Phyllis Nystrom

The following marketing analysis is for the week ending Dec. 30.

CORN — Happy New Year! A holiday-shortened week with limited fresh news as we headed to month, quarter, and year-end. The final trading week of the year brought good news to growers as prices rallied to seven-week highs on less rainfall in Argentina than expected. The extended forecasts show limited rain and a return of hotter temperatures. Tempering the upside was the increase in Covid cases in China; but restrictions are easing which lent support. Travelers going into China are no longer required to provide a negative Covid test to enter the country, but travelers entering the United States, India, South Korea, Spain, and other countries must provide a negative test 48 hours before traveling.

Insurers and reinsurers are not renewing war risk coverage in Ukraine, Russia, and Belarus. They usually renew on Jan. 1, so this is their first opportunity to limit coverage since the Russian/Ukrainian war began back in February. This may result in fewer shipments and/or higher costs. Reinsurers have suffered losses this year related to the war and Hurricane Ian in Florida.

A well-known private consultant lowered his Brazilian corn estimate by .5 million metric tons to 125 mmt and cut his Argentine estimate by 1 mmt to 46 mmt.

The University of Illinois did a study titled, “The Impact of Long-Run Declines in Gasoline Use on the U.S. Corn Market.”  Their bottom line was the US ethanol industry faces uncertainty due to electric vehicles and declining gasoline use. Decreasing ethanol production could decrease corn prices by about 4 percent, but this assumes current corn production and other uses continue current trends. New uses could alter that outlook.

Weekly export sales were delayed until Dec. 30 due to the Monday holiday. Sales were above the highest expectation at 30.8 million bushels, but were below the same week a year ago for the fifth straight week. Total export commitments are 843 million bushels and down 47 percent from last year. We need to average 32.8 million bushels of sales per week to hit the current U.S. Department of Agriculture outlook of 2.075 billion bushels. China only has 632,000 metric tons of unshipped purchases on the books compared with 10.1 mmt last year. Most traders will expect a cut to the export category on the Jan. 12 World Agriculture Supply and Demand Estimates report which will likely feed directly to an increase in ending stocks. There was only one fresh daily sale announcement this week with 295,000 bushels for old crop and 6.69 million bushels for 2023-24 — both going to Japan. Total exports for the 2023-24 marketing year are 44.8 million bushels vs. 59.5 million bushels last year.

Weekly ethanol production fell more than expected, down 66,000 barrels per day to 963,000 bpd. This was an 11-week low and was down 9.1 percent from the same week last year. We need to average 1.027 million bpd to hit the USDA’s 5.275 billion bushels of corn for ethanol. Weekly ethanol stocks were at a record high for the week at 24.64 million barrels and up 596,000 barrels for the week. Stocks were up 19.2 percent from the same week last year. U.S. gasoline demand was a 12-week high at 9.3 million bpd but is down 4.1 percent from the same week last year. The four-week average gasoline demand is down 6.7 percent from last year.

Argentina’s corn planting was estimated at 62.9 percent complete compared to 78 percent on average by the Buenos Aires Grain Exchange as of Dec. 29. Their corn rating for good/excellent was unchanged at 15 percent but the poor category was up 2 percent at 28 percent.

Outlook: Weather, weather, weather, plus a little export demand and macro considerations thrown in for fun. The start of a new calendar year and a long weekend can combine for a volatile restart on Jan. 3, it’s a game of wait and see. In the last five years, there is a tendency for March corn to rally in January. Pencils will begin to be put to paper for how much corn ending stocks may increase on the Jan. 12 report, which may limit where we go from here.

For the week, March corn rallied 12.25 cents to $6.78.5, July was 13.75 cents higher at $6.71.75, and December 2023 was 9 cents higher at $6.10.75 per bushel.

The Chicago Mercantile Exchange reopened for post-New Year’s trading on Jan. 3 at 8:30 a.m.  The January WASDE and Grain Stocks reports will be released on Jan. 12.

SOYBEANS — Argentina continues to struggle with hot, dry conditions which provided underlying support, but concerns over rising Covid cases in China may limit the upside momentum. This didn’t stop March soybeans from soaring to fresh six-month highs and filling the overhead gap left in June! Soybeans closed higher for five straight sessions. March soy meal set a new contract high on Argentina’s weather as they are the world’s largest exporter of meal. Soyoil felt pressure to end the week on heavy deliveries against the January contract. Brazil’s weather is mostly favorable with the only real area of concern being dryness in the far southern portions of the country. 

A respected private consultant cut Argentina’s soybean estimate by 2 mmt to 43 mmt with planting 60 percent complete vs. 79 percent on average. His Brazilian estimate was unchanged at 151 mmt. The BAGE commented that up to 500,000 hectares of Argentine soybean acreage may not get planted if rains don’t improve. Bean planting was estimated at 72.2 percent complete vs. 88 percent on average. The BAGE’s Argentine soybean production outlook was unchanged at 48 mmt vs. the USDA’s 49.5 mmt projection. Their soybean rating dropped 2 percent to just 10 percent rated good/excellent with the poor rating increasing 3 percent to 28 percent. Last year, their beans were rated 57 percent good/excellent and 8 percent poor. Argentina’s special soybean exchange rate has ended. It’s estimated Argentina’s farmers have sold 80 percent of last year's soybean crop.

Weekly export sales were neutral with 25.9 million bushels sold, bringing total export commitments to 1.584 billion bushels. This is up 4 percent from last year. We need to average 13.4 million bushels of sales per week to reach the USDA’s 2.045 billion bushel outlook. China has so far purchased 25.7 mmt of U.S. soybeans for 2022-23 vs. 23.4 mmt bought last year by now.

Russian President Putin banned the sale of Russian oil and oil products to countries imposing a price cap on the oil. The EU and UK have banned the import of seaborne Russian crude oil and the Group of Seven effectively put a ceiling on Russian crude oil by barring Western companies from insuring, financing, or shipping Russian crude oil above $60 per barrel.

Indonesia will push back the start of the increase in mandatory palm oil biodiesel blending from 30 to 35 percent to February. The 30 percent blending level has been in place since 2020.

Outlook: The weather and optimism about possible Chinese demand improving sent March soybeans to a five-day string of higher closes. It has closed over $15 just three times since June 22 and all were this week. March and November soybeans soared to their highest since mid-June and March soy meal made a new contract high. The next upside target for March soybeans may be the contract high at $15.72.25 per bushel. In the last five years, there has been a slight tendency for March soybeans to rise in the first half of January.

For the week, March soybeans soared 39.5 cents to $15.24, July jumped 40.25 cents higher to $15.33.25, and November 2023 gained 23.25 cents to $14.16.75 per bushel.

Weekly price changes in March wheat for the week ended Dec. 30: Chicago wheat was 16 cents higher at $7.92, Kansas City rallied 13.25 cents to $8.88, and Minneapolis was 7 cents higher at $9.38.75 per bushel.   

Phyllis Nystrom is a market analyst with CHS Hedging in St. Paul.    

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