MARKET SUMMARY 01-07-2022
Soybean export demand is still going to be a key number watched going into next week’s USDA report. Soybean shipment totals as of December 30 were 1.125 billion bushels, which is 21% below last year. Total shipments last week were 64 million bushels, which was still ahead of the pace to reach the USDA target of 2.050 billion bushels. The demand concerns have kept the market somewhat pressured, but the recent weather events in South America have brought money flow into the soybean market and helped build some weather premium. Expectations for the report are for ending stocks to increase slightly to 348 million bushels. This would have soybean stocks up 6% year-over-year. With the main export window coming to a close, the question for the soybean market will be how the USDA handles the demand on next week’s report.
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CORN HIGHLIGHTS: Corn futures edged higher into the close, gaining 3 cents to finish the session at 606-3/4 in Mar. For the week, Mar corn gained 13-1/2 cents posting a reversal. Support is coming from sharp gains in soybeans and meal as well as continued weather worries in South America. New crop Dec gained 3-1/2 cents today and 11-3/4 for the week to end the session at 5.57-3/4.
There are a lot of moving parts in the commodity markets this year that may influence price. Namely, farmer selling of old crop (or lack of), energy prices, fertilizer costs/availability, and most importantly, the near-term South American weather and next week’s WASDE report. Very warm temperatures are expected to stress corn, especially if is in the pollination phase. Expect private forecasters to be ahead of the USDA if downgrades are anticipated. Next week’s WASDE report will likely show a 177 bu/acre yield or higher. The Nov estimate was 177. Exports, due to a slower pace this fall/winter, could be reduced while ethanol could show a bump of 50 to 150 mb. Little net change is expected to project carryout. If behind on sales, consider catching up.
SOYBEAN HIGHLIGHTS: Soybean futures exploded as did soy meal on a very hot forecast for mid-month in Argentina and southern Brazil. Soybean futures finished 23 cents higher in Mar closing at 14.10 and 15-1/4 higher in Nov ending the session at 13.21-3/4. For the week, Mar soybeans gained 71 cents, reflecting ongoing weather concerns and speculative buying. New crop Nov gained 52-1/2 cents closing at a new contract high. Mar soybean meal added just under 26.00 dollars for the week, also closing at a new contract high price.
Forecasters are suggesting that by mid-month, parts of northern Argentina and southern Brazil could see temperatures well north of 100 degrees. In fact, some are forecasting higher than 115 degrees. In a region that is already on the dry side and in need of moisture, high temperatures will certainly have an effect on crops already needing moisture. We still will exercise caution, however, as weather projections can abruptly change. Prices struggled early in the week when it looked as though forecasts may increase rain chances, but with today’s new outlook the market went very aggressively on the offensive. Next week Wednesday the USDA WASDE report will be released, and expectations of slower crush and export sales are anticipated. Yield could also be increased slightly. Bottom line carryout could rise on this report. Yet, the market will likely keep key focus on weather and less attention to small line-item changes.
WHEAT HIGHLIGHTS: Wheat futures, after trading on both sides of steady, managed to post moderate gains. This appears to have been with help from soybeans, which took off around midday. Mar Chi gained 12-1/2 cents, closing at 7.58-1/2 and Jul up 8-1/4 at 7.57. Mar KC gained 6-1/2 cents, closing at 7.75 and Jul up 5 at 7.75-1/2.
In what started out as another ugly day, wheat managed to stop the bleeding by the close. This comes despite a number of items pressuring the market. As an example, Argentina’s wheat harvest is done and it looks like they will have more to export. In fact, the Buenos Aires Grain Exchange increased Argentina’s wheat production estimate by 300,000 mt (now at 21.8 mmt). Elsewhere in the Southern Hemisphere, Australia is offering wheat for export, though there are some limitations on their export capacity. Adding to the pressure have been poor U.S. exports; last week’s export sales of only 1.8 mb were a new marketing year low. All that being said, wheat futures are oversold technically and today’s action may have been the beginning of a correction upwards. Perhaps all wheat needed was a catalyst, which it got in the form of a surge in soybean prices. As for why beans turned higher – South American weather seems to be the main factor. With temperatures of 100+ degrees (and highs near 120 expected) over the next ten days in northern Argentina and southern Brazil, weather in that region is becoming more of a concern each day. As for U.S. weather, the southern Plains remain mostly dry, with that situation predicted to stay the same into the spring. The Kazakhstan situation is also getting worse – it was reported that Russian troops are being sent in to suppress the conflict. As this news unfolds, it may have an impact on the wheat market, though what it means today is not known for certain.
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Author
John Heinberg