We kicked off the day with MBA 30-Year Mortgage Rate, MBA Mortgage Applications, MBA Mortgage Market Index, MBA Mortgage Refinance Index, and MBA Purchase Index at 6:00 A.M., ADP Employment Change at 7:15 A.M., Fed Waller Speech, Initial Jobless Claims, Continuing Jobless Claims, and Jobless Claims 4-Week Average at 7:30 A.M., EIA Energy Stocks at 9:30 A.M., 17-Week Bill Auction at 10:30 A.M., EIA Natural Gas Storage at 11:00 A.M., 30-Year Bond Auction at 12:00 P.M.,FOMC Minutes at 1:00 P.M., Consumer Credit Change, Used Car Sales MoM & YoY at 2:00 P.M.

Purdue University’s Ag Economy Barometer showed a slight down tick in producer sentiment in December, following a historic surge in November. The Ag Economy Barometer was down 9 points at 136 but was still 22 points higher than a year ago and the highest in December since 2020. The Current Conditions index was down 13 points for the month at 100 and was 12 points less than last year, while the Future Expectations index was down 8 points at 153 compared to 115 a year ago. Producers’ expectations for a more favorable policy environment in the years ahead, including environmental, estate, and income tax policies, contribute to their optimism about the future. The possibility of a trade war that negatively impacts US agricultural exports is a growing concern among farmers, with 48% of respondents in December thinking it’s either likely or very likely. The Farm Capital Investment Index fell 7 points in December to a reading of 48, and the Farm Financial Performance Index fell 8 points in December to 98.

Photo by Jesse Gardner on Unsplash

South American Forecast Wetter in Southern Brazil; Pattern Change Watch for Argentina:

The major forecasting models agree that welcomed rainfall expands into Parana & Santa Caterina in Southern Brazil in the 8-15 day period which keeps above – trend Brazilian soybean yield potential intact. However, model guidance lacks any meaningful pattern change in Argentina prior to Jan 21^st, and the arrival of excessive heat next week speed the loss of subsoil moisture. A few scattered showers are possible in N Argentina Jan 16-20, but confidence in details is low. The EU model’s 6-10 day forecast has max temps in the high 80’s and mid 90’s in Argentina’s principal ag belt. Subsoil moisture in key parts of Cordoba and northern Santa Fe are adequate, but regional crop stress mounts in Buenos Aires and southern Santa Fe into late January as moisture there has been depleted since mid-Dec. Ag Resources (ARC) expects Argentine yield loss to be only regional in nature, but there’s no doubt widespread/regular rain is desired after the next two weeks.

Central US Weather Pattern Discussion

Heavy Snows Blanket Central Plains, Southern Midwest; Frigid Temps Not a Concern:

Snow this week has fallen as expected across KS, NE, the southern Midwest, and KY. Current snow cover there ranges 2-20”, with moisture equivalents in KS, MO, IL, IN, OH, an KY calculated at 1-3”. Tis is welcomed in KS/NE, and this week’s drought monitor is unlikely to feature expansion. A deep low pressure Trough sinks into S Canada and the Great Lakes region during the second half of this week, and this allows for a rather cold pattern to be established nationwide into Jan 16^th . The arrival of snow across the northern section of the HRW Belt is view as timely with minimum temps in KS, NE, and MO set to drop into single digits Tues-Wed and again early next week. A moderation in cold is forecast after Jan 16^th . Wheat winterkill threats are low.

Official US corn exports in November totaled 185 Mil Bu, vs. 142 Mil the previous year and the second largest for the month on record. ARC also notes Census exports in November were 34 Mil Bu (23%) above reported FGIS shipments for the monthly and so it remains that weekly & monthly inspections data is a partial reflection of US corn disappearance. Using FGIS data for December, and the ongoing discrepancy between Census & FGIS numbers, ARC pegs official US corn exports in Dec at 217 Mil Bu, a record for the month and up 30 Mil Bu year-over-year. Cumulative Sep-Dec exports are calculated at 730 Mil Bu up 30% on last year. USDA is not to adjust downward in its annual US corn export forecast and notice that seasonally export disappearance doesn’t peak until March/April. Whether sales/shipments have been frontloaded ahead of probable tariffs/retaliation will be monitored, but US export demand is set to be strong during winter. Corn export demand thereafter will hinge upon South American yields, and whether the Brazilian wet season is extended into late April.

Corn Finds Support Amid Adverse Argentine Weather; Fob Market Less Concerned:

Global corn futures ended flat but off session lows as midday forecasts failed to introduce any shift to wetter weather in Argentina. Heat next week will accelerate soil moisture loss and yields will be negatively impacted if dryness is extended into February. Worst-case scenarios will be avoided following abundant rainfall in autumn, but as Brazil’s new crop won’t be harvested until summer,  Argentine weather is key over the next 30 days. However, ARC notes Argentine fob premiums are unmoved and sit at parity with US origin for Feb arrival. Argentine fob corn is quoted $.13/Bu below US origin for March delivery. As such, sustained drought in Argentina is needed to push March CBOT above $4.60. ARC views supply-driven rallies in Jan-Feb as providing the opportunity to add to ’25 hedges. Fund length is already sizable, and so cash markets must lead prices higher moving forward. The market reaction to Friday’s USDA report will key longer term price direction.

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