CORN HIGHLIGHTS:

• Corn futures and the grain markets traded lower on Wednesday. March corn lost 5 ¾ cents on the session as grain markets saw broad based selling pressure.
• Argentina devalued their currency, the peso, versus the dollar to stabilize Argentina’s economy. The drop in the peso value makes Argentina’s ag exports more competitive on the world export market, which pressured the ag commodity markets on Wednesday.
• Ethanol production fell to 1,074,000 barrels/day, down slightly from last week, but up 1.2% from last year. Production was above expectations and the 2nd highest of the marketing year. There was 108 mil. bu. of corn used in the production process. Ethanol margins are likely to tighten as pressure in the crude oil market could be starting to tighten those margins.
• The USDA will release weekly export sales on Thursday morning. Corn sales have improved, which is needed by the market given the supply. Expectations for new sales to range from 800,000 – 1,600,000 mt last week.
• South American weather stays a focus. The next 7 days show a drier forecast with a strong heat wave returning. Longer extended forecasts are more favorable for crop growth if those forecasts materialize.

SOYBEAN HIGHLIGHTS:

• Soybeans ended the day lower again with prices now back below all major moving averages on a nearby, front month chart. The forecast for more favorable Brazilian weather a week from now, along with anticipation of increased Argentine selling pressured the soy complex lower today.
• Newly inaugurated Argentinian president, Javier Milei, has been preparing to get inflation in check with policy changes to grain export taxes. So far, they temporarily suspended export licenses and devalued the Argentinian peso by half. Milei is also expected to make adjustments to export taxes on grain, which could further incentivize selling.
• This morning, the USDA reported private exporter sales of 125,000 metric tons of soybeans for delivery to unknown destinations during the 2024/2025 marketing year. This is the fifth consecutive sale since last Thursday by either China or unknown destinations.
• Brazilian weather is set to remain hot and dry over the next 5 days, but rain is forecast to return on December 19 and is expected to last well into January. Southern Brazil is still too wet and is expected to receive more rain over the next 7 days before drying out slightly into the new year.

WHEAT HIGHLIGHTS:

• Kansas City futures led the wheat complex lower today, but all three classes had sharp losses. The big news weighing on the grain markets relates to Argentina’s new president and his economic policy. In addition to currency devaluation and possible export tax adjustments, there is also talk that Argentina will expand wheat production under his leadership. Some estimates see production increase as much as 60% to 25 mmt next growing season, due to deregulation that encourages more output.
• This afternoon, the Fed announced that they will be keeping interest rates unchanged for the third time in a row. After the announcement, the US Dollar Index dropped significantly, and this may provide some support to wheat tomorrow, as the two tend to share an inverse relationship.
• According to Argus, Ukrainian wheat production in 2024 will fall to 20.2 mmt, a 12-year low, and representing a 9% decline. Smaller plantings are said to be the cause of the decline, which would be the lowest since 12/13.
• Adding to bearishness today was an estimate from FAO-AMIS, which raised world wheat stockpiles for the 23/24 season from 315.1 mmt to 319.3 mt. The production estimates for Russia, Turkey, and Saudi Arabia were increased. Additionally, corn and rice stockpile estimates were also increased.
• From a technical perspective, March Chicago wheat did hold just above the six-dollar level today, with a low of 6.02-1/2. The 21, 40, and 50-day moving averages all converge around this level, making six dollars an important area of support. A break below this level would make the market look more technically weak.

DAIRY HIGHLIGHTS:

• Spot butter has closed red in three straight sessions and has fallen a total of 21c so far this week. The price closed Wednesday at $2.46/lb, its lowest close since June.
• The butter weakness is starting to create some spillover selling pressure in the Class IV trade. Jan ’24 Class IV is down 42c this week.
• The Class III market found some support from cheese, with blocks up 2c and barrels up 2.50c. This brings the block/barrel average back to $1.55875/lb.
• The 2024 Class III milk average finished the day at $17.92, its lowest close since July.
• All four spot dairy products are either in downtrends or a sideways pattern. Demand has been weak.

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Author

John Heinberg