It’s been another mixed session, with corn, wheat and beans all within pennies of unchanged as the market digests CONAB’s latest report, another round of weak US export sales, and preps for tomorrow’s stocks & seedings numbers. The soy complex has extracted premium from price amid ideas that the USDA will raise Brazilian production, lower US exports and find new land available for soybean seedings via reduced winter wheat acreage. The break from recent highs is understandable, but our work suggests the market is fairly valued at $9.45-9.75, basis March, until more is known about S American production – particularly as Central & Northern Brazil will be drier in the second half of January.
Through the week ending January 4th, US exporters sold a net 17 Mil Bu of corn, 3 Mil Bu of wheat and 22 Mil Bu of soybeans, all of which are considered disappointing.
For their respective crop years to date the US has sold 1,067 Mil Bu of corn, down 25% from last year; 1,523 Mil Bu of soybeans, down 14%; and 715 Mil Bu of wheat, down 8% from a year ago. Much better demand is needed to hit the USDA’s forecasts, and though late season corn/soy sales are a function of South American production, US exporters must now sell 700 Mil Bu of beans from now till Aug 31, vs. 400 Mil a year ago.
ARC does mention that our contacts suggests China still needs to cover its spring needs, but does not seem to be in a rush to do so. Two cargoes were sold to unknown destinations this morning.
Funds net short in soybeans has gotten rather large, and as of this morning ARC pegs managed funds’ short at a net 100,000 contracts. This is the shortest such position on record ahead of a S American growing season, and is just 18,000 shy of the all-time record posted last June. The US soybean balance sheet is no doubt comfortable, but the short side of the market is getting crowded.
Crude is up another $1/barrel, with gas & ethanol following.
Midday GFS Weather Forecast Discussion: The midday GFS is wetter in Brazil beyond January 25th, but is otherwise unchanged. Indeed, how the 6-15 day period forecast behaves (whether wetter or drier) will be a focal point of the market. In the meantime a fairly stable high pressure Ridge will develop aloft E Brazil beginning early next week. Rainfall in Central & Northern Brazil will be temporarily shut off Jan 17-25, and temps there will rise slightly. Two-week precip in Mato Grosso, Goias, Minas Gerais & Bahia is pegged at 10-50% of normal, thus raising the burden on precip in late Jan/early Feb. Argentina’s forecast features a mostly favorable mix of rain & sun, though key areas of southern Cordoba and Buenos Aires will see further soil moisture loss in the next 10 days. Crop conditions will now be updated weekly in Argentina.
AgResource Market Comment: Soybeans in the last two weeks have digested incremental boosts in Brazilian soybean production estimates, as well as a string of disappointing weekly export sales. Downside risk is viewed as limited ahead of pod fill in South America, which will take place over the next 2-5 weeks.
