** Low volume and slow has been the CBOT this AM with the grain markets slightly higher with soybeans/soy products slightly lower. Traders continue to await Thursday’s Brazilian crop estimates from CONAB and the USDA January Crop Report. Soybean futures have retested prior lows with March taking aim at $9.5475 with funds still exiting long soymeal positions. ARC estimates that funds are now short around 97-99,000 contracts of soybeans as they add to their net short position. Funds have been modest buyers of wheat. ARC looks for a mixed CBOT close as the index roll and rebalance continues.
** CBOT brokers estimate that funds have sold 4,300 contracts of soybeans, 2,900 contracts of soymeal, and 1,200 contracts of soyoil. In the grains, funds have bought 2,000 contracts of corn and 1,600 contracts of wheat. The funds continue to add to net short soybean position, while covering a modest portion of their grain short.
** Brazilian ethanol imports recovered in December and set a new record for 2017. There was 846 Mil liters if ethanol entering the country which was up 68% from November and set a new record. Much of the ethanol came from the US. Brazil ended up being an importer of 1.82 Bil liters of ethanol, more than double last year’s total, making them a net importer for the 1st time. The cheapness of US ethanol vs gasoline is making ethanol a choice for other world importers. US crude oil prices continue to hold above $63/gallon.
** India is expected to record large wheat production in 2018 based on an increase in yield according to India’s ag secretary, SK Pattanayak. The Govt has kept a target of 97.50 MMTs with harvest to begin in March. The critical stage of wheat growth is now occurring under favorable weather conditions. India is expected to import 3 MMTs of wheat in 2017/18 for quality purposes according to USDA. WASDE estimates 2018 Indian wheat production at 98.4 MMTs
** US weekly ethanol production declined to 996,000 barrels/day or 293 Mil gallon vs 303 Mil gallons for the week prior. Even amid the holiday production decline, US ethanol stocks rose to 954 Mil gallons, up 13% from a year ago. US crude oil stocks declined to 419.5 Mil barrels, down 13% from a year ago, which is considered supportive to price. The US ethanol data was considered slightly bearish.
** Traders continue to discuss their expectations for a negative USDA report on Friday as WASDE adjusts down US corn, soybean and soyoil exports.
** Midday GFS Weather Forecast Discussion: The forecast is slightly drier for Argentina over the next 10 days. The next few days will be largely dry across Argentina/S Brazil with high temps in the 90’s. A front will pass across Argentina on Sunday and push into S Brazil on Monday. The weekend cold front looks to produce .2-1.25” of rain with coverage pegged at 60%. Temps will cool to the 80’s to mid 90’s under cloud cover. A second and somewhat weaker system will pass northward during the middle of next week producing .2-.8” of rain.
The forecast is slightly wetter for N Brazil with additional lite showers. No extreme heat is noted with seasonal 80’s and 90’s. A trend of below normal rainfall is also starting to emerge for the northern half of Brazil. Soybeans can handle some dryness stress, but soil moisture levels need to increase before winter corn seeding in late February.
** AgResource Market Comment: The expectation of a bearish USDA January report is pulling the soy complex back to its prior lows as traders discuss a sizeable drop in US soybean exports. Corn and wheat are trying to hold near unchanged amid the soybean downdraft.
China is seeking world soybeans on the break, but fund selling is keeping CBOT values under pressure.
