Written Commentary
SOYBEANS
Beans closed with most modest gains of $.02 – $.05. Jan-23 soybeans failed its attempt to break above its recent range of $14.60 – $14.95. Soybean meal closed $3 – $4 higher. Soybean oil was mixed with Jan-23 closing at 66.31 up 26 points right at its 100 day MA. Deferred contracts were slightly lower. There remains a chart gap from 67.00 – 67.40 from early Dec-22 for the Jan-23 contract. DataGro lowered their Brazilian soybean production est. 1.1 mmt to 152.2 mmt, vs. the Dec-22 USDA est. of 152 mmt. Chinese soybean imports in Nov-22 improved to 7.35 mmt, while up from 4.14 mmt in Oct-22, they are down 14% from Nov-21. The US was the top supplier in Nov-22 with 3.38 mmt. Brazil sold China 2.54 mt, while Argentina provided 1.15 mt. Cumulative Chinese imports for 2022 (Jan thru Nov) are down 8% from YA. I expect a big increase in Chinese imports in Dec-22 up to 10 mmt, largest monthly since July-21. As a result 2022 imports would reach 90.5 mmt, down 6% from 2021. Currently the USDA is forecasting Chinese imports for the 22/23 MY (Oct22 – Sept23) to reach 98 mmt, up 7% from YA. Although the first 2 months have been weak, Oct-22 & Nov-22 imports at 11.5 mmt are down 16% from YA, I’m not ready to lower the Chinese imports forecast just yet. While a full opening from Covid restrictions will likely be pushed back until late winter or early Spring-23, I suspect Chinese imports will rebound strongly in the 2nd half of 2023.
CORN
Old crop futures closed $.08 – $.10 higher, surging into new highs on the close. New crop futures were up $.06. Mch-23 broke above its recent $6.35 – $6.60 trading range with the next resistance being the 100 day MA at $6.67 ½. Not much change with the South American forecast as rains Friday thru Sunday will bring short term relief to Argentina with some rain reaching Southern Brazil by early next week. Cooler but mostly dry conditions next week. Week 2 brings opportunities for more rain for drought effected areas however no significant relief for at least a few more weeks. Chinese corn imports in Nov-22 at 740 thousand tons were up from 550 in Oct-22 however down 6% from Nov-21. Ukraine’s Ag. Minister suggests their corn production could slip to 22 – 23 mmt, vs. 41.9 mmt YA and well below the Dec-22 USDA est. of 27 mmt. Roughly 30% of this year’s crop remains unharvested as fuel and labor remain in short supply. Even if Ukraine’s corn production is lowered to 22 mmt it’s still feasible they reach or even exceed the current USDA export forecast of 17.5 mmt. I look for feed & residual down 1 mmt, exports up 1 mmt, with ending stocks slipping to 1.9 mmt down from the current 6.9 mmt, however more in line with preinvasion levels. Weekly ethanol production slipped 3% from last week to 1.029 tbd, however was in line with expectations and above the pace needed to reach the USDA corn usage forecast of 5.275 bil. bu. We look for production rates to seasonally decline into the early part of next year as production margins have also slipped. Stocks fell to 24.1 mb, in line with expectations and well above the 20.7 mb from YA. While implied gasoline demand at 8.714 mbd did jump 5.5% from the previous week, it remained below YA levels by 3%.
WHEAT
Prices closed higher in all 3 classes with Chicago and KC up $.15 – $.18 while MGEX was up $.10 – $.12. Sub-zero temperatures and high winds with limited snow cover in winter wheat areas provide support. The need for addition war premium has stimulated a short covering rally, at least for Chicago futures. Mch-23 Chicago traded above last week’s high of $7.69 ¼ however settled below it at $7.67 ¾. Not much resistance until $8.00 level. Mch-23 KC closed at $8.64 up $.17 however still well below last week’s high of $8.79 ¼. Mch-23 MGEX closed at $9.27 ¾ also below last week’s high of $9.32. Ukraine’s Ag Minister states wheat available for export in 2022/23 MY will reach 16.3 mmt, above the current USDA forecast of 12.50 mmt.
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