USDA crop report sets grain trade defensive.

Grain futures are lower across the board this morning, in the classic sell the grains after crop report day style, this was prevalent last year from the first crop report of the year through June. Forecasts of rain in the next week has the market hopeful of some help to rejuvenate the crops in Argentina. Yesterday maximum temps and Argentina ranged from 104-109° with similar readings due today and Friday. The models suggest accumulative precipitation of 1-2” of rain will impact northern Argentina and parts of Córdoba and Santa Fe in the 6-10 day forcast. Exactly where and how much rain falls will be critical for next week’s trade.

Argentina’s Rosario Grain Exchange this morning lowered Argentine corn production to 48 MMT’s, versus USDA’s 54 and soybeans down to 40 MMT’s versus the USDA 46.5. This is all due to dryness to date with the searing heat. The Buenos Aries exchange will release updated crop ratings and production estimates today. Argentine exports account for 40% of global soy meal and 50% of global soy oil trade. With the US increasing renewable diesel usage this year, this creates a longer-term bullish vegetable oil story that continues into 2022. Overnight Malaysian Palm oil futures rallied to just marginally shy of all-time highs scored in November. Malaysian Palm oil is rallying what is typically a negative seasonal price trend in January-February.

The South American forecast is similar to prior runs with the better-performing ensemble models maintaining moderate to heavy precept in southern Brazil and across the northern half of Argentina’s primary Ag belt in the 6-10 day. Dryness will finally start to occur in central and northern Brazil. Totals of 1-2” of rain will favor Santa Fe and fringe producing areas of northern Argentina. Additional rain is possible January 25-27, but confidence in this is low.

Grain futures are pausing as needed rain and cooler temps are forecasted probable next week. Evaporation losses and Argentina, Paraguay, and southern Brazil have been massive this week, and the key to potential yield stabilization will be whether normal rains in this region can be sustained into February. Climate guidance is doubtful at next week’s rain triggers a lasting pattern change. A return of La Niña-based heat/dryness in Argentina and southern Brazil is the most likely outcome going into February.

On Wednesday cattle and feeder cattle finished lower with the cash cattle trade at $1.00 lower in Kansas at $1 six 35. Dressed trade Nebraska was down $2 at $218. Box beef market extended gains with the choice higher by $1.71 and $13 higher from last Wednesday. Select gained $2.35 and was $11.37 higher than last week. April cattle need to hold 140.00, or a much larger correction will continue in January.