Grains firm overnight. Index funds short covering out of wheat.

Grain futures are higher with follow-through buying from yesterday’s firm performance, as export sales data was anticipated to be robust and was confirmed this morning with strong sales at estimated expectations. Also, the market expects China to return next week being a buyer. Still, it’s questionable with the sizeable Brazilian crop on the way that they may choose to take the lower offers that are available. Also, Chinese purchases of US corn have only been 3.7 MMTs in the current marketing year, and that’s down 70% from a year ago. Brazil has as much as 50 MMTs of corn to export in the 2022/23 crop year and looks to replace the US as the world’s largest corn exporter. Brazil’s June forward FOB corn offers have been weakening as of late, with their first corn harvest looking to be record large.

Mexico’s deputy Ag Minister indicated that Mexico would move to replace 30-40% of its yellow corn imports by 2024. They will do so by producing additional corn within Mexico and by substituting US corn with other non-GMO grain. Mexico will not be able to replace all 16 MMTs of US yellow corn that is shipped to Mexico. The recent statement now is a first that Mexico looks to substitute and move away from US yellow corn in the next 11 months. Over the years, Mexico has grown to be the US largest corn buyer taking 600-650 Mil Bu. This news continues to be a concern for longer-term corn exports, considering Brazil’s growing dominance.

Weather models continue to have the GFS looking for drier weather for Argentina in the coming weeks, while the euro maintains a wetter forecast for Southern Brazil and Argentina over the next two weeks. Rain of .25-1.25” fell overnight across La Pampa and Buenos Aires areas. In recent days there have been pop-up thunderstorm clusters forming which are producing important rain and some of the key crop areas. The rain is forecast to become more vigorous through Saturday with an accumulation of .5-2.00”. This slow-moving system will produce daily chances of showers into the weekend. A second system is offered in the middle of next week with the drier trend to follow in the 11-15 day, but heat is lacking.

Yesterday’s cash cattle market in the Plains continued untraded on limited demand. Asking prices in the southern plains are quoted at $157, which is $2 better than last week. Feed yards are holding firm amid the strength of the board. The January Cold step storage report showed that the end-of-month December beef stocks were 4% larger than in November and 7% larger than a year ago. This was a record-large December stocks number and the second largest on record. However, the December stocks increase falls well below the 19-20% increases realized earlier in 2022. The outlook continues for declining cattle slaughter and beef production rates in 2023.