Market News

Soybeans down as corn ekes out modest gains

Soybeans were lower on profit taking and technical selling, along with spillover from the broader market. There is some rain in the near-term forecast for parts of Argentina, but overall coverage is expected to be scattered and not nearly enough to alleviate the dry conditions in most areas. The USDA’s FAS lowered its outlook for Argentina’s soybean crop to 36 million tons, a drop of 9.5 million from the most recent supply and demand report, with the next projection out February 8^th. That could open the door for improvements in U.S. soybean and soybean product export sales as Argentina is normally the world’s biggest exporter of meal and oil. Brazil’s harvest is slower than average due to rain delays in some areas but remains on pace for record production. The dollar, Dow, and crude oil were all lower during Wednesday’s commodity session ahead of the Federal Reserve raising interest rates by 0.25%. The Dow did end the day with a firm gain after the release of the numbers. Soybean meal was higher and bean oil was lower on the adjustment of product spreads. Bean oil had additional pressure from the drop in crude oil. The USDA says December’s soybean crush was 187 million bushels, 2 million less than November and 11 million below December 2021, due in part to reduced holiday schedules as margins remained in positive territory, reflecting solid demand for soybean products. Soybean oil production was under both the prior month and year, and while soybean meal production was up slightly on the month, it was down from the year before.

Corn was higher on short covering and technical buying. Corn was watching development weather in Argentina and the early second crop corn planting pace for Brazil. That pace is being delayed in some areas by the slower than average soybean harvest. The USDA’s FAS sees Brazil’s combined corn crop at 125.5 million tons, a half million more than the last official guess and up 8% from 2021/22 thanks to better weather. Exports for Brazil are projected at 47 million tons, largely on expectations for strong demand from China due to price and an agreement with Beijing for increased grain trade. The USDA’s Cattle Inventory report showed more contraction, pointing to lower feed demand. The U.S. Energy Information Administration says ethanol production last week averaged 1.028 million barrels a day, up 16,000 on the week, but down 13,000 on the year, with stocks at 24.442 million barrels, a decrease of 635,000 from the previous week and 1.412 million from a year ago. The USDA says December corn for ethanol use was 425.283 million bushels, down 6% from November and 11% from December 2021 due to winter weather and reduced schedules. DDGS production was 1,679,600 tons, a decline of 6% on the month and 19% on the year.

The wheat complex was mostly higher. Winterkill is a possibility in parts of the Plains, but the extent of the damage won’t be known for weeks. While winter wheat is generally regarded as a hard crop to kill, potential freeze damage in addition to drought are expected to have an impact on yield when the crop emerges for dormancy and could also lead to an increased rate of abandonment. Forecasts have more dry weather in the southwestern U.S. Plains, against a wetter pattern in the southeastern Midwest. The trade also has an eye on the northern U.S. Plains ahead of spring wheat planting. The USDA says the fourth quarter wheat for flour grind was 229.463 million bushels, 3% less than Q3 and 2% below Q4 2021. Export demand continues to be a bearish factor for wheat with Russia continuing to hold a significant price advantage and most of the export market. The USDA’s weekly numbers are out Thursday morning. Ukraine is still exporting grain, albeit at a reduced pace because of slower inspections by Russia. Increased feeding demand is a potential positive for U.S. wheat, but there’s competition from Australia following a dip in quality caused by late season rains.