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Daily Insights

January 26, 2023

Good morning,

Stronger markets to start the day. Corn is up 3 and soybeans are up 6.

 

Weekly exports had another decent week with corn coming in at 35.8 million bushels and soybeans at 42.1 million bushels. Despite the decent numbers, corn is still 235 million bushels behind the USDA’s projections for this year.

 

Trader’s are expecting big things from China as their economy reopens for the first time in three years.  Additional demand for food and energy are believed to be the driving force.  Index funds have been buyers which has put crude oil at the top of the recent range.

 

A USDA attaché in Beijing said that China is set to import “a substantial amount” of Brazilian corn in calendar 2023, without giving an exact number; imports are priced competitively with local supplies, despite a strong 2022 harvest in the North China Plain. End users are mixing more corn in feed rations due to higher prices for wheat and sorghum.  China has only bought 3.7 mmts of US corn this year, down 70% from last year.  Brazil will have as much as 50 mmt of corn for export if crops sizes stay large.

Mexico’s Deputy Ag Minister yesterday said the country’s goal is to reduce yellow corn imports by 30-40% by 2024. Mexico buys 16 mmt of US yellow corn from US exporters.  Sometimes Mexico is the US’s largest export customer taking 600 plus million bushels.

 

Producers should take advantage of any small rallies to unload old crop corn. We need something bad to happen with weather in South America for corn to push above $7. I look for the markets to ease lower late today and tomorrow.

 

 

Have a Safe Day!

 

Garry Gard

920-348-6844

ggard@didioninc.com

January 23, 2023

Good morning,

Rain in Argentina and Southern Brazil have the market lower to start the week. Corn is currently down 10 and soybeans are down 20. More rain is in the forecast as the weather has shifted to wetter for the end of January and the beginning of February.  Rain totals over the weekend totaled .70-3.5 inches in Argentina.  Coverage was 80% and more is on the way.  Midweek another storm system is expected to produce .5-2.5 inch of rain this week.  Northern Brazil and Central Brazil will see normal rain in the next two week.  Temps are hot in Argentina in the 90’s to 100’s but are expected to cool off in the next week.  The long-term forecast is moving to cooler and wetter.  The forecast has shifted to bearish.

Friday afternoon’s USDA Cattle on Feed Report showed all U.S. cattle on feed as of January 1 at 11.682 million head, or 97.1% of last year, above the average trade estimate of 96.8%. December cattle placements came in at 92.0% of last year, above the 91.0% guess, with December marketing’s at 93.9% of last year, below the estimated at 94.7% figure.

The rally we saw following the USDA report has come and gone as we are now trading favorable weather. The markets are currently headed lower with favorable South American weather and China on New Year holiday break. The funds have been buyers recently, so the downside is elevated. I look for lower trade this week and into the first of February as we don’t have much bullish news to focus on.

Have a Safe Day!

Garry Gard

920-348-6844

ggard@didioninc.com

January 18, 2023

Good morning,

The markets are steady this morning with corn down 1 and soybeans down 3.

 

Something a little unexpected happened after the lower open yesterday.  New investor flows of money moved into the ag markets.  Corn open interest was up 19,026 contracts and beans were up 5,178.  Goldman is said to be pushing some investment money into the commodity index products.

 

Some pop-up showers developed overnight in Argentina. Totals of .1-.7 inches fell with more on the way tomorrow.  Three storm systems are projected to move through in the next two weeks.  Take a look at the 10 day forecast below, it shows up to 4-5 inches falling in some areas over the next week with total coverage at basically 100%.  The heat also moves out and normal temps are forecast next week.

 

Brazil’s Ag Minister yesterday said crop production could be increased by 5% per year for “several years” without deforestation, due to the conversion of pastureland; the country has over 370 million acres of pastures with low productivity, and nearly 100 mln ac of that could be converted into crops.

There are comps in the past that can be used to apply to current market conditions and the one that comes to mind is 2013 corn. Corn doesn’t normally make the high in January, more normal would-be June.  So why sell.  I think this is part of a potential unwind that we have going right now.  2013 was a serious unwind with each rally lower than the last.  The highs in 2013 were made at the peak of the 2012 drought, with the last decent rally during September. This is obviously weather dependent as hot dry weather could change the course.  If crop conditions improve in SA and US weather is normal for once, prices will go down.

Producers should be selling more crop that they normally would and doing it now.  Current values for old and new crop corn are profitable and should be taken advantage of.  Let someone else pray for higher prices later.

 

Have a Safe Day!

 

Garry Gard

920-348-6844

ggard@didioninc.com

 

January 16, 2023

Good morning,

There will be no markets today as the trade observes Martin Luther King day.

 

Garry Gard

920-348-6844

ggard@didioninc.com

January 13, 2023

Good morning,

The USDA surprised everyone by reducing harvested acres by 1.6 million acres. This is the largest November to January acreage reduction on record. While harvested acres were lowered, the USDA did increase yield by 1 bushel per acre(bpa) to 173.3 bpa. Unfortunately, this yield increase was not enough to offset the acreage decline and we saw production fall by 200 million bushels.

As expected, we saw a reduction in demand that mostly fell in the export category. US exports were reduced by 150 million bushels while Feed and Industrial use were reduced by 35 million bushels.

The net result of the reduced production and decline in demand was an ending stocks number that was decreased by 15 million bushels. This is currently 8.9% stocks to use ratio which is considered bullish the markets.

The production numbers are final, and this is what we will be using on balance sheets for the balance of 2023. We could see additional changes on the demand side of the equation. There are two demand categories that I feel could be adjusted in the coming months. 1. Ethanol production is running 5% behind last years pace and the USDA failed to make any adjustments to corn use for Ethanol. I believe this should be 20-25 million bushel lower. 2. Following the adjustments in exports, we are still behind the USDA’s projected pace. If this trend doesn’t change, we could see another 150–200-million-bushel adjustment to exports.

January 12th WASDE

  January 12th, 2023 December 12th, 2022 Change
Planted Acres 88.6 88.6 0
Harvested Acres 79.2 80.8 -1.6
Yield 173.3 172.3 1
Beginning Stocks 1,377 1,377 0
Production 13,730 13,930 -200
Imports 50 50 0
Total Supply 15,157 15,357 -200
Feed Demand 5,275 5,300 -25
FSI Demand 6,715 6,725 -10
Total Domestic Demand 11,990 12,025 -35
Exports 1,925 2,075 -150
Total Use 13,915 14,100 -185
Ending Stocks 1,242 1,257 -15
Stocks/Use Ratio 8.9% 8.9% 0

 

Have a Safe Day!

 

Garry Gard

920-348-6844

ggard@didioninc.com

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