at 877 million bu. We suspect that the US 2020/21 soybean end stock total could be lower with an export increase of at least 50 million bu which would drop US soybean stocks to just 140 million bu.

• The 10-day forecast is drier than the overnight run for NW Brazil and slightly drier for Argentina. The 10-day rainfall map reflects that rainfall will be less than normal! The midday forecast has cut some 0.25-1.50″ from the NW Brazilian forecast which is going to leave the area short of soil moisture with heat/dryness returning by the weekend and then continuing for at least another week. This is concerning.

• N Brazilian temperatures are forecast to be seasonal with highs ranging from the 80′s to the mid 90′s. Argentina and S Brazil temperatures will range from the 70′s to the 90′s. Our concern for S American weather is rising (again) amid the ongoing “deficient” rainfall pattern for N Brazil/Argentina.

• The Chicago decline is about bearish chart patterns and fund liquidation ahead of the USDA December Report on Thursday. We see the break as engendering new end user/importer buying with China said to be looking for high value US ag goods before year end. Our concern over hot/dry S American weather is increasing.

• Chicago futures have reversed opening losses with corn, soybeans and wheat higher at midday. The fund selling slowed with rumours of China booking Brazilian soybeans for March/April and US soybeans in a new crop position. The volume of trade in Chicago has been much larger than last Thursday, and the test of recent lows appears to be completed. Chicago will continue to closely follow S American weather and US export demand heading into the end of the year.

• We look for a firm close today, but we doubt that Chicago is ready to strongly rally until after Thursday’s USDA/CONAB crop reports. Following these reports, it is the NOPA December 15 Crush Report and then the January USDA Crop report that should produce an upwards price lift. Few will want to be bearish ahead of the NOPA crush or the January USDA crop report amid tightening US stocks and the potential for record large demand.

• Chicago brokers report that funds have bought 12,000 contracts of corn, 2,000 contracts of wheat, and 7,000 contracts of soybeans. In the soy products, funds have bought 1,000 contracts of soymeal and 1,500 contracts of soyoil. The funds turned around quickly to the buy side of the marketplace this morning on the testing and reversal of key chart-based technical support.

• US export inspections for the week ending December 3 were; 28.9 million bu of US corn, 84.4 million bu of US soybeans, and 19.5 million bu of US wheat. For the prior week, US inspections were revised upwards by 14.2 million bu of soybeans to 89.1 million , corn was revised up 5.7 million bu to 40.7 million, and wheat up 1.1 million bu to 19.6 million. US weekly soybean export revisions to the upside continue to be sizeable. China took 56.5 million bu of US soybeans or 63% of the weekly export total. We understand that China loadings from the US will stay active well into the first week of February.

• For their respective crop years to date, the US has exported a record 1,081 million bu of US soybeans (up 443 million or 69%), 434 million bu of corn (up 177 million or 68.5%), and 494.8 million bu of wheat (up 14 million or 3%). Based on Census data, it appears that the US will have exported a record 1.1 billion bu (26% of the 2020 US soybean crop) in the first quarter of the crop year. This massive export pace reflects strong demand from China, which has us looking for record large US soybean loadings in Q2.

• The price difference between FOB US Gulf and Brazilian soybeans for February is down to just $0.05/bu with it almost impossible to find a Brazilian offer for the first half of February. The delay in Brazilian seeding combined with recent dry weather has delayed the crop and pushed back maturation. This has exporters scrambling pulling back on Brazilian offers with the FOB spread narrowing. Brazil has a quality and freight advantage into China, but other world importers will be prodded to cover their soy import needs from the US. China is rumoured to have booked 5 cargoes of Brazilian soybeans for February and US new crop soybeans for Sept/October.

• The 10-day weather forecast is drier than the overnight run for N and C Brazil and equally as dry for Argentina. The 10-day rainfall anomaly map reflects that the forecast is far from normal. Although rains will drop across N Brazil in the next 2-3 days with totals of 0.5-2.00″, such rain is short of historical crop needs and averages.

• N Brazilian temperatures are forecast to be seasonal with highs ranging from the mid 8O’s to the mid 90′s. Argentina and S Brazil  temperatures will range from the 80′s to the mid 90′s. Our concern for S American weather is rising again amid the ongoing “deficient” rainfall pattern for N Brazil and all of Argentina.

• The coming N Brazilian rain has been talked about for well over a week. The problem is that following 3-4 days of normal rainfall, the forecast is arid again thereafter. This is not what the Mato Grosso or Goais farmers have been hoping for after an extensively dry October and November.

• US soybean demand is record large with exports nor crush showing any sign of price rationing. Traders are looking for WASDE to raise US 2020/21 soybean exports by 25 million bu, we expect the increase to be more like 50-75 million bu. US corn export demand is also understated. We maintain a bullish outlook.

