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Afternoon Market Recap for January 19, 2022

phongphan5922/Thinkstock markets charts - green with red line
Expect volatility as South American harvest progresses.

Farm Futures writers Jacqueline Holland and Ben Potter are on assignment at the Business Summit this week. Josh Green, Ag Risk Management Advisor for Advance Trading, Inc., provides guest commentary below.

After a risk off day yesterday, the markets were back to trading the extended forecast for Brazil and Argentina. Argentina seems to have caught some relief, but Southern Brazil seems to have more spotty thunderstorms in the forecast.   

Weather

Strong to severe heat affects northern Argentina, southern Brazil, and Paraguay over the next 10 days as upper-level high pressure lingers, and only accompanied by isolated t-storms in Brazil and Paraguay. Conversely, waves of energy flow along the southern edge of the high to trigger numerous t-storms in central and southern Argentina where heavy totals will ease drought, but a drier period is expected after a cool-front passes. The front dislodges the high in 10 to 14 days to trigger t-storms in Brazil and Paraguay but are very unlikely to satisfy the driest Nov.-Jan. in more than 35 years in Paraná and Paraguay. 

Corn

Nearby spreads continued to firm today confirming strong demand for old crop corn. Exports have had a good showing by China the past couple of weeks with 13.7 shipped this week and 10.8 last week. China has unshipped sales of 385 mbu on the books, against 238 last year at this time. No change in the Brazilian corn estimates today at 112.0 MMT and steady for Argentina at 51.0 MMT. Brazil is expected to ship 2.6 MMT of corn in January, or more than 3 times some of the trade’s earlier forecasts. Despite last year’s drought-impacted safrinha crop this would still be 250K MORE than last January. December shipments were very respectable 3.4 MMT.  Brazilian farmers were big sellers of 21-22 corn last week to 45.5%, but still well behind LY’s 67% total as of the same date. 

Soybeans

Concerns in Southern Brazil and the potential for lower production continues to catch the attention of money flow into soybeans. Soybean crush margins rebounded today as domestic crushers continue to show strong demand. Earlier this week NOPA reported a record December US soybean crush of 186.4 million bushels, which exceeded trade estimates. Chinese crushers seem to be looking heavily to Brazil to cover their remaining February and March needs. China is estimated to be 95% or more covered on its January and February soybean import needs. March coverage said to have risen from about 50% covered just before the start of the New Year, to 71%. One point of caution might be that early January shipments out of Brazil could be 200 million bushel larger than last year due to the early harvest. The U.S. really needs to see some additional old crop sales to confirm end users concerns over lower production estimates in South America. Weather markets can be really good, and really bad all in the same week. Expect plenty of volatility the next couple weeks as South America’s harvest progresses. 

Wheat

Tensions between Russia and Ukraine continue to make headlines support the wheat markets. Dry weather seems to stay in the US plains as a cold snap is moving throughout most of the Midwest. The nearby contracts were able to break through most moving average resistances and will look for exports to support the rally.

CBOT Quotes as of 2:18 p.m.

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Josh Green is an Ag Risk Management Advisor for Advance Trading, Inc. The risk of trading futures and options can be substantial. All information, publications, and material used and distributed by Advance Trading Inc. shall be construed as a solicitation. ATI does not maintain an independent research department as defined in CFTC Regulation 1.71. Information obtained from third-party sources is believed to be reliable, but its accuracy is not guaranteed by Advance Trading Inc. Past performance is not necessarily indicative of future results.

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