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Today’s Prices
Grain prices bounced back today. Yesterday rains were better than expected in Argentina. Today rains less than expected for Brazil creating somewhat of a small reversal.
Grain Market News
South American Rainfall Sunday-Monday
This map shows rainfall that took place Sun-Mon. Argentina did pick up some pretty decent rain. Anything in blue is 1-2” of rain. Not everybody got rains but these rains were better than expected and that is what triggered the lower prices yesterday. This same frontal boundary that produced rains in Argentina did not produce very good rains as it moved north and east through Brazil.
SA 30-Day Precip vs Average
Argentina is in pretty good shape at the moment especially after the decent rains that fell Sun into Mon. It’s the southern third, maybe 40% of Brazil that is becoming a concern as well as portions of Paraguay and Uruguay. Areas in both Parana as well as Rio Grande do Sul in southern Brazil reporting crops are suffering in some areas due to the lack of rainfall.
SA 2-Week Precipitation Forecast
Today’s forecast does not have as much rain for southern Brazil or Argentina as it did yesterday and that was seen as somewhat bullish. And next week’s forecast shows virtually no rain in Argentina and only light rain in southern Brazil. The forecast is a concern all the way out through the end of Dec.
Temperature Anomaly
In addition to relatively light precipitation for southern Brazil and Argentina, the temperatures look like they’ll be warming up significantly later this week and continuing into next week. Our temperature anomaly for South America for today through next Wednesday shows Argentina with above normal temperatures and some of those above normal temperatures impacting Paraguay, Uruguay, and portions of southern Brazil as well. The corn and bean markets added some risk premiums to prices today and if the forecast looks similar over the next few days we wouldn’t be surprised to see some additional risk premium added.
30-Day Observed Precipitation
Here in the U.S. it is not the heart of the growing season but we are monitoring weather conditions for the hard red winter wheat crop. This map shows precipitation that has fallen over the past 30 days. You can clearly see most of the central and southern Plains have not received any precipitation over the last 30 days. In fact, portions of the southwestern Plains have not seen rain over 60 days. This has dried out soils and now we have a big wind event coming in tomorrow.
Wind Path Forecast
This map shows winds as of noon tomorrow. The darker maroon color are sustained wind of over 50 mph with gusts as high as 60-70 mph+. This wind will move from to the north and east. It will moderate as it moves through the northeast but tremendous wind in the Plains and they’re talking about blowing sand and dirt that could not only reduce visibility but could cause some significant damage to winter wheat as that sand drifts across the ground.
Grain Market News
Soybean Crush Margin
One of the reasons crush demand for soybeans and ethanol demand are strong is because of margins. This chart shows soybean crush margins and it shows we’ve been running $1.60 to over $2 for the past few months and that is promoting very strong crush demand at this time. Not only is this supportive for the soybean crush and what it might mean for the U.S. supply and demand balance sheet but it is also supportive for the basis level.
Ethanol Profit Margin – Iowa Prices
In ethanol, profit margins for ethanol plants in Iowa have been extremely profitable. In fact, record large profits have been reported. At times, plants reporting they could make anywhere from $2.80 to over $3.00 per bushel for grinding corn and producing ethanol. It’s the combination of strong demand for product and extremely profitable processing margins for soybean crush as well as ethanol that is keeping demand strong and this should help support basis levels as well.
March Corn Chart
Corn prices after being down significantly yesterday, bounced back nice today and keeps the overall uptrend intact. Today’s firmer close was enough to turn the technical indicators back up again after they turned briefly lower on the break in prices yesterday. On the break in prices yesterday. Today’s reversal and firm close does indicate this market may be interested in testing the recent highs at $5.96 that were posted about two and a half weeks ago. As we’ve mentioned often the $5.96 level in this case is not going to necessarily be a top, just the next level of overhead resistance. If South American weather continues to present risk or even crop losses then higher prices can certainly be expected but as of today, $5.96 does present the next level of overhead resistance.
January Soybean Chart
Soybean prices also reversed to close higher today. Trend line support from our pennant formation did provide support as well as our moving averages and prices closed stronger today. We do have initial overhead resistance at $12.76, the highs posted last week. If that is broken, $12,89 would become the next of overhead resistance for Jan soybeans.
March KC Wheat Chart
Wheat prices are looking better. We’re still in a short-term downtrend but the market appears like it’s trying to reverse that trend over the last few days. Technical indicators were oversold and they have turned upward as well. If wheat prices could close stronger tomorrow than it could signal the recent lows were a fairly significant bottom in the wheat market. After rallying consistently through Oct and Nov and then a sharp break, over $1 break, it was a 12% pullback in Mar KC wheat.
Paris Milling Wheat
This chart shows Paris Milling wheat futures. Prices running higher through Oct and Nov and then a significant drop in Paris Milling market. It also fell 12% in the that break. Our markets are very global in nature and not only have U.S. prices bounced over the last few days, Paris Milling wheat also showing some sign of significant bottoming action after that 12% correction. The technical indicators for Paris Milling wheat looks very similar to our U.S. market.
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