TFM Midday Update 1-12-2024

CORN

US missile attacks against Houthi positions in Yemen may continue to raise tensions in the Red Sea region which will impact trade routes and shipping costs. This is also likely why crude oil is rallying this morning and providing some support to the grain complex as a whole.
Funds are estimated to hold 200,000 short corn contracts, which indicates they are expecting a continued bearish outlook. However, any friendly news could mean that this will lead to a short covering rally.
According to the Buenos Aires Grain Exchange, Argentina’s corn crop is rated 95% good to excellent, a 2% decline from last week.
Argentina’s inflation is said to have reached 211%. This may lead to farmers there holding onto their grain, which may in turn help the US grain export market.

Rainfall totals in Mato Grosso, Brazil will decline for the next couple of weeks. They have received enough rain over the past few weeks that this shouldn’t cause much issue. Some of the other areas of Brazil that have been drier, however, may get good rain coverage over the next week or two.
Currently, funds remain short soybeans and soybean oil, but are long meal.
According to the Buenos Aires Grain Exchange, Argentina’s soybean crop is rated 97% normal to excellent, a 1% decline from last week.
China is said to have purchased 99.4 mmt of soybeans for the year, but most of that has been sourced from Brazil.

Yesterday, Paris milling wheat futures had a reversal off the high that ended with a lower close. That offers no support to the US market, and those contracts are trading lower again this morning.
The major winter storm moving across the Midwest should bring heavy amounts of snow and rain. The areas that receive snow cover should be ok, but there may be damage to wheat in areas without it as temperatures are expected to be well below zero in the next few days.
Funds are still net short both Chicago and KC wheat, which like corn, indicates a bearish outlook. However, friendly news could trigger a rally if funds begin to exit positions.
March Chicago wheat is trading just below the 40 and 50-day moving averages, which are converged around the 606 area. While that contract has traded both sides of those averages recently, it is also near oversold levels; this consolidation might indicate wheat is due for a break to the upside.

Brandon Doherty