• Excluding soyoil, Chicago futures are sagging in Friday’s midday trade with corn/ wheat the downside leaders. USDA’s FAS did NOT confirm any fresh Chinese buying of US corn, soybeans or wheat, which was rumoured on Wednesday. Exporters have 48 hours to report new sales that are kept on their US books. Multinational exporters can always hold a US sale overseas until they want to shift back, which sometimes produces a delay in FAS daily reporting.

• Information suggests that the US WAS a seller of US corn/soy to China, it is just that the sales could have been spread around to several exporters that fall under the daily reporting standard (100,000 mt) and/or a sale will be shifted to their US sales books in coming days.

• The lack of China demand confirmation was taken as bearish with the driest areas of Brazil to start to see rain this weekend. The improved Brazilian weather forecast pressured Chicago valuations for the first half of the week and made a return visit today. Brazilian soy/corn values are sagging with rain prospects as farmers sweep old crop supplies out the door. A mixed close is forecast with end users buying corn and soymeal on the morning break.

• FAS did confirm a US corn sale to Mexico for 182,000 mt.

• The monthly US October Trade report showed that the US had enjoyed its largest positive Ag trade balance since 2016 at just over $3.5 billion dollars. The US exported a record 420.4 million bu of US soybeans (18.5 million  over FGIS weekly Inspections). The prior soybean export record was set back in October of 2016 at 415.6 million bu. For the first 2 months of the crop year, the US has exported a record 706.4 million bu of soybeans. The US is easily on track to export over 1.0 billion bu of soybeans in the first quarter of the crop year.

• US October corn exports were 145.0 million bu vs FGIS October Inspections of 133.8 million bu. The increase was 11.2 million bu with September/October US corn exports standing at 294.7 million bu vs last year’s 269.4 million bu. We look for the US corn export pace to accelerate in early 2021 as US soybean exports slow and Gulf elevation costs are curtailed.

• US wheat/wheat flour exports were 64.5 million bu, which is down from September and last year. The US wheat export pace is suffering from high autumn prices and aggressive export offers from Australia on their near record new crop. The US wheat market will struggle on rallies and slow to keep pace with rising US cash corn prices. US wheat export demand did increase during November.

• Most of N Brazil will be dry for another 48 hours before showers/storms break out with regularity across Mato Grosso and Goias. Next week’s N Brazilian rain will be below normal, but the there is no indication of a return of the pure void of rain that has been witnessed here over the past 2 weeks. The lack of rain has caused crop stress/reduced yield potential. N Brazilian temperatures are forecast to be seasonal with highs ranging from the mid 80′s to the lower 100′s. Argentina and Southern Brazil will hold in an arid weather pattern for the next 10 days with limited rain. Temperatures will be cool next week with highs in the 80′s, but warming is noted beyond December 11.

• The December USDA report looms next week Thursday. Traders will not want to be overly bearish soybeans with USDA likely to raise US exports by 50-100 million bu and potentially make modest downward adjustments to S American crops due to November dryness. Yet, a China purchase confirmation, or the continuance of Argentine/S Brazilian dryness is needed to ignite a push above $12 January soybeans. Our view remains bullish as Northern Brazil receives rain while S Brazil/Argentina dries out. New highs in both corn and soybeans is likely in the weeks ahead.

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Weekend summary 4 December 2020

• Chicago ag values are mixed at midday, with markets digesting this week’s FAS export sales report along with final Canadian production numbers posted by Stats Canada. The extended range Brazilian forecast also maintains an erratic pattern of rainfall across Mato Grosso and Goias beyond Dec 10, which is further supporting global oilseed futures.

• Stats Can pegged final Canadian wheat production at 35.2 million mt, up 200,000 mt from the USDA’s number and a new all-time record. Canada’s exportable wheat surplus will also be a record large 25.4-25.6 million mt in 20/21. Stat Can’s wheat production hike along with a larger Australian crop only adds to non-US wheat production. Competition for world trade continues to weigh on rally efforts in cash wheat markets.

• However, Stats Can lowered final Canola production to 18.7 million mt, vs. USDA’s 19.4 and vs. the trade’s average guess of 19.3 million. This downgrade will further tighten the global canola balance sheet, with USDA in November already projected global canola stocks/use at 7.4%, the lowest since 2016. World canola stocks have been nearly cut in half over the last two crop years.

• Canola futures are trading in Canada and Europe, with spot ICE canola finding new seasonal highs this morning. Tightening global vegetable oil markets mandate a slowing of demand until large oilseed crops are made in 2021.

