** CBOT Midday Market Comment;
** CBOT grain and soy futures gapped higher on the 1st day of 2018 with fund shorts wanting to reduce their exposure. Traders are talking that index and hedge fund managers want to make new investments at the CBOT as they see grain and soy futures at value.
The new bets are being considered based on rising inflationary expectations tied to the Trump Tax Bill and hope for an US Infrastructure Bill in the Q1 2018. Debates within economic forecasting shops are all focused on what rate the inflationary rate will be (not its occurrence)?
The CBOT markets have not done much over the past year! A year ago on January 3rd, spot corn closed at $3.5575, spot wheat at $4.065, and spot soybeans at $9.8675. Although the 1st day’s trade of the New Year won’t be finished for a few hours, current spot corn prices are down 2 cents or .5% and soybeans are down 28.5 cents or 3%, while wheat prices are up 28 cents or 7%. The big wheat gains are all based on the cold weather threat across the Central US and how much winterkill damage was assessed?
The point is that there have been trades around last year’s price range, but neither the bulls or the bears have been able to sustain their position for more than a few weeks. The point is that in a world awash in grain, one has to be careful about being too bearish or too bullish at historically low prices unless there is a dire weather situation developing. Fear of the loss of supply was the only real driver of higher US/world grain prices in 2017 – a trend that we expect will persist during 2018.
** CBOT brokers tell ARC that funds have bought 4,700 contracts of corn, and 4,200 contracts of Chi wheat. In soy, funds have bought 900 contracts of soymeal and 1,700 contracts of soyoil, while selling 2,200 contracts of soybeans.
** US export inspections for the week ending Dec 28th were; 26.8 Mil Bu of corn, 10.0 Mil Bu of wheat, and 41.8 Mil Bu of soybeans. The weekly grain export totals were disappointing (though US sorghum exports were 4.0 Mil Bu), traders are not paying much attention due the past holidays.
However, for their respective crop years to date, US corn exports are down 255 Mil Bu or 38%, while wheat exports are off 37 Mil Bu or 6.5%, while US soybean exports are down 172.5 MMTs or 14%.
** Argentine heat/dryness is starting to materially impact corn with private sources estimating 1st crop yield reductions of 10-15% on yield. This week’s heat amid pollination is adding to the stress to both the 1st and 2nd corn crops. ARC sees 2018 Argy corn production under 40 MMTs (vs USDA 42).
** Midday GFS Weather Forecast Discussion: The forecast is slightly drier than the overnight solution (overnight was basically dry already) for the next 10-12 days across Argentina and the southern third of Brazil. A late week warm front could produce a few spits of rain, but the overall forecast does not offer much rain with building heat for Argentina and S Brazil. A Ridge of High Pressure is evident next week that has to be closely watched to see if it sustains its position? High temps in the next few days will range from the 80’s and a few lower 90’s with temps warming to the 90’s and lower 100’s by the weekend and much of next week. We see the forecast as more concerning with soaking rains failing to materialize as advertised over the past 2 weeks.
Regular rains look to drop across the northern 2/3’s of Brazil with seasonal temps. Crops are preforming favorably amid a good mixture of rain and temps.
The extended 12-15 day forecast offers some rain hope for Argentina/S Brazil, but our confidence this far out is low.
** 10 Day Rainfall Forecast; Noted Dryness for Argentina/S Brazil:
** 10 Day Rainfall Difference from Overnight 0z Run:
** Ridge Position On January 10th (Hot/Dry), Last Friday’s Run Called for Heavy Argy Rainfall:
** AgResource Market Comment: The Argy/ S Brazilian forecast is threatening and we caution against chasing the midday CBOT break in soybeans. The grains firming on short covering and improving demand for corn amid cold Midwest temps
