Dec 30, 2020

Ag Markets Digest Sharp Gains

USDA currently is forecasting Brazil to cut 133M tonnes of soybeans, which would be a record

South American Weather

  • Recent rain in Argentina was less than needed in several important soybean growing areas in the south and east.
  • Below normal rain is forecast for the next two weeks which will make the already dry conditions worse.
  • Rainfall during the past week in Brazil favored central and northern soybean production areas.
  • There are no severe moisture shortages, though many areas in far southern and northeastern Brazil are drier than normal.
  • Some timely rainfall is expected this weekend into next week for parts of northeastern and southern Brazil.

FBN’s Take On What It Means: The weather forecast for Brazil is less threatening, but there is still concern about some areas in the south and damage already done in the center-west. The outlook for Argentina continues to add risk to corn and soybean production. If significant precipitation doesn’t develop into the end of the month, expect reductions in crop conditions to support prices.

FBN-advisor

Argentine Strike Settled

  • Argentina's soy crushing companies came to an agreement with unions late on Tuesday.
  • The Labor Ministry stepped in to facilitate negotiations in an effort to restart exports as soon as possible.
  • The deal includes a two-part 25% wage increase from January to August with inflation indexed raises through the end of the year.
  • The Rosario exchange reported loading of 162 ships has been delayed due to the strike.
  • Soy crushing and many other ag-related industries have been on hold since the strike began almost three weeks ago.

FBN’s Take On What It Means: The end of the work stoppage removes one of the obstacles which have supported bean prices in recent days. The market dipped sharply on the news, but has regained much of the overnight loss. There may be some further incentive for profit-taking as the end of the month and end of the year approach, but the tight US stocks situation remains and will continue to support prices into the new year.

Suppose Brazil Harvests a Smaller Soy Crop
USDA currently is forecasting Brazil to cut 133 million tonnes of soybeans, which would be a record. We know Brazil faced planting delays and that weather has not been overall favorable. Assuming that production comes in at 130 million tonnes puts an already tight situation to a tighter one. That would put Brazil with a stocks to use ratio around 13% or the tightest in years. We lean towards a smaller production total than what USDA currently is forecasting. (Please note that the 130 million tonne outlook is a placeholder and is not considered an official forecast byFBN)

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Kevin McNew

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Magazine

Marketwatch: Jan, 18

US Corn Price Idx: ZCPAUS.CM

open: 5.7667
high: 5.8486
low: 5.7266
close: 5.8288

US Soybean Price Idx: ZSPAUS.CM

open: 13.366
high: 13.376
low: 13.2328
close: 13.2696

US Hard Red Winter Wheat Price Idx: KEPAUS.CM

open: 7.3061
high: 7.3384
low: 7.2334
close: 7.2454

US Soft Red Winter Wheat Price Idx: ZWPAUS.CM

open: 7.0114
high: 7.0566
low: 6.9566
close: 7.0014