Argentina's devaluation softens the grain trade overnight.

The grain trade moved lower overnight as it focused on Argentina's drastic currency devaluation. Argentina’s new Economic Minister announced a devaluation of the peso to an exchange rate of 800 pesos/dollar from the official rate of 366 pesos/dollar. Argentina’s central bank said they will keep the key interest rate at 133%. After the sharp devaluation, they plan to lower the peso by 2%/month. All resources will be utilized to achieve monetary stability and reduce inflation. Argentina’s Ag export sector is set to meet with President Milei today, and the government is expected to adjust export taxes, but no timeframe was given, and it takes an act of Congress to do this. They are also making other adjustments, i.e., cutting government ministries in half.

Removing the ag export taxes in Argentina will take a considerable amount of time to end, and there are strong rumors that Argentina will return to the taxation of corn and wheat to garner additional revenue. Argentina needs the tax revenue to pay the IMF loans, and they cannot risk default during their fragile economic timeframe.

Algeria has secured 930,000 MTs of wheat, with most sellers being from the EU. The sale occurred at a $7/MT premium from their last purchases and reflects the world cash wheat values are now rising. Russian FOB wheat values are also moving upwards into the holidays as logistics start to snarl.

Today, the Federal Reserve ends its meeting and will update its interest rate policy at 1:00 p.m. with no change in lending policy indicated. The US dollar will weaken if there are hints of rate cuts in 2024.

The forecast for Northern Brazil offers a heat wave with limited rain for the next seven days, adding additional crop stress to the corn/soybean crop. A high-pressure Ridge starts to amplify across the northern 2/3s of Brazil, which fans temperatures in the 90s to lower 100s. Some highs can reach 106-109° in Mato Grosso. Rain chances are forecasted to improve after December 20, which has been typical for long-range forecasts that have proven to be wet and are now coming with low confidence. The Brazilian weather pattern appears to remain abnormal, with heat/dryness persisting across the northern half of Brazil during what is typically a monsoonal time window. Again, the 11-15 day models try to bring about near to above normal rainfall.

Live and feeder cattle futures enjoyed another higher session yesterday, which marked three days of higher closes, which has not occurred since early November. Even with the early selling that was present early in the session, new demand surfaced, pushing the markets higher into the close. Meanwhile, cash markets yesterday and the plains remain at a standstill, with fed cattle supplies expected to be tighter this week and feed yards looking to acquire leverage.

Estimated slaughter margins are $50-60 a head better than one to two months ago while wholesale beef values started to firm. Domestic beef ahead demand has held firm in the last six months, even with record prices. Rationing has mostly occurred in reduced exports, but cattle supplies continue to contract now into the year ahead. Fed live cattle have resistance at 170-171, while January feeders have immediate resistance at 220-221 to overcome in this first rally.