Corn and wheat remove Black Sea premiums. Soybeans hold their ground.

Grains

Brazil's weather issues are not fixed. They are simply not as a bad what they were seeing one month ago. The two week forecast for the Center/West regions is mostly normal with some below normal areas. The South will see a mixed pattern.

Argentina has been set for trend yields with generally normal rains recently. The general two week forecast is mostly normal rains with some areas seeing above normal. We're still quite cognizant of the fact a normal El Nino pattern is for above normal rains and above normal yields.

Corn

With little new news, and no retaliation by the Russian military, corn took back yesterday's premium from Black Sea concerns.

Weekly ethanol production, normally released by the Energy Information Administration every Wednesday at 9:30 am Central, will be released tomorrow.

The Russian military did not retaliate against Ukraine for their weekend attack against a navy vessel.

China's Ministry of Agriculture and Rural Affairs has approved 26 domestic companies to produce, distribute and sell GMO corn and soybean seeds. The trade has suggested perhaps 1.5% of 2024 plantings could be with approved GMO varieties.

Last week's four early-week stories showing concern over Brazil were not able to hold prices up. Interior cash corn prices in Brazil are up 57% from July lows. As you know US corn prices are driven from a significant extent on the US balance sheet. Just because their price is rallying does not mean our price had to.

Though there is concern over this coming 2nd crop corn planting in Brazil it is not yet time to officially hit production numbers. USDA this month left their total corn production view unchanged from last at 129.0 million tonnes. Conab, which already started out with a lower estimate than USDA, lowered theirs from 119.066 to 118.528.

Argentina devalued the peso against the US dollar by more than 50%. So far this is no confirmation of the government's plan to raise the current 12% corn export tariff to 15%. The peso devaluation more than offsets the light coming increase in the export tariff.

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 has ending stocks at 2.131 billion. Export increases are likely still ahead. However, corn for ethanol needs to be lowered. No matter the mix of changes ahead for exports or ethanol the general oversupplied US 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. A new low and lowest close were made last week for this downtrend. 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. There is a sharp downtrend line from October and December highs that crosses tomorrow at 482 ½. We would hesitate to say that a violation of that line means a transition to an uptrend.

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: The Black See concern is not really a valid lasting story. We're still back to monitoring US demand and South American weather. We do expect light corn production losses out of Brazil but that would mainly be light acreage shifts. It is still months before you can say significant yield issues. Our general discussion of 430 futures for a target remains...Rich Nelson

Working Trade:

(11/30) Sold March 480 call 15, risk 28, objective 0. Closed 10 7/8.

Soybeans

Soybeans resisted the lower corn and wheat pricing and ended the day lightly positive. Brazil will likely see further production declines in the coming months but the short term forecast is not as bad as previous. Additionally, Chinese buyers have shown minimal interest recently.

In the first 15 days of December there were 11 reported overnight soybean export sales. In the seven business days so far in the second half of the month there is only one sale, 132,000 tonnes to Unknown back on 12/19. There is a clear change in China/Unknown interest.

Imea estimates Brazil's soybean harvest at 1% complete in the state of Mato Grosso. It may be odd to hear of a harvest estimate when the bulk of production has not even started reproduction. Keep in mind their planting is a multi-month operation each year.

While we are strong proponents of Reuters as a newswire we've always held skepticism over their attempt at also providing grain research. Over 10 years ago their first attempt, Lanworth, released outlandish views of US crop production. They're current itteration of that research group, Refinitiv, generally provides more balanced views. This group, Refinitiv, currently estimates the Brazilian soybean crop at 151.1 million tonnes. We don't consider that a realistic number just yet. Four other private groups last week suggested 153 - 160. Conab and USDA, recently lightly lowered, are currently 160.177 and 161 respectively. Allendale suggests up to a 4% decline from lightly lower acreage and a light yield drag from later plantings, 156.5.

Argentina's ag ministry lightly increased its view of currently active soybean plantings from 16.6 million hectares to 16.7. The increase is not a large one at all. But a planting increase combined with good weather ahead is negative psychologically.

Argentina devalued the peso against the US dollar by more than 50%. Their government said they would try to raise export tariffs from 31% to 33% for soymeal and soyoil exports. So far, the government says no change to soybeans which are currently at 33%.

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 consistent change from normal precipitation to normal El Nino above-normal.

USDA has ending stocks at 245. We can prove their domestic crush estimate is low by 10 - 20 million bushels. We cannot really jump export sales much at all though. 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.

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 general trend over six months is sideways. But the recent action over five weeks is down. From a chart perspective this market is in a short term downtrend and just recently made a new low. There is only the major low from 10/11, 1282 ½, left as support. Bulls need to see a successful break of this downtrend, 1325 1/2, before discussing neutral or higher prices. There is still an intraday gap left open at higher prices, the 11/22 close of 1374 ¼. After that we have resistance from the 11/15 high of 1410 ¾ then others.

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: Though we may not like it the soybean market is correct in this price break. Concerns over Brazil have very lightly eased over the past month. Argentina's situation has improved. US soybean export sales have been positive in five of the past six weeks but few are ready to suggest this will be the norm unless Brazilian losses are confirmed. Recent Chinese buying interest has lowered. We can agree this market should be supported over 1295. But the argument needed for a rally is not quite there yet. There are still a lot of ups and downs ahead as we near the very important weather window for Brazil. If the forecast turns back to normal precipitation and stays there then you can validly remove all risk premium. For producers we are holding cash beans unhedged...Rich Nelson

Trade Recommendation:

(12/22) Stand aside.

Wheat

With no response from Russia the wheat market took back some of yesterday's premiums. The US weather forecast is beneficial for hard red but detrimental for soft red.

Over the weekend the Ukraine air force successfully caused severe damage to a Russian troop landing ship. There has been no retaliation from Russia yet. So far, there is no disruption over even missile attacks to the Odessa port complex.

Recent moisture in the Plains, from Nebraska through Texas, was generally 0.25 - 1.00 inch water equivalent. Portions of the Eastern half saw up to 2.00 inches. The current forecast out through two weeks is normal to above normal. The general winter forecast, transitioning to above normal moisture, appears to be working. This would benefit perceptions of the hard red winter crop, KC wheat futures. However, the general forecast for the coming two weeks is below normal moisture for the Eastern Cornbelt, soft red winter wheat areas.

SovEcon lowered their view of December exports of Russian wheat again. Today's decline was from 4.0 million tonnes to 3.8. This is important because it is -0.2 mt from last year. November exports were -0.9. Allendale has suspected their exports would slow into the end of the year and perhaps more stable general wheat pricing could be seen.

Prices of Russian 12.5% milling wheat out of Novorossiysk were down to $225 per metric tonne in October. They have rebounded to $243.50. This the best price since September. Their prices are not rocketing higher but this is a clear sign of perhaps tightening supplies after aggressive exports earlier.

Last week Argentina devalued the peso against the US dollar by more than 50%. The government wants to raise the current 12% wheat export tariff to 15%.

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 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. Though we are not exactly wheat bulls we can say we are no longer bears...Rich Nelson

Trade Recommendation:

(12/21) Stand aside.