Argentina's rains have been increased. Algeria buys wheat again.

Grains

The monthly report on retail level pricing, the Consumer Price Index, was released this morning. November inflation was estimated at 3.1% over last year in November. That was on the trade expectation. Food inflation, both at home and out of home, fell to 3.0% over last year in November.

As we inch closer to that all-important January/February weather window for Brazil's soybean and 1st crop corn yield determination period there is no real change in the forecast ahead from current conditions. This fits in with Drew's latest long term forecast released back on December 1. For week one ahead clearly below normal rains area seen for the dry Center/West. Next week is normal to lightly below normal for that region. Allendale is assuming some level of lightly below trend yields for this region. For the wet South the next two weeks may bring a little relief, lightly below normal rains.

The forecast for this week's Argentine rains has been increased. Over three separate systems, ending on Monday, Drew Lerner forecasts 1.5 - 4.0 inches will be seen across the three main grain production provinces. Cordoba will see normal to lightly above normal. Buenos Aires, #2 for corn and tied for #1 in soybeans, will see clearly above normal rains with 3 - 4 inches over most areas. Santa Fe, a distant #3 producer, will see 2 - 3. Next week will see normal to very lightly below normal for these three areas. We have zero concern with Argentine yields at this time. As a reminder, strong El Nino years like this generally bring above-normal moisture and above trend yields. If we see above normal rains consistently we will up our forecast.

Corn

March corn left a small ¼ cent intraday gap to yesterday's 481 ½ close today. Lightly higher trade was noted for futures but this market is still having trouble testing upside resistance.

For Brazil's crop USDA left their view from November,129.0 million tonnes, unchanged last week. Conab last week lowered theirs from 119.066 to 118.528. They have both been at odds with corn estimates for some time. Heck, they're even a bit off from each other for the completed 2023 harvest numbers. But the general message is still the same. No one is really lowering their starting estimates much. Over the past 30 days the private trade is 119.3 - 128.7 depending on which government number they were starting from. We do not view the 112.51 guess from Patria Agronegocious on 11/30 as realistic.

El Nino and Argentine Corn Yields: Argentina plants corn mid-September through November. Over the past 25 years there were 8 with an ENSO reading of +0.5 during their yield determination (January). All 8 years posted above trend yields (+3.4% to +15.0%). The influence is relatively consistent.

USDA lowered US ending stocks by 25 million bushels to now 2.131 billion. Only an adjustment for exports was noted. While there will be further export estimate increases ahead Allendale warns they may be countered by for ethanol decreases. No matter the mix of changes ahead for exports or ethanol the general story for the year has yet to change. Anything over 1.8 billion bushels suggests economic value under 410 for futures. With the market balancing its concerns with South American weather we see a reasonable downside target at 430.

March Corn Seasonal: Allendale monitors seasonal price factors but does not adhere to them religiously. For corn the seasonal is for a harvest low October 3, minor rally to October 23 then retest of the harvest low on December 7. The 15 year seasonal suggests that December low is the major low and higher prices into spring. This year's price pattern since harvest is moderately similar. The 9/19 harvest low was broken by 12 cents to the current 11/19 low. Separate from our view on fundamentals the seasonal would suggest higher prices into spring.

March Corn Chart: The long term downtrend remains. There is no breakout yet from recent highs which are minor resistance at 493 ¼ - 496 ½. Last week's trade rejected 493 ¾ and 492 upside attempts. Today's trade left a small intraday gap to the 12/11 close of 481 ½.

2022/23 Producer Marketing: Completed 2022/23 marketing year net of $7.01 (USDA seas. ave for Central IL $6.60). Previous hedges on 50% using options, 25% on 2/28/22 and 25% on 6/7/22, were lifted 7/26/22 for +56 4/5 cents (adj. to 100% of the crop nets +28 2/5 cents). Cash sales of 25% 1/18/23, 50% 1/26/23 and 25% 2/10/23 for net $6.73 via Cental IL.

2023/24 Producer Marketing: Profit of 163 7/8 cents from two prior hedges on 75% of the crop (123 cents when brought to 100% of the crop). Currently holding the third hedge on 75% enacted 11/13/23 using purchased CH 460 puts at 10 1/4/sold 520 CH calls 6 ¼ for net 4 cents. No 2023/24 cash sold. 1st hedge on 75% using short CZ23 futures were lifted on 5/1/23 for +68 4/7 (sales of 50% at 600 on 1/19/23 + 25% at 595 on 2/10/23 lifted 5/1/23 at 529 ¾). 2nd hedge on 75% using options were lifted 11/13/23 for +95 2/7 (sales of 50% on 6/16/23 using purchased CZ 560 put 35/sold CZ 640 call 27 for ((net 8 cents)) lifted 11/13/23 at 97 and 1/8 ((net 96 7/8)) + 25% 6/20/23 using purchased CZ 580 put at 41/sold 660 CZ 660 call 32 for ((net 9 cents) lifted 11/13/23 at 117 ¼ and 1/8 (net 117 1/8).

