PM Comments January 10 2025
Good afternoon. Happy Friday. What a day. The post-holiday lull in the ag space came to an abrupt end on Friday, as traders were hit with all kinds of market data ranging from delayed weekly export sales and monthly hiring figures this morning, to the USDA data at mid-day, to headlines regarding 45Z and renewable fuel policy this afternoon. The news led markets to sharply higher closes in the case of corn, beans and bean oil, with the key now going forward being how long this pop can be sustained with record crops in South America still looming.
CH ended the week at 4.70 1/2, up 14 1/2 cents. CK was up 15 cents at 4.79 1/2. This the highest close in spot corn since December of 2023. SH was up 26 and 1/4 at 10.25 1/4. SK finished at 10.38, up 27 and 1/4. WH closed at 5.30 and 3/4, down 3 and 1/4. Outside day lower for wheat. Products were mixed, March soybean meal closed at 298.30, don $1/ton, and March soybean oil closed at 45.58, up 2.82. Outside day lower for meal and oil closed at its highest level since November 18th. Livestock markets were higher, February live cattle closed at 198.77, up $1.17, March feeders closed at 269.40, up $1.10, and February hogs closed at 82.55, up 77 cents. New contract highs again for feeders. Outside markets are sharply mixed, crude oil futures are up $2.60-2.80/bbl, the Dow Jones index is down 650 points, and the US$ index is up 50 points. The S&P500 is down 90 points and the NASDAQ is down 370 points. Crude oil traded to its highest level since July today, while the $ index again made new contract highs.
Spreads were mostly mixed, corn spreads finished the week down a half cent to up 12 cents, and soybean spreads to end the week were down 6 cents to up 9 cents. CH/CK closed Friday at -9, down 1/2 of a cent, and SH/SK closed at -12 3/4, down a penny. WH/WK traded a nearly 3 cent range before settling at -12 3/4, down 3/4 of a cent.
For the week: March corn was up 19 and 3/4 cents; May corn was up 21 and 1/4 cents; March soybeans were up 33 and 1/2 cents; May soybeans were up 34 and 1/4 cents; and March Chicago wheat was up a penny and a half.
Where to start. Might as well go in time order today and start with this morning's weekly export sales report, which was delayed to today due to the closure of USDA offices on Thursday for former President Carter's funeral. The report, which was for the week ending January 2nd, was similarly poor to last week and showed volumes through the holiday that were well below trade expectations. Corn sales in the week were seen at 445k mt's; featured buyers were Colombia (177,100 mt's) and Japan (91,100 mt's). Soybean sales for the week were seen at 289k mt's; featured buyers were the Netherlands (205,400 mt's) and China (171,800 mt's), and unknown destinations assigned out/rolled/canceled 696,100 mt's. Also of note on soybean sales, Japan bought 40k mt's of beans for 2025/26 in the week. And lastly, wheat sales for the week were seen at 111k mt's; featured buyer was Korea (68,100 mt's), while unknown destinations assigned out/canceled/rolled 89k mt's. Weekly totals for all three crops were marketing year lows.
USDA was mostly bullish across the board, with the drop in yields being arguably the biggest discussion point in the hours following the release. USDA dropped the average corn yield by 3.8 bu/acre to 179.3 bu/acre, and dropped the average soybean yield by 1.0 bu/acre to 50.7 bu/acre. At the state level, there were still still five states that either set or tied new all-time records in corn (including Illinois and Iowa), and 2 states that either set or tied all-time records in soybeans (Arkansas and Mississippi). The yield drops resulted in lower production by 276 mil bu in corn, and 95 mil bu in soybeans. In the case of soybeans, imports were adjusted higher by 5 mil bu's but otherwise the drop in production entirely accounted for the 90 mil bu drop in ending stocks. On the corn side, 50 mil bu's were trimmed off of feed and residual use, while another 25 mil bu's were cut from exports, which resulted in an ending stocks figure of 1.540 bil bu's. The quarterly stocks report also leaned friendly, with December 1 corn stocks seen at 12.074 bil bu's vs the avg trade guess of 12.147 bil, while December 1 soybean stocks were seen at 3.100 bil bu's vs the avg trade guess of 3.208 bil.
At the world level, global corn stocks were down 3.1 mmt's from December at 293.34 mmt's, and global soybean stocks were down 3.5 mmt's to 128.37 mmt's, with production cuts in the US accounting for most of this decline. In South America, USDA again kicked the can down the road for another month, with no adjustments made to corn or soybean production in either Argentina or Brazil from last month. Other notable global balance sheet adjustments included a trimming of corn exports out of Brazil by 1 mmt, and also a trimming of corn imports into China by 1 mmt.
Wheat data out of the WASDE report was a non-event, with ending stocks in the US nearly exactly as the trade had expected and only marginally different from last month on next to no balance sheet adjustments. Quarterly stocks as of December 1 were seen at 1.570 bil bu's, which was just marginally higher than the trade had expected and up roughly 150 mil bu from December 2023. Winter wheat seeding data was also largely as expected, with all wheat acres seen at 34.115 mil, which compares to 33.390 mil last year. Hard red acres were seen at 24.0 mil, soft red acres were seen at 6.44 mil, and white winter acres were seen at 3.64 mil. At the global level, world carryout came in at 258.82 mmt's compared to 257.88 last month. Notable balance sheet adjustments included a 1 mmt cut in Russian exports, and also a 0.5 mmt cut in Ukraine exports.
The last piece of relevant data Friday was the US Treasury Department's release of what was labeled as a "notice of intent" to propose regulations regarding the 45Z renewable fuel tax credit. Will start this by saying I am not a policy export nor will I pretend to be one, and so will try and explain this to the best of my ability. In leman's terms, the Biden administration today issued proposals for what it would like rules surrounding 45Z to look like once Trump takes office and his new administration makes the final decision on the ruling. Trump does not have to follow this guidance, nor does he have to finalize any guidance at all if he chooses not to, meaning the industry is largely just as in the dark today as they were yesterday. Notable in the verbiage of the guidance were a few points: one, as expected, there is an open public comment period that runs through April 10th, meaning at the very least, official guidance should not be expected before this date. Two, the Treasury Department explicitly acknowledged problems with used cooking oil imports, stating that there were "significant concerns with the ability to reliably distinguish between imported UCO and palm oil," and that as a result pathways using imported UCO as feedstock would not be eligible for the credits. And three, the Treasury Department mentioned intent to propose rules for CSA (climate smart ag), meaning the three-method approach (no-till, efficient fertilizer application, and cover crops) that irked farmers previously is at the very least under review.
With the plethora of other data, will focus weather comments this afternoon on South America as there was again little updates to the US forecast through the weekend and into the first part of next week. Argentina's forecast at mid-day took a shift to the wetter side in the week two period, but a shift to the drier side in the short-term. Through next week, models see only the far western edge of the country with any decent rain potential, while the rest of the country and into southern Brazil remains dry. As we've mentioned all week, we can not overstate the importance of this rain being brought into the near-term forecast; the confirmation of such moisture likely leads to a removal of premium, while a forecast miss will likely lead to further upside action by the end of the month.
Looking to next week, we expect for today's trading action/data to likely key price direction through Monday, as there will presumably be spill-over action to start Sunday night trading. Have a good weekend!