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Today’s Prices
Grain prices sharply higher as South American weather is threatening and production estimates are coming down fairly quickly.
Grain Market News
Past 30-Day Precip vs Normal
Southern Brazil is way below normal precipitation and keep in mind, many areas in southern Brazil has seen way below normal for 60 days. Argentina below normal over the past 30 days and significantly below normal. Paraguay and Uruguay also below normal as well. This is not just below normal precipitation. We’re talking about 90-150 mm below normal over a 30-day time period. That is 4-6” and that is because they would typically get 4-6”, 6-8” of rain and they’ve gotten very little. It’s not just dry, it has been extremely dry over the past 30 days.
Observed High Temps
The situation for South American crops is not just lack of moisture. It is also the tremendous heat that we’ve seen over the past 10 days now. Temperatures in the mid to upper 90’s and 100’s for 10 days in a row in almost all of Argentina and that pushes into extreme southern Brazil, Paraguay, and Uruguay.
GRACE-Root Zone Soil Moisture
The root zone is about the top 3 ft of soil and much of southern Brazil, much of Argentina, Paraguay, and Uruguay all seeing well below normal soil moisture and drought conditions are getting worse at least for the moment.
South American Vegetation Health Index
The left is the vegetation health index compared to one week ago. Much of southern Brazil, Argentina, Paraguay and Urugay all seeing their vegetation health index decline from last week. The right is the vegetation health compared to last year. You can see southern Brazil, Paraguay, and Argentina all seeing vegetation health significantly below a year ago.
Parana Soybean Crop Conditions
This map shows Parana, a state in southern Brazil and shows their good to excellent rating. This year we’re currently at 30% G/E. That compares to 96% G/E just 5-6 weeks ago. The heat and dryness taking a toll on the crops in Parana, South Brazil.
SA 2-Week Precipitation Forecast
Any change in the weather pattern and these markets will start to give away their gains very quickly. The forecast right now for the first week shows below normal precipitation in southern Brazill, very little rain in Argentina in the first week of the forecast. We do see a little bit of improvement in the second week. Argentina still looks very dry but there does look to be some better rain chances in southern Brazil in the second week of the forecast and so that will need to be monitored over the next few days to see if that wetter weather for portions of southern Brazil shows up over the next few days.
Grain Market News
Weekly Ethanol Production
Ethanol production is running near record levels over the past 3 months. YTD ethanol production is up 8.3%. USDA is estimating that ethanol production would be up 4.4%. We are on track to exceed USDA’s total by 150 mb fairly easily. USDA is not likely to make a change in next week’s January crop report but they could certainly raise corn use for ethanol by 50 mb, maybe 100 mb.
Grain Market News
60-Day Precipitation as % of Normal
The Plains have been extremely dry over the past 60 days. That would be the central and southern Plains while the northern Plains have actually been getting above normal precipitation and building a decent snowpack specifically in ND. You can see this precipitation as a % of normal at 5-10% of normal in much of the southern and southwestern Plains. This is not just a week or two, this is over a 60-day timeframe so we see tremendous dryness developing in the southern and southwestern Plains.
March Corn Chart
Corn prices had a big up-day today and closed near the high. That makes the chart look much better, it’s turned upward. Technical indicators hooked upward as well on the big move and the next objective would be $6.17 on the Mar chart. That doesn’t mean that is the top. It is just the next objective and if South American weather remains threatening then we’ll start looking at some of the other tops we saw last spring and early summer in the $6.30-$6.40 range. But the first objective for Mar corn would be to challenge the $6.17 level that we hit a week ago.
January Soybean Chart
Soybean prices also having a big up day today closing near the highs. Turned the technical indicators back up. Soybean actually posted a new high for the move at $13.80, taking out the highs from a week ago. The next objective is at $13.83 then $14.20 and again it’s all about South America’s forecast. If South America’s forecast remains warm and dry for southern Brazil and Argentina, we cannot rule out this market moving well into the $14 range.
March KC Wheat Chart
Wheat prices have been somewhat of a lagger although we did close higher today. A little bit of a hook in the technical indicators. Today’s move was not a major convincing move on the chart but we do believe we found some additional bottoming action and would not be surprised to see this market initially into the moving averages around $8.25 and then, if corn and beans can continue to move then $8.50 would be the next objective.
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