Grains have a firm start expected this morning.

After a long three-day Christmas break, the return of trade has the grain trade anticipating a firmer restart at 8:30 a.m. Soybeans are called 3-5 higher, corn 1-2 higher, and wheat is mixed to firm. Disappointing weekend rainfall in Brazil with the forecast that continues to disappoint. It’s backloaded with preset in the 6-15 day forecast, but the reality is large portions of northern Brazil continue to come up short. Forecasting models try to lean towards normal climate conditions as this time of year is generally a wetter tropical time for Brazil.

Needed soaking rainfall has been highly scattered and regional, with totals above 1.5” over the last five days confined to NW Matto Grosso and Minas Gerais. The wet forecasts have continued to be incorrect in Mato Grosso do Sul and large sections of East and South Mato Grosso. Three-day rainfall has only been recorded at just .20-.60”, where several inches had been forecasted. A warmer and drier forecast resumes over Central and Northern Brazil into December 31.

Seasonals are bullish, with an emphasis on commodities in January as funds seek inflation hedges for the new year. Funds are the shortest in Ag futures they have been in three years. Index
rebalancing begins January 8th, and there is potential for big buying of KC wheat, corn, and lean hogs. Commitment of Traders showed managed money sold 29,154 contracts of corn (net – 180,724), sold 20,583 contracts of beans (net 10,266), and bought 4,497 contracts of wheat (net -65,032). This week is expected to feature light trading volumes and choppy action. With a lot of the books closed for trading firms, they may not reestablish holding positions until the new tax year starts next Tuesday, January 2.

The warmer and drier pattern in Central and Northern Brazil resumes this week with high temps in Mato Grosso, Mato Grosso do Sul, and Goias reaching the mid-90s. This coming weekend, South American precept seems confined to the far southern areas of Brazil and NE Argentina. This is away from the major producing areas of Brazil. An expansion of Brazilian rainfall is forecasted in the long-term models for next Monday- Tuesday, but confidence in those forecasts is low. Model guidance has continued to lean too wet in Brazil during this growing season. December will go down as subpar, with Northern Brazil receiving less than 40% of normal precipitation, while upcoming January is also monsoonal and should expect 9-12”, with the question now being, how much short will that be?

Cattle on Feed Report results: On Feed (Dec 1) 102.7% (102.2% est) vs 102% last month, Placements 98.1% (96.2% est) vs 104% last month, and Marketings 92.6% (93.3% est) vs 97% last month. The Cattle on Feed report was viewed as neutral to slightly negative due to the slightly higher placement number and just above-average estimates On Feed supplies. The cold storage report showed beef stocks were down 13% from a year ago, the 10th lowest consecutive month below last year, and are now the tightest for December 1 stocks since 2014. The placement rate was higher than expectations but was still the lowest in four months, with a net inventory change of +63,000 head versus +363,000 head in November. Placement rates will plummet into the new year on record low feeder cattle inventories. A softer start of $0.50-$1.00 lower is anticipated.

Quarterly Hogs & Pigs Report results: All Hogs & Pigs (Dec 1) 100% (99.5% est), Kept for Breeding 96.7% (98.8% est), and Kept for Market 100.3% (99.5% est). The Hogs and Pigs report for December was mixed, with the breeding herd falling 3% to a 9-year low, while the market hog inventory was nearly unchanged from last year. The report is friendly for the 2024 outlook, and a more seasonal pattern is expected as a cash market recovery should get underway in late January as the hog supplies start to decline in domestic demand returns.