PM Comments December 26 2024
Good afternoon. Merry Christmas. Ag markets traded higher right from the opening bell this morning, led to the upside by the soy complex. Dry forecasts in the world's number 1 exporter of soybean meal (Argentina) likely caused what few remaining fund shorts were left to exit those positions today, which led futures to trade 3.5-4% higher through most of the session. Elsewhere, corn again challenged and broke through the old Fall high at 4.52 1/4, and also traded above the 200-day moving average for the first time since late May.
CH closed Thursday at 4.53 3/4, up 5 1/4. CK was up 5 1/2 at 4.60 1/2. SF closed at 9.88, up 12 3/4. SH was up 16 cents at 9.97 1/4. WH finished at 5.41, up 6 1/4. Products finished mixed, January soybean meal closed at 305.70, up $12.80/ton, and January soybean oil closed at 39.47, down 37 points. Both beans and meal had gap-higher opens this morning. Livestock markets were mostly higher, February live cattle closed at 190.10, up $2.72, January feeders closed at 259.30, up $3.45, and February hogs closed at 84.20, down 17 cents. Inside day for hogs. Outside markets are trading mixed/quiet, crude oil futures are down 40-60 cents/bbl, the Dow Jones index is up 50 points, and the US$ index is down 15 points. The S&P500 is unchanged and the NASDAQ is down 40 points.
Spreads were mixed to lower on Thursday, corn spreads were up 2 cents to down a penny and a quarter, while soybean spreads were down a penny to down 4 and 3/4. CH/CK closed at -6 3/4, down a quarter of a cent, and SF/SH closed at -9 1/4, down 3 and 1/4. WH/WK had an outside day lower and closed at - 11, down a half cent.
Like we mentioned at the top, a lot of the action at the Board of Trade on Thursday was largely attributed to the dry forecast in Argentina for the next two weeks. This pattern has held on for several days now, which is beginning to raise confidence in the likelihood that this forecast may actually verify, as opposed to the last several weeks of dry forecasts which have significantly underperformed on rainfall. Soy meal and oil markets also saw price action related to a Bunge soy crush facility fire in southern Illinois, which attributed to both the spike in meal and also the sell-off in oil. The facility has capacity to crush roughly 150,000 bu of beans/day according to sources familiar. Otherwise, short-covering is the next best explanation for the day's action in the soy complex with open interest in both the January and March contracts being lower on the day.
In the case of corn, today's action was seen as friendly for the bull camp as the market was able to close above resistance that has been in place for months now. While volume was better today than Tuesday, trading still remains thin which means market action going into the weekend tomorrow and early the first part of next week will be closely watched. Should these levels hold, the next upside targets on the charts become the 62% retracement level of the summer decline at 4.68 1/2, and then above here at the June high of 4.88. From a fundamental standpoint, Argentine weather will continue to play importance, as this predominantly determines how long the US export window lasts into Spring. Brazil's corn exports come primarily from its second crop, which isn't planted until after soybeans have been harvested in February/March meaning any production hiccups in Argentina (similar to the late-season leafhopper problems last year) would likely directly translate to more business for the US if all else stays the same (Russia/Ukraine, tariffs, trade wars, etc.).
Weather forecasts for the US going into the weekend remain largely unchanged. A large/strong storm system will work its way into the PNW through the evening tonight into tomorrow, bringing heavy rain/snow and strong winds. On the other side of the country, storms look to work their way north and east out of east Texas, providing rainfall of up to an inch for parts of the mid-south, southeast, and southern Midwest through the weekend. Snowfall into early next week looks to be limited to mainly the northwest and Canada, while the northeast and the Great Lakes regions get a break aside from a small area in northeast Minnesota. Temperatures look to remain largely well above average for most of the country through the middle of next week, before things turn more seasonally average into the opening days of January.
Forecasts for South America also remain largely unchanged, as most of Argentina along with the entirety of Paraguay and Uruguay look to see no rains over the next 3-5 days. Southern Brazil also falls into this category but rains are seen returning to most of this area over the next two weeks unlike areas to the south and west. And further north, northern and central Brazil will continue to be well-watered. Temperatures look to run above average over the next week through southern Brazil and into eastern Argentina, while temps in central/northern Brazil will remain average to slightly below average.