Corn Summary: We can agree with a light psychological premium in corn from the Brazil story. It is quite difficult to make this a “buy US corn” story at this time though. While many are looking at the seasonal charts with hope we are skeptical of them working this year. At best, perhaps sideways or a lower than expected downtrend. Our general discussion of 430 futures for a target remains. For producers we continue to hold hedges...Rich Nelson

Working Trade:

(11/30) Sold March 480 call 15, risk 28, objective 0. Closed 17 3/8.

Soybeans

Argentina's coming economic policy changes may make their more competitive agricultural exporters. The trade also notes their rainfall forecast for this week has been upped. Argentina's likely production is just fine. Brazil is still a light problem. Next chart point to monitor is the intraday gap to 1356 ½.

USDA reported an overnight export sale of 198,000 tonnes to an Unknown buyer. Daily overnight sales have been reported for now five days in a row. The amounts are not huge. They are consistent though.

Not all is rosy in the world of US soybean exports though. Brazil still holds price discounts vs. the US, we have a falling Mississippi River in the days ahead and Panama Canal delays. This week the US grain trade has been pointing out our sales vs. shipping disparity. We're okay on a year to date comparison. Sales through November 30 are -8% from the five year average pace. Shipments through the same period are -5% from average. That looks fine. But the past four weeks have seen shipments slip to -23% vs. the five year average pace.

Argentina's government has temporarily stopped releasing grain export certificates. This comes one day before a new economic plan is to be released by the new administration. The grain trade speculates about a potential devaluation of the Argentine peso or even some type of improvement in the country's oppressive export tariff system. Either way, we should expect the new government to imply larger grain exports.

Brazil's oilseed industry association, Abiove, lowered its prior production estimate down from November's 164.7 million tonne to now 161.9. This fits entirely in the trade's view of only minimal declines for the crop so far. Last week USDA lowered their view from 163.0 to 161.0. Conab lowered their prior 162.42 view to 160.77. Bulls would be disappointed by the lack of serious declines so far. We have no problem with these minimal declines though. They are completely reasonable given that yields are not really determined by weather during the vegetative growth stage. Weather specifically during the reproductive phase, January/early-February, is the key yield determinant. Allendale's current worse case scenario has only been -4% so far, 156.5. Yes, we do expect that number to decline. But we can't do it until we see next month's weather show.

The Malaysian Palm Oil Board's monthly release of palm oil statistics would be called lightly positive. Palm oil production in the country had increased in each of the prior four months. The trade expected that to stop with a decline from October's 1.937 million tonnes to 1.809 in November. Today's release showed November production lower than expected at 1.789. November export data was a little weak at 1.397 mt vs. the trade expectation of 1.526. Balanced out between production and exports the stock level declined from October's 2.447 down to 2.420 at the end of November. That was just under the trade's 2.437 expectation.

USDA recently left their US ending stock forecast unchanged at 245. Domestic crush is a little behind their whole-year goal. Export sales, at least in the recent four weeks are quite strong. USDA is holding from export increases as Brazil still holds a better export price as the Mississippi/Panama Canal dryness issues remain. Unlike corn, the soybean balance sheet is still very much in play with Brazil’s weather likely a key influence. We compute a 200 ending stock as implying 1400 futures, 220 at 1360 and 250 at 1295. We would expect prices to hold a light premium over this implied 1295 price in the coming weeks.

El Nino and Argentine Soybean Yields: Over the past 25 years there were 7 with an ENSO reading of +0.5 during their yield determination (February). 6 years posted above trend yields (+3.2% to +22.3%). 1 saw below trend yields (-1.3%). The influence is relatively consistent. El Nino brings above trend yields to Argentine soybeans. At this time we are not yet seeing a change from normal precipitation to normal El Nino above-normal.

March Soybean Seasonal: Allendale monitors seasonal price factors but does not adhere to them religiously. The general price pattern for soybeans is different than corn. Here, a major harvest low is generally made October 3. After a minor rally to October 23 there is one last minor bear move to November 13. That moderate move down to November 13 does not take out harvest lows and is a spring board for higher trade into spring. The 2023 contract has a harvest low posted on 10/11 and a rejected rally to 11/15. Separate from any fundamental based views seasonal traders would be looking for low.

