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Grain Comments: 12-12-2023

Good morning.

Markets are quiet/higher this morning, as wheat and soybeans catch their collective breath after yesterday. Not a whole lot in the way of fresh fundamental news overnight. Financial markets will be keyed by today’s CPI report, which is expected to be steady vs last month. Holiday trading volume is beginning to set in in the ag markets, leaving the likelihood for volatility high. Corn, soybean and Chi wheat futures all trading 1-2 cents higher, products higher with meal up $2 and soybean oil up 5-10 points. Outside markets quiet, crude oil down 40 cents/barrel, the Dow up 65 points and the US$ index down 40 points.

Macroeconomic headlines will likely dominate the trade for the next couple days; today’s CPI report will be closely watched, with core inflation expected to remain the same vs Oct at 4.0%. This could be a step towards lower interest rates in 2024.

The last FOMC meeting of 2023 kicks off today, and will go through tomorrow, with most economists expecting the Federal Reserve to maintain interest rates for the third consecutive meeting.

Ukrainian President Volodymyr Zelenskiy, in Washington this week, will be making a last-ditch plea today to press US lawmakers into replenishing nearly depleted funding for the war against Russia. The US has provided more than $110 billion in aid since the February 2022 invasion, but none since the Republicans to cook control of the House in January.

Yemen’s Houthi rebel group claimed a Monday missile attack on a Norwegian commercial tanker. The group over the weekend said it would target all ships heading to Israel, regardless of nationality, as the Gaza conflict intensifies hostilities in the region.

Chi wheat yesterday didn’t quite give back half of its gains from the week prior. Following the recent run up, the market had become technically overbought and was in need of a correction, with RSI nearing 70.0.

South American weather continues to be the primary driver of CBOT row crop markets. South American production, and their amount of exportable supplies for marketing year 23/24, will key price direction into Feb/March.

The EU, the GFS, and the Canadian weather models all remain wet in the two-week forecast. Whether this moisture can be pulled forward continues to be the million-dollar question. Northern Brazil crops are running out of time for a pattern shift, and yield loss is likely.

Weather in Argentina remains favorable. Another round of showers is expected Thursday-Saturday. Spring planting progress will likely surpass 50% in the next week. Trend yields expected at this point.

March corn below $4.70 feels cheap, as the US has fantastic export potential for the next couple months. South American supplies likely won’t be available before April, and other than Ukraine, the US is the cheapest store in town. Ukraine grain pencils into Eastern Europe, but war/insurance risks make it too expensive for most other importers. Ukraine corn does not work into China/Asia.

Have a great day!

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