Morning Commentary - 1/6/2021

CBOT Running Bull Market Scores New Rally Highs on Investment Inflow; Palmoil and Dalian Futures Soar

AgResource Farm Marketing Advice for Wednesday: 1/ Wheat Producers: Exit 25% of 2021 wheat hedges basis July Chi futures at $5.86.                

6:30 AM CBOT Prices: March soybeans are up 26.00 cents to $13.73, Mar corn is up 6.75 cents at $4.985 while March Chi wheat is up 5.25 cents at $6.5925.

AgResource AM CBOT Comment & Analysis: Good Morning! The running CBOT bull market continued overnight with March corn breaching while soybeans and soy products scored new rally highs. March soybeans reached $13.7825 overnight with the next upside target at $14.00-14.20 while March corn’s next upside resistance rests at $5.10-5.20. Wheat prices appear to be tagging along on rising Black Sea prices – both at export & the interior. Fears are growing that the Russian Gov’t could place additional restrictions on exports. 

CBOT open interest rose on Tuesday with corn up 12,284 contracts, soybeans up 10,825 contracts, and wheat up 12,473 contracts. One cannot even contemplate a correction until CBOT open interest falls for several days in a row. The influx of new investor money is the propellant for the CBOT rally with cash basis levels steady on active export demand and limited farmer selling. New investor money is usually pushed into the CBOT over 3-4 days timeslots. Today would be the 3rd day of additional investor fund flows into agriculture.

In the Georgia Senate runoff, it appears that the Democrats have picked up the seat appointed to Ms Kelly Loeffler as Rev. Warnock is the projected winner.

The race for the other GA Senate seat between Purdue & Ossoff is too close to call, but the control of the US Congress is down to this outcome. The US dollar fell while US/world equity markets are mixed. WTI crude oil prices are at a 10-month high with March oil at $50.15, up $.14. And the US Congress will start the certification process today of Joe Biden for US President while some Trump supporters argue that the November election was flawed. The US political landscape gives traders much to watch and ponder in today’s trade.   

There were 25 soybean contracts tendered for delivery against Jan futures. No tenders of US soy products have been offered as cash is trading above futures.

China’s Dalian corn/soymeal futures set another round of historic contract highs. May Dalian corn futures finished up $.08/Bu at $10.94/Bu while May DCE soymeal rose $8.30/MT to $543.00/MT. And China’s palmoil and soyoil futures also scored new rally highs on tightening stocks. The rise in domestic Chinese soy values is keeping soy crush margins positive.

March Malaysian palmoil settled up 122 ringgits at a new 10 year high at 3,877 RM/MT. The spot January palmoil futures roared past resistance at 4,000 ringgits/MT and closed at 4,040 RM/MT. The remaining upside target is the all time high at 4,300 set back in 2008. At that time US soyoil values reached $.70/pound compared to today’s $.445.

March Paris wheat is up €.50/MT at €218.25/MT and is likely to test key resistance at €219-220.00.

There is no evidence that cash prices are rationing US export or domestic demand with investors becoming fearful of inflation. The USDA Crop report is just 4 trading days away. ARC maintains our bullish view on tightening stocks.  

South American Weather Pattern DiscussionA few showers occurred across Buenos Aires producing rains of .2-.7” while the remainder of Argentina was dry. High temps ranged from the 70’s to the 90’s with the coolest readings across BA.

Northern Brazilian rainfall was again disappointing, a trend that extends back into the weekend. Most totals were less than .10” and dryness is becoming an issue for reproducing soybeans. High temps ranged from the 80’s to mid 90’s.

The attached 10-day rainfall graphic is from the EU model. Limited rain is forecast for Argentina for another 4-5 days before a cold front produces widely scattered showers of .25-1.00”. Widespread 90’s will be common across Argentina before the rains start to arrive early next week. The GFS model is wetter than the EU model, but the GFS has been too wet both across N Brazil and Argentina based on actual rains that have fallen.  AgResource maintains a drier forecast for Argentina and S Brazil into late January.

A below normal rain trend will persist across N Brazil with daily shower chances not equaling seasonal averages. A trend of below normal rain envelops N Brazil into mid-January. Brazilian High temps range from the mid 80’s to lower 100’s. Our concern for weather stays elevated.

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