Markets Slightly Higher Overnight; Heat Forthcoming in Argentina

Dec 6, 6:57 am | Morning Commentary | Share this:

AgResource Daily Farm Marketing Advice for Wednesday: 1/ Corn Producers: Sell 10% of the estimated ‘18 corn harvest at $4.01 basis Dec ‘18 futures. 2/ Corn Producers: Sell 10% of estimated ‘19 corn production at $4.17 basis Dec ‘19 futures. 3/ Corn Producers: Sell 15% if the 2017 corn crop if March ‘18 corn futures reach $3.72.   

6:30 AM CST CBOT Prices: January soybeans are up 3.50 cents at $10.12, March corn is up 2.0 cents at $3.5575, and March Chi wheat is down 0.5 cents $4.3225.

  Good Morning! Markets overnight traded modestly higher, again in mediocre volume, as South American forecasts are unchanged, and as more & more longer term climate guidance centers on La Nina through at least mid-winter. ARC discussed on Tuesday how the EU model’s monthly update put below normal precip across all of Argentina and even C and N Brazil in January, and two-week forecasts still lack a shift to wetter weather.

  In international markets, Malaysian palm futures ended lower again, despite a correction in the ringgit overnight. East Asian vegoil markets continue to benefit from rising production/stocks. Milling wheat futures in Paris are down €.75/MT ($.02/Bu). US crude & gasoline futures are down slightly ahead of this morning’s weekly EIA report, in which a slight build in stocks is possible, and as seasonal trends in energy consumption of course turn negative in the Dec-Feb period.

  Stats Canada will release its final production report in the next few hours, and it’s widely anticipated to include slight upward revisions to wheat and canola yields, likely to the tune of 0.5-1.0 MMTs. Wheat supplies in Canada will be adequate, but it’s important that the market gets a higher canola production figure, as recall Canadian canola end stocks currently are pegged at a rather low 1 MMT, vs. 1.3 MMTs in 2016 and 2 MMTs in 2015. Exports have drawn down stocks considerably in recent years.

  Argentine corn basis levels are steady this AM, though we do mention Argentina’s market is at parity with the US Gulf well into late winter. And when accounting for freight costs into ports the US market looks even more attractive. Corn basis is also rising in Brazil and Ukraine, which along with lofty barley and sorghum prices may provide a narrow window in which to boost US corn export demand. Brazilian soy basis, too, is stronger this week, and so late season Brazilian soy exports may be absent.

  The EU & GFS models are in agreement that another 10 days of near complete dryness lies ahead in Argentina and Southern Brazil, including Parana, a major first crop corn and soy producing state of Brazil. The models continue to flirt with relatively better rain chances in Central Argentine thereafter, but until this is pulled forward in time ARC’s confidence in such a shift is low. Highs in the 90s in Argentina will be more common beginning this weekend. Like all weather markets, it’s just tough to prove that this pattern of dryness will change.

  It’s all weather into the New Year! The soy market will be much more sensitive to S American production ideas (S Am corn carryover stocks are large, and corn demand growth is lacking), and we await another 10-20 cent rally before making new sales.