We kicked off the day with Export Sales, Export Prices MoM & YoY, Import Prices MoM & YoY, Retail Sales MoM & YoY, Initial Jobless Claims, Retail sales Ex Autos MoM, Continuing Jobless Claims, and Jobless Claims Ex Gas/Autos MoM at 7:30 A.M., Business Inventories MoM and Retail Inventories Ex Autos MoM at 9:00 A.M., EIA Natural gas Storage at 9:30 A.M., 4-Week Bill Auction & 8-Week Bill Auction at 10:30 A.M., 15-Year Mortgage Rate & 30-Year Mortgage Rate at 11:00 A.M.

Photo by Waldemar on Unsplash

Following a fractional downtick in CPI inflation on Tuesday, Producer Price Index inflation also ticked lower from October and was slightly below expectations at 0.9%. This was the lowest PPI inflation rate in 5 months and the 2^nd lowest since December 2020. This follows the Chines PPI that was reported at a 3-month low of -3% in November. Both US and Chinese wholesale and retail price inflation continues to track raw materials prices, as measured by the CRB Index. In October, the Index was down 2.2% year-over-year, while the current change in December is down 6.7%. This is likely foreshadowing lower inflation figures for December and one reason why the US Central bank signaled that they could lower lending rates in 2024 which pushed the DOW to record highs. The South American forecast has delayed the arrival of soaking rain in Northern Brazil, with any pattern shift not scheduled to begin until Dec 22nd. The EU model in particular in the last 24 hours has trended drier. Light/scattered showers are possible in Mato Grosso beginning Dec 20, but excessive heat impacts South America into early next week. Highs are projected from the mid-90’s to low 100’s across far North Argentina and Mato Grosso do Sul, Mato Grosso and Goias in Brazil Friday-Monday. The pattern across Brazil is worrisome as net soil moisture loss is extended well into January. The 11-15 day forecast for Northern Brazil is for near above normal rain, but our confidence is low given the inaccuracy of forecast so far since mid-November. Agronomy sources indicate Brazilian soy yield potential drops precipitously if late December rains fail to appear. Drought risks are growing. The funds and certain speculators are anticipating rain, they will be disappointed if it does not come into fruition and the market could seek new monthly highs after settling 5 cents lower and dropping below the 50-day moving average in yesterday’s action. Spot and forward contracts in Brazil ended 4-5 cents higher, with Brazilian premiums widening to new 14-month highs. Talk is growing that exports are trying to ship Gulf US corn to Northern Brazil. Argentine offers appeared following Tuesday peso devaluation, but exports will not resume in bulk until summer. AG Resources (ARC) also notes corn export taxes have been raised – not lowered – to 15%, vs. 12% previously. Any trimming/elimination of Argentine export taxes are months away. A head and shoulders pattern is forming on the March corn char. The soaring Brazilian corn market and their massive forward supply risk battles large US corn stocks. US ethanol production in the week ending Dec 8^thtotaled 316 Mil Gal, up 1% year-over-year, but a seasonal retreat in weekly grind occurs after the holiday season. There is a decline in cash production margins with US energy market weakness. ARC maintains a strategy of adding Jan-Apr supply coverage at current prices. Cash sales await clarity over S American weather. Amid a falling value of the US dollar, the price risk leans to the upside into spring. In the overnight electronic session the March corn is currently trading at 482 ¾ which is 3 ¼ cents higher. The trading range has been 484 to 481.

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