Grains start the week lower ahead of key reports.
Grain futures are lower to start the week, after two runs at a firmer trade overnight on the session for corn and beans, weakness continued as the general weakness across the commodity complexes and financials prevails. This week is Brazil’s CONAB crop production estimates on Tuesday, the USDA releases their data on Wednesday, and we have South American weather that keeps volatility heightened.
This week Wednesday key US inflation data will be released with the December rate forecasted at 6.9-7.1%. This would be the highest in four decades. Inflation continues to create interest in commodities overall going into 2022 as the Federal Reserve struggles to fight inflation with monetary policy. The problem with inflation in grains, it’s also about a shortfall in production that is adding to the elevating of price.
Argentina and southern Brazil are suffering from historic heat that produces extreme stress this week. Temperatures of 103-hundred 12+ anticipated this week. As a result, the internal Argentine corn crop could find 35% of their estimated 54 MMT’s production cut by half to the flash drought in the coming historic heat this week. Crops in southern Brazil are also enduring the same fate making February weather conditions very important.
After this coming weekend, the US and European weather models are offering a shift in the South American weather pattern with rain chances for northern Argentina and southern Brazil. In contrast, dryer weather conditions could find their way to northern Brazil. The forecasts maintain a .5-2.00” potential of rain for Argentina and S Brazil during January 17-22., With a dryer trend to follow. Confidence in the rain is increasing as the moisture is being pulled forward into the forecasted is under the 10-day models. Crops will be under extreme stress before these rains arrive and need to arrive.
Iraq has extended its tender to purchase Canadian, Australian and US wheat to January 13. The tender extension should allow for lower price offers for the export. February/March. The US has a good chance of filling this tender, along with the second tender for another 500,000 MTs is expected to follow. China auctioned off 100% of its billing wheat offer overnight from government reserves. The tender found widespread demand and interest for this wheat that was from 2014-2020.
Last week, the negotiated fed cattle trade developed at $138, steady in the central and southern markets and $1- lower in the north. Top prices paid were in the Western Midwest, where live cattle sold steady on the week at $140. Last week cattle slaughter rose to a three-week high of 620,000 head, but this is still well short of the fourth quarter average near 660,000 head. The light slaughter offered support for box beef values throughout the week. The choice cutout gained $6.56 while select was higher by $2.87. February live cattle have heavy resistance at 138-139.