Grain futures start last the week of the year higher.
Overnight grain futures pressed higher after the Christmas holiday break, as the stagnant and persistent weather pattern in South America continues. Rains in northern Brazil, while southern Brazil and Argentina remain mostly dry with rising temperatures. Rainfall across the drought areas over the holiday weekend was lacking in the forecast through January 5 is hot and dry. The extended range 11-15 day forecast is a bit cooler with some rain, but it’s so far out on the weather models, it needs to verify into the 10-day models.
The forecasts are not entirely void of rain, as it always rains in a drought; it just never rains enough. Chances are sporadic with expectations of less than 1.00” for southern Brazil, with most of Argentina dry through January 5. High temps into the new year range from mid-80s to lower 100’s.
Corn futures are pushing new 6-month price highs, and soybeans new 5-month highs, as a vast majority of S Brazil corn crop heads into pollination stressed with heat and dryness likely through January. There is evidence that CONAB’s summer corn production number will be lowered by 3-6 MMT’s. This pulls exporter cornstalks/you substantially lower and triggers the need to ration corn supplies in Brazil between now and July when the safrina harvest begins. This will create increased US exports, with the combination of rising ethanol usage that the USDA has to account for, and larger exports could have 2021/2022 US corn ending stocks back to 1.0-1.2 Mil Bu, which puts the spot corn price into the $6.50-7.00 spot basis range into the spring.
Friday’s Cattle on Feed report was mostly neutral, with On Feed par with the estimates, and Placements were 104% versus 103.2% estimate. Marketings were 105% versus 104.4% estimate. The December Hogs and Pigs report was viewed as bullish for hog futures as none of the inventory numbers offered a bearish surprise. Revisions to last years's inventory were 435,000 head below the average estimate, equivalent to one day slaughter. The breeding number came in at 97% versus a 100.1% estimate, while marketings were 99% when estimated at 96.9%. The Hogs & Pigs report will produce a sharply higher response to futures this morning, with summer hogs likely besting the 100.00 price value.