Market Thoughts 12.11.22
Mar corn lost 2’2 to end the week at 644’0. Futures slid to a new low of 635’0 on Wednesday before recovering some by week’s end. Jan beans gained 45’2 to close at 1483’6, highest weekly close for Jan beans since June 13th and highest close for nearby beans since late August. March wheat lost 19’6 to close at 901’4 after trading as low as 890 earlier in the week; making it now three straight sharp weekly losses as the March contract came within 15 cents of its harvest lows.
Friday’s Dec WASDE report was pretty tame but a couple numbers are worth highlighting. Old crop bean carryout was left unchanged at 220 mln bu while Bzl/Arg soybean production also left unchanged. U.S. bean carryout unchanged at a tight 220 million bushels alongside an Arg crop that is almost certainly not 49.5 tonnes anymore is pretty supportive for beans. On the corn side, USDA finally cutting exports by 75 mln with more reductions coming to exports and possibly ethanol too doesn’t paint a very bullish picture.
With only minimal changes from the Dec WASDE and a relative lack of other major fundamental news, our opinion remains largely the same. Beans have mounted an impressive meal-led rally as the market contemplates sharply reduced Argentine soybean supplies and with it less meal exports. Despite that impressive rally, corn is still faltering and wheat is back near harvest lows. Energy markets continue to slide and ethanol grind likely takes a hit as gasoline demand falls and margins remain under considerable pressure. We continue to see a low probability that corn is above 600 and beans above 1400 at harvest next fall. That said, corn is approaching the seasonal time frame (last half December) that its post-harvest decline should wrap up, beans are supported by a great headline story with the Argentine drought and nearly all energy commodities are into Buy Threshold on our price signals, suggesting energy weakness could subside. Would not expect a major further price collapse for corn/wheat now into end of year.
In a little over two weeks, soybean oil has lost nearly 20% of its value while soybean meal has rallied 15%. The EPA wavering on renewable diesel volumes largely contributed to the oil collapse while extended dryness in Argentina spurred the meal rally (and comparable rally in bean futures). With oilshare collapsing, going to need to see dryness continue in Argentina for beans to sustain or build on these prices.
Weekly check in on corn seasonal comparison to 11/12 and 12/13 – March 23 corn did get down to 637 this week, inching closer to the 620ish level that we believe would be major support. Worth noting, March ‘12 corn placed its winter low on Dec 15th while March ‘13 was on January 5th. Corn should be within range now of a winter low.
Energy price collapse continued last week with Crude Oil hitting new lows for the year.