March Soybean Chart: The three week downtrend is now being tested. Support on the chart is at two places, the recent 12/7 low of 1311 ¾ and the 10/11 major low at 1282 ½. Bulls would like to discuss a move to at least the intraday gap left from the 11/22 close of 1374 ¼. After that we have resistance from the 11/15 high of 1410 3/4.

2022/23 Producer Marketing: Completed 2022/23 marketing year net of $15.08 (USDA seas ave for Central IL $14.20). Previous hedges were on 40% using options (20% on 2/14/22 and 20% on 2/28/22 lifted 7/26 for +7 1/9 cents). Adj. to 100% of the crop nets +3 5/9 cents. Cash sales of 25% on 1/3/22, 25% on 1/17/22, 25% on 2/15 and 25% on 2/23 for net $15.05 via Central IL.

2023/24 Producer Marketing: Profit of 29 cents from two prior hedges on 75% of the crop (22 5/8 cents when brought to 100% of the crop). Curently unhedged and holding cash. 1st hedges on 75% using options lifted for net +60 7/8 cents. (50% sold on 1/19/23 using 1360 Nov puts 78 7/8/sold 1180 puts 17/sold 1500 calls 40 1/8 for net 21 3/4 cents + 25% sold on 2/15/23 using 1360 Nov puts 68/sold 1180 puts 12/sold 1500 calls 35 1/2 for net 20 1/2 cents. All lifted 5/2/23 at 86 1/8 (115/17 1/2/11 3/8 for 50% and 81 ¾ (115/22 1/4/11 3/8) on 25%. 2nd hedges on 75% using options expired 10/27/23 for net -31 7/8 cents. (Sold 6/30/23 on 75% using bought 1240 November puts 47 3/8 and sold 1460 calls 15 ½ for net 31 7/8, expired at 0 on 10/27).

Soybean Summary: Let's get the upside intraday gap filled first. Beyond that point we wonder if we'll have to wait for January before seeing this discussion of 1400. There are still a lot of ups and downs ahead as we near the very important January weather window for Brazil. If the forecast turns back to normal precipitation then you can validly remove all risk premium. For producers we are holding cash beans unhedged...Rich Nelson

Working Trade:

(11/21) Sold March 1300 soybean put 17, risk 36, objective 0. Closed 23 ½.

Wheat

A second week in a row of big buys from Algeria helped stabilize wheat prices. While many suggest a bottom in wheat prices we cannot say it is time of rally hard. Rains are directly ahead for the Plains. The two week forecast also shows normal to above normal precipitation. There were no Chinese buys this morning.

Algeria's state grain buying agency was said to have wrapped up another big wheat purchase. Today's completed purchase was said to be 500,000 - 700,000 tonnes according to most private traders. Reuters newswire did find someone who suggested up to 930,000. This is a stepped up buying pattern. Last week on December 6 they bought 450,000 – 500,000. The purchase before that, November 7, was 180,000 – 580,000.

Argus Media expects Ukraine's wheat harvest to drop from 22.2 million tonnes in 2023 to to 20.2 for 2024. This -8.1% decline is likely a little lower than the trade expected. They are using -2.2% for this fall's winter wheat planting. USDA won't release their 2024 estimates until May.

Rains of 0.2 - 1.75 inch will be seen for Southwest Kansas - Texas. The trade is wondering if that December - February forecast for the Plains, above-normal moisture, is now coming true.

The Interfax news agency reports the Russian goverment has banned all durum wheat exports from now until May 31. This is a relatively small crop for them. The trade will call this disappointing as it was not a ban on the important milling wheat crop that many have been speculating on.

SovEcon estimated Russia's December wheat exports at 4.2 million tonnes. We call this lightly bearish. It is +0.2 mt from last year. We only have November showing export declines. That was due to weather. The trade still has an expectation of year over year declines ahead.

USDA recently lowered US ending stocks for this old crop 2023/24 marketing year by 25 million bushels to now 659. This is reasonable given recent China buys.

March Chicago Wheat Seasonal: Allendale monitors seasonal price factors but does not adhere to them religiously. After a minor peak on October 21 this is generally a bear market into July. For KC the March contract's seasonal break is limited from October 23 to December 8. On the July KC there is a similar break into December 8 then a moderate rally to March 4. That rally is generally a major peak for sharp bear move to new contract lows into July.

Wheat Summary: We are still suggesting a changed view of this wheat market. Separate from China's purchases last week we do agree with the view of this 18 month downtrend in wheat prices coming to an end. It is likely Russian exports will subside in the coming months, even more than they seasonally do. Additionally, a changing view of US interest rates later in 2024 could add support. It is no coincidence that the early 2022 peak in wheat prices coincided with the Federal Reserves interest rate increases. We are not exactly wheat bulls. We can say we are no longer bears...Rich Nelson

Trade Recommendation:

(11/17) Stand aside.