TFM Midday Update 12-27-2023

CORN

After three higher closes in a row, March corn is trading lower this morning. This may be due to profit taking, a lack of significant news, as well as more favorable weather conditions in South America.
Despite some of the recent attacks on vessels in the Red Sea, some shipping companies have resumed travel there in the face of the associated risks.
The USDA is estimating Brazilian corn production at 129 mmt, but some private estimates are well below that number, with one as low as 117 mmt. The safrinha crop has yet to be planted, so it may be too early to make a judgement call just yet.
Ethanol demand remains strong, and production has been higher than the USDA’s estimated corn usage number for ethanol.

March soybean oil closed yesterday at the lowest level since June and is in negative territory again this morning. Meal is also trading lower and this is weighing on soybean futures.
Favorable crop conditions in Argentina, and an improving outlook for Brazil are both negative to prices and may be pressuring the market this morning. Over the next couple weeks, central Brazil’s forecast calls for more consistent rains.
One private estimate of the Brazilian soybean crop is at 153 mmt. This is well below both the USDA and CONAB, both of whom are projecting a 160 mmt plus crop.
The expectation for higher biofuel demand may provide support to soybean oil as time goes on. However, the increased crush may also lead to an overabundance of US meal, especially if Argentina has a good soybean crop as anticipated.

Yesterday, March Chicago wheat closed well above the 100 day moving average after a strong rally. However, most of those gains are being given up this morning with all three US wheat classes trading lower.
The US Dollar Index continues to fall and is approaching the 101 level at midday today. This should be supportive to wheat, but as long as Russian wheat remains cheap, US exports remain uncompetitive.
Currently, the spread between March Chicago and KC wheat is less than a dime in favor of the KC. With improved moisture and conditions in the US southern Plains, this spread may continue to weaken.
According to Russia, their wheat harvest is nearly complete. So far, 93 mmt of wheat have been harvested versus a crop last year that totaled 104.2 mmt. Despite the lower crop this year, they are still the cheapest global source, with FOB values ranging between $240 to $243 per mt.

Brandon Doherty