For the week, March corn was up 0.75¢, January soybeans were down 21¢, January soybean meal down $8 per short ton, with January soybean oil down 125 points. March Kansas City wheat up 14.5¢, March Chicago wheat climbed 29¢, and March Minneapolis wheat was down 0.75¢.
The December WASDE was out on Friday and is usually a place holder with USDA making more significant changes in January. USDA made only minor adjustments to world numbers, which was positive because the stocks to use ratios were not increased for corn, soybeans or wheat. This was a concern going into the report especially with the predictions for a record corn and soybean crop out of South America, according to Jamie Wasemiller, Gulke Group market analyst.
“I think some people in the marketplace were thinking we could see stocks to use ratio move higher and that was just going to be a weight over the overall markets,” he says. “It didn’t lower but at least it didn’t move higher so that’s a good thing.”
While USDA lowered Brazil soybean production 2 million metric tons to 161 million, they are still well above CONAB and private firms. Wasemiller says he was surprised USDA did not make any adjustments to corn production in South America. In fact, the Brazil corn crop was left at 129 million metric tons.
“There aren’t any private firms that are even close to that figure and CONAB estimated Brazil corn at 118.5 million so there is a big discrepancy there,” Wasemiller says.
Their contacts in South America are confirming there are production issues he adds.
“First, the weather has had a lot more detriment to both crops, but it may affect that safrinha corn crop more. So, we could see some acres get reduced there,” Wasemiller says. “But also, CONAB uses trend-line yields until February. So, we come February, we could potentially see a relatively significant move in the yield for the acres that that do get planted down there.”
Plus, he says corn is not profitable for farmers in Brazil right now which may also deter plantings.
The market is closely watching the South American forecast for mid-December which was expected to turn wetter. Wasemiller says that prediction is starting to fade according to ag meteorologist Eric Snodgrass.
“He was talking about how so there’s been divergence between the European model and the GFS model,” Wasemiller says.
Snodgrass says over the years the European model has been a little more consistent, and that has been the wetter bias model, while the GFS has been the drier bias model. On Friday the European model turned much drier.
“So, they’re talking it’s not maybe less than an inch of rain over the next seven to 10 days. That’s pretty significant,” Wasemiller says. In week two and week three, both models turn to wet, so he says that could delay some soybean planting but ultimately that will also have a domino effect on the second crop corn.
“That’s positive for corn down the road,” Wasemiller says.
Domestic balance sheets were left unchanged on soybeans at 245 million bushels, while ending stocks for corn and wheat were both lowered 25 million bushels due to a subsequent increase in exports. Wasemiller says they expect China will continue to be a buyer of U.S. wheat, in particular soft red winter wheat, so that could help support the market going forward and push some of the funds to cover more of their short position.
Technically corn was flat for the week even with falling energy prices. Chicago and Kansas City wheat were up for the week which could keep the funds short covering and technical buying going. Wasemiller says even though soybeans had a lower weekly close, there has not been technical damage done yet he says.
“That leaves the soybean market susceptible to changing positions reflecting new information on demand or weather in Brazil,” Wasemiller says. “Volatility will stick around.”
For more information contact Jamie at info@gulkegroup.com.
