LEADING OFF: Grain markets remained closed overnight for the Christmas holiday and will re-open at 8:30 a.m. CT. They’ll do with little fresh news to drive prices, but with some positive momentum from the pre-Christmas trade: Corn has settled higher five of the past six days, while Chicago and Minneapolis wheat have each ended higher five days in a row. Soybeans also rallied in Wednesday’s shortened trading session. Today’s trading session will close at the normal time, but trading volume is likely to remain low as many traders stick to their holiday routines.
The grains’ strength comes amid a favorable outside market environment. The dollar index made a 12-week low before Christmas and is down slightly this morning after initial overnight gains. Crude oil made a three-week high overnight and is near unchanged this morning. Gold and silver continue to make new all-time highs. The stock market looks poised for a mixed open, which would leave the S&P 500 near the all-time highs set earlier in the week.
Recent hopes of a peace deal between Ukraine and Russia that would also facilitate easier grain production and movement, particularly in Ukraine, appear to be fading. While talks have not stopped, there is widespread agreement that Russia will not agree to a 20-point peace plan put together by the U.S. and Ukraine President Volodymyr Zelenskyy. Russia declined an offer of a Christmas ceasefire, and has continued to bombard the key port city of Odesa, targeting port infrastructure in particular. Drone attacks have continued today. As the New York Times described it in a Thursday story: “While major Ukrainian cities commonly experience bursts of intense Russian bombardment followed by quieter periods, Odesa has been under nearly constant attack since the early morning hours of Dec. 12.”
CORN: Strong demand helped underpin this market even in the face of weakness in soybeans and wheat, and with those markets having rebounded, corn made a three-week high on Wednesday. If there’s fresh export demand news today it will not come from Washington, as today was declared another holiday for federal employees. Corn could also be seeing some support from concern over dryness in Argentina. That situation is far from a crisis, but it is clouding the yield outlook there.
Nearby March futures closed at $4.51 on Wednesday and technically the next near-term upside test is a Dec. 2 high of $4.52 ¼. Above that, the next target is the Nov. 13 high of $4.57 – taking that out would put futures at their highest level since June.
SOYBEANS: March futures sit nearly 20 cents off of last week’s low, and settled Friday above their 10-day moving average for the first time since Nov. 28. That should feed the notion that the market has made a bottom, although trading volume is low for the holidays so this action may be discounted to an extent. And the confidence in a bottom here isn’t as strong as in corn or even wheat.
Fundamentally the prospect of a very large Brazilian crop still hangs over the market. Weather so far this season has been mostly benign, and with the harvest just weeks away, the forecast looks favorable. After a drier stretch in east-central and northeastern areas, rainfall prospects are improving, with meaningful rain over the next 7–10 days according to World Weather Inc. The most widespread and intense precipitation will arrive in the second half of next week. Northeastern Brazil will be slower to see relief, and some totals there may be on the light side. Temperatures in east-central and northeastern Brazil will remain warmer than normal until heavier rain arrives. As noted in the corn comments, dryness in Argentina is more of an issue, particularly Southern Argentina. It is unlikely to receive much rain over the next 10–12 days. Drying is most likely in Buenos Aires and La Pampa, with some neighboring areas also at risk.
A Reuters story to start the week on how China did not import any U.S. soybeans in November for the third straight month got a bit of traction in the broader political and business media, but the supposed negative implications of this news have likely been way overstated. Although China didn’t receive any shipments in November, it did start making active purchases, and with the “trade deal” with China only being announced in late October, the lack of arrivals in November is no surprise. StoneX is saying that China has already bought well over 8 MMT already, although shipments will take some time. While the goalposts for the 12 MMT were moved a few weeks back to the end of February, at this point the expectation is the goal will be met. The question is what happens after that, especially assuming Brazil harvests a large crop, which right now seems a likely scenario.
WHEAT: To the extent this market was feeling pressure from prospects of a Ukraine peace deal, that has stopped for now, as there continues to be no deal and Russia has spent the past two weeks pummeling port infrastructure in Odesa. The other potentially supportive factor for wheat is dryness in the Plains, which is expected to persist over the next 10 days according to World Weather Inc. Temperatures will also remain well above normal in the region, which will exacerbate the dryness and also reduce winter hardiness. That said, NOAA’s 8-to 14-day outlook does show above-average precipitation for the region, and drought is not yet a major concern. And other areas of the world continue to see mostly favorable weather. Most notably, the western portions of the former Soviet Union will see ample snow in the next 10 days according to World Weather, limiting any winterkill concerns from the bitter cold that is also expected.
Futures have some upside momentum, with Chicago and Minneapolis settling higher five days in a row and K.C. five of the past six days. March soft red winter futures on Wednesday closed above their 10-day moving average for just the second time since Nov. 18.
LIVESTOCK: Plains cash cattle trade was mostly light on Wednesday, with USDA reporting trade at $229 in Kansas, steady with last week and Tuesday’s light trade of $228-29. Trade was a little more active in Nebraska, at $230 on a live basis, compared to $228 last week, while dressed trade at $356 compared to trade last week at $356-58. Packer margins that are back deep into the red is a negative factor for the market. The afternoon Boxed Beef report on Wednesday showed Choice down $1.15 and Select down $3.84.
Lean hog futures ended lower on Wednesday, retreating from the prior day’s multi-week highs in nearby months and settling down for the first time in five sessions. The market had pressure from Tuesday’s bearish Hogs and Pigs report and from weaker wholesale pork values. The afternoon pork carcass cutout value on Wednesday was down $3.03.