• US weekly corn and wheat export sales were within expectations, while soybean sales were a bit weaker than anticipated. Corn sales through the week ending Nov 26 totalled 54 million bu, vs. 66 million the previous week. An average weekly pace of just 37 million is needed to hit the USDA’s target. We expect corn sales next Thursday to total 45-55 million bu. Wheat sales totalled 16 million bu, vs. 29 million the previous week. US white wheat export commitments now account for 93% of the USDA’s forecast, which clearly needs to be raised 30-40 million bu. The overall pace of US wheat exports remains slightly above what is needed to validate the USDA’s forecast. Soybean sales were a meagre 15 million bu but China’s absence was known by the market pace. Soy sales need to average just 9 million bu per week to hit the USDA’s target, while China is rumoured to be returning for its pre-Lunar New Year needs.

• Finally, we note that China last week secured another 11 million bu of US sorghum, bringing total US sorghum export commitments to 178 million bu, or 69% of the USDA’s forecast with a full 39 weeks left in the crop year. Elevated sorghum cash prices are required to encourage expansion. Corn feed use across the Plains will be enlarged.

• The 10-day S American forecast is drier in Argentina and far Southern Brazil but wetter in Mato Grosso and Mato Grosso do Sul. Near daily showers will be featured across Central Brazil all of next week. Cumulative rainfall of 2-4″ will stabilise vegetation health there. Yet, rainfall across Mato Grosso and the North becomes more erratic and scattered in nature beyond Dec 13. Confidence in details so far is low but above normal rainfall is required to maintain trend soy yield potential in C Brazil. La Niña-based dryness in Argentina remains a concern.

• Our row crop outlook remains bullish. Establishing the next leg up will take time, but amid probable sizeable yield loss in Argentina, rationing soy will be difficult as crush markets rally. The loss of Argentine corn supply will flood the US market with additional export demand beginning in late winter.

• Chicago grain markets have recovered with wheat posting sharp gains while corn follows amid rumours of China buying. Soybean futures have followed to the upside on commercial talk that China has booked 2-4 cargoes of US soybeans for January with Chinese crush margins back in the black. The volume of trade this morning has been massive with fund selling on liquidation while end user and commercial demand has offered support. The fund selling has slowed at midday and a higher close would indicate that a trading bottom has formed.

• Rumours abound that China has secured as much as 1.0 million mt of US April corn while also asking for offers on US HRW/White wheat. We cannot confirm any US wheat sales to China, but the cash wheat demand talk started to blossom after the Chicago opening. We noted that US wheat prices relative to the rest of the world have become competitive. US wheat depending on freight costs could work into N Africa and Mideast when futures were trading near the day’s low. The function of price was to reach levels that spark new consumption, which appears to have been reached in corn, wheat and soybeans this morning. The demand will act to slow S American weather liquidation that has been ongoing since Monday. It is a long growing season before S American crops are made.

• Chicago brokers report that funds have bought 8,500 contracts of wheat, 12,000 contracts of corn, and 5,300 contracts of soybeans. In the soy products, funds bought 2,900 contracts of soymeal and 4,000 contracts of soyoil. Funds were sellers overnight, but returned as buyers as commercial buying was noted.

• On the weekend it was suggested that China was issuing another 5 million mt of corn import licenses. You must have a GMO certificate to import US corn into China. It appears that these rumours are true and that the overnight weakness in Chicago corn sparked buying. We note that WASDE is forecasting that China from all origins will import 13.5 million mt of corn, while the FAS China attaché forecasts 22 million mt in 2020/21. We could see China taking 24-28 million mt which would raise US 2020/21 corn exports above 3,000 million bu, an historic record.

• The US produced 286 million gallons of ethanol last week that was down just 5 million gallons from the week prior. Such ethanol production would consume 99 million bu of corn and argue for an annual corn grind that is 100-150 million bu above the WASDE estimate of 5,050 million. There is a chance with the soon to arrive Covid vaccine that WASDE could raise their 2020/21 US ethanol demand forecast by 50 million bu in the December report next week Thursday.

• The GFS weather forecast is consistent with the overnight run in terms of 10 day rainfall totals. Another 3-4 days of hot/ dry weather will prevail across Brazil with any showers to occur in SC Brazil including Parana and Minas Gerias. The chance of Argentina rain has ended with the next chance not occurring until late in the 10-day outlook. A more arid weather pattern is setting up for S Brazil and Argentina in coming weeks. The MJO has shifted into position 4 which suggests that the models may be overdoing the rain for N Brazil next week. But there is still a chance of daily rain, it is just that the coverage may not be as high as advertised.

• US weekly export sales will be slower on Thursday due to last week’s US Thanksgiving Day holiday. La Niña influences wax and wane, but with its ongoing strengthening, the odds are that additional weather scares will develop in coming weeks. ERS just raised the 2020 US net farm income estimate to $119.6 billion on rising crop prices. This is a 36% bump on last year and the best since 2014. The income hike as many farmers holding onto any remaining cash grain stores to avoid taxes. A US demand rationing rally is required. China shows no evidence of slowing their ag buying. Rising DDG prices is keeping US ethanol producers profitable. A sustained bearish trend is unlikely until S American crops are made.