It’s been another mixed session at the CBOT, with corn slightly higher, wheat steady and soybean futures down 3-5 cents at midday. The GFS model trended much wetter in Argentina beyond Dec 17th, which has given pause to overnight buying, but so far much of the weather community is skeptical that such rains will materialize in the extended period. There’s more of a wait and see attitude, but this does make Sunday’s forecast much more important. By Sunday, the 10-day forecast will either include this shift, or not.
Raw material markets are mostly higher. This month’s US employment report featured the addition of 228,000 jobs, a bit more than expected. The US unemployment rate is unchanged at 4.1%.
Crude has sustained its overnight rally, up $.70 at $57.30, basis spot, with gasoline and ethanol markets following. The DOW is up 90 points. EU milling wheat futures will finish with modest gains.
FAS this morning announced that US exporters have sold a total of 331,000 MTs of beans to China & unknown destinations, with another cargo sold for 2018/19 delivery. Much more demand is needed to maintain the USDA’s export forecast, but South American premiums have been rising, and ARC suspects that finally Brazil may be done for the year. Just how covered China is will be determined in the next few weeks.
Brazil’s Congress look to introduce a tax on grain export, though details surrounding the measure are lacking. Currently, there’s a tariff on state-to-state movement of commodities within Brazil, but grain is not subject to any tax leaving the country. Corn and soybean exports are a major driver of Brazil’s economy – and also a source of potential government revenue.
Otherwise, it’s a pretty slow day, news-wise. The CFTC’s commitment of traders report is awaited, as is the final run of the EU weather model, which will finish just prior to today’s close. ARC notes that the lesser followed Canadian model is also wetter in Argentina beginning Dec 17, but keeps rainfall in excess of .25” confined to Buenos Aires. Model agreement may just finish the week far from perfect.
The US forecast is slightly warmer in the Midwest beyond Dec 20th but is still completely dry. Just 5-30% of normal precip has fallen across the Plains in the last 60 days.
Midday GFS South American Weather Update: The midday GFS’s 11-15 day precip forecast is below, with Argentina’s Ag Belt highlighted, and if realized moisture deficits will be nearly erased via totals of 2.5-4.0” in Cordoba and Santa Fe. So far even the market isn’t willing to embrace this shift, but again much will come down to Sunday night’s forecasts. In the meantime, above normal rain will persist across Central & Northern Brazil, or roughly 50% of the soy belt there. Rainfall in Argentina Dec 9-17 will be limited to lite/scattered events amid ongoing high pressure aloft. All models are still in good agreement on heat in C and N Argentina.
AgResource Market Comment: Large US and global stocks have limited the market’s reaction to adverse weather in Argentina and S Brazil, and the USDA’s report next week will serve as a reminder that exportable surpluses are more than adequate. However, the addition or subtraction of weather premium will be more pronounced in Jan/Feb.
