Turn-around Tuesday is underway.

This morning, grain futures are firmer across the board as row crop futures are firmer on the continued degrading South American soybean and corn crops. Yesterday, StoneX reduced the Brazilian soybean crop by 11 MMT’s from the December crop report, but other commercial crop estimates are even lower. Some estimates suggest Brazilian production could drop 11-16 MMT’s and Argentine production soon lowered by 3-4 MMT’s.

Four state Ag secretaries in Brazil from RGDS, Parana, Santa Caterina, and Mato Grosso do Sul, conducted a virtual meeting late yesterday to discuss crop solutions to help farmers struggling with drought. MGDS will declare a drought emergency today, while the Ag minister of Parana indicated that its state had lost 38% of its 21 MMT’s of soybean production, which equates to 8 MMT’s, and the first corn harvest will fall 2.4 MMT’s or 43%. The minister for RGDS suggested similar yield losses with pre-drought production estimated at 21 MMT’s. All toll, collectively losses of 15-18 MMT’s of soybeans and 4.8-6.7 MMT’s of first crop corn losses can be occurring due to the November-December heat/dryness.

Moving forward, it’s essential to understand that such a sizable South American soybean crop failure holds massive implications for the 2021/22 and 2022/23 US balance sheets. Soy product availability at a time when a new industry, US renewable diesel, will double its annual production by over 1 billion gallons in 2022 is extremely price supportive. This new demand and crop curtailed South American soy production produces bullish pricing for soybean oil in the coming year.

Parana’s Deral will update state crop conditions and harvest progress later today. Recent rains from last week in Parana and southern MGDS will not add many bushels with corn/soybeans in the initial harvest stage.

Yesterday the release of US HRW wheat condition ratings showed a sharp fall for Kansas, Nebraska, and Colorado. The US’s biggest wheat-producing state, Kansas, witnessed the fall in its GD/EX wheat ratings of 29% from 62% in late November to now just at 33% for January. Part of this rating decline is based on a lack of plant growth due to the deepening drought. The forecast offers no precipitation with widely swinging temperatures for the plains into mid-January.

After a firm start, cattle futures closed lower on the first trading day of the year. Cash cattle markets were quiet but active trade is likely to kick in by midweek. Slaughter margins are historically strong in early week beef trends are higher. Box beef values were higher, with the choice gaining $0.77 to $266.03 and the select value gaining $0.67 to $258.90. Cattle futures are notorious for making a price high the first trading week of the year and struggling the preceding 6-8 weeks ever to overcome any high made this week. This is similar to grains typically making a high around July 4th.