A mixed morning greets the start of the week.
Grain futures had soybeans opening higher overnight while wheat and corn softened, and wheat produced the prominent weakness throughout the evening session. Kansas led the decline on proving rains again will fall across Eastern sections of the HRW belt this coming weekend. On mediocre volume, movement is more pronounced going into the end of the year.
According to trade sources, Saudi Arabia purchased 1.353 MMT of wheat in a tender that closed late last week, with the bulk of it thought to be sourced from Russia. On-farm Russian wheat stocks reported by Rosstat are still the largest inventories in key southern exporting regions, matching last year and just over six MMTs. Total on-farm stocks are estimated at 25 MMTs, which is slightly below last year. Russian wheat is offered at $242/MT, basis fob, for nearby delivery, when compared to US Gulf SRW at $266 and German origin at $256. This is why the wheat futures had sold off from the push higher into December 6, which became quickly overvalued.
NOPA Crush numbers on Friday showed a record November 2023 crush of 189.04 mbu (exp. 185.98 mbu), while soy oil stocks were higher than expected at 1.214 billion lbs (vs. 1.138 billion lbs).
Fertilizer companies are saying that Brazilian farmers are delaying purchases due to drought conditions. Typically, if they miss their ideal planting window for safrinha corn in January and February, fertilizer purchases are less due to fewer acres.
Soybean prices are firm this morning, with soybean oil representing strength, as the Biden administration confirmed late Friday that the GREET program is being considered with details by March 1. This will be a boon for the ethanol industry and reduce the price of biofuels for airline usage. There are still more details we worked out, which is keeping the story from reflecting the full bullish potential.
South American weather has a pattern of scattered showers that begin in northern Brazil on Wednesday. Light rainfall was recorded on Sunday of .50-.90”, encompassing central Mato Grosso with 20% coverage. Rainfall of .50-1.00” was recorded in East Santa Fe and Western Entre Rios in Argentina. The remainder of South America was dry with the excessive heat of 96-106 across the whole of N Brazil. The GFS, the most accurate forecasting model for over two and half months, calls for accumulations in the 10-day of 1-2” of rain in areas in a deficit of 12 inches as of December 12. The 11-15 day reverts back to hot and dry.
On Friday, live and feeder cattle futures were pushed higher and reflected the first higher close on the week in over four weeks for the February live cattle. Cash trade last week was lower in all regions, where Nebraska reported trade at $168, which was $2.00, with an improvement to steady at $170 by the end of the week. Dressed trade was quoted $2-3 lower at $267-268. Meanwhile, cattle in the South sold for 11 lower for the week at $170. This is compared to a year ago. Sales are still $11-15 higher, with a 5-area average up $13.
The fund liquidation has pushed their ownership down to the lowest since July 2022. Meanwhile, the commercial net short has also been the smallest since March 2020. This keeps the liquidation effect by the index funds minimal as compared to the weekly action in November that they were able to produce. If there were any catch-up sales made by LRP insurance companies that were also part of the grand selloff due to puts that were written instead of purchased, they might find themselves caught in a short covering pinch if they overstay their new shorts at lower levels, too long.