Grains turn mixed after a firm Sunday evening start.
Grain futures opened firm Sunday evening, but those gains faded as the evening session wore on. The lack of fresh speculative interest in low-volume trade allowed the index funds shorts to reassert their pressure easily. The Commitment of Traders Report on Friday showed managed money sold 29,819 contracts of corn (net -260,542), sold 45,549 contracts of beans (net -76,797), and sold 10,587 contracts of wheat (net -68,575). The corn short position is almost record for this time of year, and it only takes some 40+ thousand more contracts to have a record corn short position on by index funds.
For the calendar year of 2023, China imported a record 99.4 MMTs of all-origin soybeans, taking 69.9 MMTs from Brazil and 24.1 MMTs from the US, while others made up 5.4 MMTs. Brazil’s record soybean harvest, combined with competitive prices last year, caused China to boost its import share to a record 70% from Brazil.
On Friday, Phillips 66 moved forward in opening its Medigap biofuel plant in Rodeo, California, by successfully navigating a comprehensive environmental review that its local regulator approved. This opens the way for the US’s largest renewable energy plan to start operations in the coming weeks. The Phillips 66 Rodeo plant has the capacity to produce 50,000 barrels of renewable diesel daily, dramatically expanding US biofuel feedstock demand. Phillips 66 has petitioned California’s Air Quality Board to be able to import and use Argentine soy oil as a feedstock if local supplies are exhausted, but if it were approved, Argentina soy oil imports would still be subject to 19% US import duties and rising transportation costs.
ECB Policy Decision on Thursday, a dovish ECB (European Central Bank) would drive the Euro down and boost the Dollar. The stock market is at an all-time high, and inflation expectations are rising. This is a busy week with the release of 4th Quarter 2023 earnings.
The South American weather forecasts show an extended period of dryness across Argentina while soaking rainfall continues for Northern Brazil, where harvest is gaining speed. Far Southern Brazil is in a below-normal rainfall and above-normal temperature pattern with Argentina. The MJO is stuck in a wet weather phase for Northern Brazil, while cold ocean waters across W and S Argentina produced a drier Argentine weather pattern. The extended 11-15 day forecast continues its trend of below normal Argentine rainfall with near to above normal temperatures and additional wet weather across N Brazil.
Live and feeder cattle posted a higher weekly close ahead of Friday’s COF report. Report did not have any surprises with On Feed 102.1% of last year (est 102.1%), Placements 95.5% (est 95.4%), and Marketings 99.1% (est 99.3%). One standout is that weights for steers were at a record 941 pounds for the month of December. A trend that is likely to be seen in 2024 with fewer cattle but harvested at a heavier weight.
Cash trade late in the week had better prices, with sales in the North steady to $2 higher at $173-175, with the dressed trade $2 higher at $273-275. Live sales in the South were $1 higher at $173. Early week outlook maintains a firm tone. Last week’s kill totaled 617,000 head, up 71,000 head from the previous week but 30,000 head less than a year ago. Box beef values made gains of $6/CWT on choice and $11 on select. Live cattle February are near resistance at 174.50-176.00, with April cattle having near-term resistance at 178.50.