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Editor’s note: Catch Randy Martinson every Friday after markets close on the
Agweek Market Wrap
at agweek.com.
The first week of December saw the grains trading in a slightly mixed fashion for most of the week. Soybeans were the weakest performers due to weather uncertainty in Brazil, but wheat and corn seemed to be happy to divorce themselves from soybeans and trade with gains. Strong demand was the main supporting factor.
Wheat started the week sloppy, but once the news broke that
China had bought another sizable amount of soft red winter wheat,
the winter wheat exchanges rallied higher. For the week, sales of wheat to China were 1.01 million metric tons. Marketing year to date China has bought 1.8 million metric tons of U.S. wheat, the highest wheat sales to China since 2020.
Minneapolis remained the weak link in the wheat market mainly due to a disappointing Stats Canada December Production estimate. The report was slightly negative as it put all wheat production at 31.95 million metric tons versus expectations of 31.1 million metric tons and versus September’s estimate of 29.83 million metric tons. Spring wheat production was estimated at 24.76 million metric tons versus expectations of 24 million metric tons and versus September’s estimate of 29.8 million metric tons. Durum production was estimated at 4.05 million metric tons, a 30% decline from last year.
Stats Canada also updated their canola production estimate to 18.3 million metric tons, up 0.9 million metric tons from their previous estimate and right in line with trade expectations. This year’s production is 2% lower than last year’s production of 18.7 million metric tons.
Corn was in the tug of war between the higher wheat complex and lower soybeans. It appears that corn has put in a short-term bottom, but that doesn’t mean the market is poised to rally. It appears that corn is happy to just waffle around as the market waits for more confirmation on the potential outcome in Brazil. Currently, it appears that the delayed soybean planting and poor economics has convinced a lot of producers in Brazil to forgo the second safrinha corn crop and just go with soybeans. But this won’t be confirmed until late January or early February.
Soybeans were the weakest link for the week. Early support came from weather concerns but reports of good rains in parts of the northern region of Brazil put pressure on soybeans. Longer term weather forecasts calling for a change in the weather pattern for Brazil added pressure. Due to the
adverse conditions in Brazil so far this growing season,
Ag Rural lowered their Brazil soybean production estimate by 4.4 million metric tons to 159.1 million metric tons.
This week there has been a lot of talk about exports. Rumors of China buying three to four cargos of U.S. soybeans and the rumor that China switched up to 10 cargos of South American corn purchases to the U.S. helped give the grains support all week. There has been no confirmation on the corn business but we have been seeing a few confirmations of soybeans sales since the rumor started.
All three grains also saw export sales to end the week with China buying 110,000 metric tons of soft red winter wheat (third sale for the week) and 136,000 metric tons of soybeans while an unknown destination bought 165,000 metric tons of corn.
One thing we know for certain, Brazil has had to replant a large amount of their soybean crop, whether that be in the north or the southern regions. And that will delay harvest and make it unlikely producers will follow the first soybean crop with corn. CONAB lowered their soybean production estimate for Brazil to 160.18 million metric tons versus 162.42 million metric tons previously. The reduction was due to adverse weather and the need for replants. Corn production was estimated at 118.53 million metric tons, a decline of 538,000 metric tons from their previous estimate. CONAB takes a conservative view when estimating production. The cut in production was made to first crop corn only as CONAB will use trend line projections for the second corn crop until February when producers’ intentions become more evident.
Position squaring ahead of USDA’s December Crop Production report was also evident. Normally the December report is a placeholder as most of the news will come out in January with the release of the Final Crop Production Report, Quarterly Grain Stocks, and Winter Wheat Seedings estimate. The December report will only be a true up for demand.
USDA’s numbers were neutral to friendly wheat. For the 2022 crop year, USDA made no adjustments to the U.S. numbers. For old crop world wheat, USDA increased Australia’s production 900,000 metric tons.
For new crop 2023, USDA increased wheat exports 25 million bushels which followed through to decrease ending stocks by the same, putting stocks at 659 million bushels, 21 million bushels below expectations. The national average cash price for wheat increased 10 cents to $7.30. U.S. exports increased 25 million bushels due to an increase in soft red winter wheat exports of 30 million bushels and a decrease in white wheat exports of 5 million bushels. The increase in demand for soft red winter wheat puts its stocks at a tight 118 million bushels.
World wheat ending stocks were estimated at 258.2 million metric tons, which was as expected and 500,000 metric tons below last month. USDA increased production 1 million metric tons for Australia and 1 million metric tons for Canada.
USDA’s report was friendly corn. For old crop U.S. corn numbers, USDA left all estimates unchanged. For old crop world corn, USDA increased Ukraine exports 100,000 metric tons and increased Mexico’s imports 600,000 metric tons.
For new crop U.S. estimates, USDA increased corn exports 25 million bushels, which followed through to cut ending stocks by the same, putting stocks at 2.13 billion bushels, 45 million bushels below expectations.
On the world stage, stocks were estimated at 315.2 million metric tons, 2.3 million metric tons above expectations but only 200,000 metric tons above last month. The larger than expected increase in world stocks was due to a smaller than expected reduction in South America’s corn production. Brazil’s production was estimated at 129 million metric tons, 3 million metric tons above expectations and unchanged from last month. Argentina’s production was estimated at 55 million metric tons, 400,000 metric tons above expectations and unchanged from last month.
The report was somewhat of a non-event for soybeans as it did not make any changes to U.S. numbers, but also did not cut South American numbers as much as expected by the trade. For 2022/23 U.S. old crop numbers, USDA went back and moved 91 million bushels from food, feed industrial use to biofuel use, which left ending stocks unchanged. For 2023/24 U.S. ending stocks were left unchanged at 245 million bushels, just 1 million bushels lower than expected.
For world numbers, USDA went back and increased Brazil’s old crop 2022/23 production by 2 million metric tons to 160 million metric tons. For 2023/24, USDA cut Brazil’s production by 2 million metric tons to 161 million metric tons, but the trade was expecting to see a cut of 3.5 million metric tons. Argentina’s production was left unchanged at 48 million metric tons but there the trade only expected a 400,000 metric ton cut. That brought 2023/24 world ending stocks to 114.2 million metric tons, 300,000 metric tons lower than last month but 1.9 million metric tons more than expected.
Cattle saw light support from USDA’s December Crop Production report, which although it showed a slight increase in production, the increase was offset by an increase in demand. Old crop 2022 beef production was left unchanged at 26.932 billion pounds. But imports increased 10 million pounds while exports decreased by 5 million pounds. Both of those were offset by an increase in use, leaving ending stocks unchanged at 615 million pounds.
For 2024, production was hiked 180 million pounds (Q1 up 60 million pounds, Q2 increased 45 million pounds, and Q3 increased 75 million pounds) putting production at 25.99 billion pounds. Imports increased 10 million pounds. The supply increase was offset by a 190-million-pound increase in use (due to a 0.4 pound increase in per capita consumption).
With the Dec report out of the way, the grains will once again turn their focus on U.S. export demand and South American weather. There continue to be a lot of rumors of China buying more U.S. wheat and corn as well as a few more jags of soybeans. The market will look for confirmation of those rumors the second week of December.
“The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results.”
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