The grain trade is firm in the overnight.
This morning’s grain trade is firm to a few pennies higher in the overnight session. Argentina's rain forecast competeing models cannot agree on whether the rain events January 19-24 are widespread rain showers or more of the soaking kind. The EU model is the one that is trying to maintain chances of rain forecasts this weekend. Of course, traders that have been touting the bearish news about how the Brazilian crop is large enough to offset any Argentine losses continue to fight what is now world balance sheets that traders grapple with, which shifted last Friday, reducing US domestic supplies. Of course, every year that we get an extended rally in beans in the new year, somebody always announces in North Carolina they’re going to import a cargo or two of soybeans to bust the rally and then end up gumming up all the machinery because South American beans are much higher in oil content then what their equipment can handle.
It’s anticipated that Matto Grosso soybean harvest is only .07% complete versus 6.5% a year ago. Motto Grosso corn progress to get planted in late January onward will be closely watched to measure the timing of the safrinha corn seeding. The Brazilian corn market is tight, with cash ethanol prices and S Brazil rising to $1.92/gal versus US Gulf ethanol at 1.65. A meaningful recovery of Brazilian corn supply occurs of the majority of the safrinha corn crop in Mato Grosso is planted by March 1.
The NOPA soybean crush for December will be out today. It’s estimated to come in at 204-206 Mil Bu, which is a new all-time record with two new plants online.
The CPI data out this morning was considered friendly to a potential June interest rate reduction. The CPI came in equal to a year ago at 2.9, while core CPI was down slightly at 3.2 versus 3.3% year-over-year. This has the dollar softening this morning while the metals, cryptos, and stock indexes rally. The Dow was up 622 points as of 7:40 a.m. this morning.
South American weather models have the EU providing a forecast of rainfall across western and southern Argentina on Saturday-Monday, with accumulations of .75-1.50″ favoring Córdoba, Buenos Aires, and La Pampa, with a combined coverage of 65-70%. This will bring cooling temperatures that will return to more normal in the 6-15 day window. Meanwhile, the GFS keeps Argentine rainfall this week largely absent, but the EU has had a better track record over the last 30 days. A pattern of dryness returns to Argentina after Monday/Tuesday and persists into the final days of January. More rain will be needed in February to stabilize soil moisture outside of Córdoba.
Yesterday's cattle trade closed a bit softer on the live trade but had well-off session lows, while feeder cattle ended firm. It appears the board is pricing in a higher cash trade this week and early negotiations are expected to get underway later today. Outlooks are firm. Last week’s International Trade report showed that beef exports November rose 5% for the month and were 11% larger than a year ago, at a 4-month high of 253 Mil pounds. Retail and wholesale beef prices were each 3.5% higher than a year ago, and the average dear price was 5% higher. With all this occurring, domestic demand was up 6.5% from year ago and marking the fourth consecutive month of year-over-year gains.
Cattle and beef supplies are seasonally tight, and with more cold weather on the way again next week in the feeding states, support looks to be strong under the market. The market pricing job is to find a price level that dramatically slows demand.