We kicked off the day 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 Musalem Speech at 7:45 A.M., S&P Global Composite PMI Final and S&P Global Services PMI Final at 8:45 A.M., ISM Services PMI, Factory Orders MoM, Factory Orders ex Transportation, ISM Services Business Activity, ISM Services Employment, ISM Services New Orders, and ISM Services Prices at 9:00 A.M., EIA Energy Stocks at 9:30 A.M., 17-Week Bill Auction at 10:30 A.M., Fed Chair Powell Speech at 12:45 P.M., Fed Beige Book at 1:00 P.M., Dairy Products and Dairy Products Sales at 2:00 P.M.

Purdue University’s monthly survey of US farmers showed a surge in sentiment in November. The Ag Economy Barometer jumped 30 points in November to 145, marking the largest 1-month increase in the dataset’s history and it was the highest that the index has been since May 2021. This followed a 27-point increase in October. The index for Current Conditions rose 18 points (following a 19-point October increase) to 113, the highest since June 2023. The index for Future Expectations marked the strongest increase, a record large 37-point increase from October to reach a high of 161. Farmers indicated that they expect Republican control of the legislative and executive branches of government could lead to a more favorable regulatory and tax environment. In October, 41% of farmers expected harsher regulations in the next 5 years. In the post-election survey, just 9% anticipated increased regulations. In November 28%, of farmers thought that estate taxes would remain unchanged vs. 57% in October. A third of farmers expected that their operation would be better off financially in a year.

Photo by Jesse Gardner on Unsplash

South American Climate into Mid-Dec Defined by Mix of Rain/Sun; Abundant Rain Impacts Brazil Next 7 Days:

The South American forecast remains favorable. A drier pattern develops across northern Brazil Dec 10-17, but prolonged dryness is unlikely. In the near term, normal rainfall totals of 1.5-3.0” are forecast across eastern Paraguay and the entirety of Brazil, which along with a lack of extreme heat keeps yield potential elevated. Rain is also projected to return to Argentina in the 9-15 day period. It’s important that this forecast verifies, but the EU, GFS, and AI solutions have been consistent in forecasting precipitation worth .50-2.00” across key areas of Cordoba, Santa Fe, and far Northern Brazil Aires after Dec 13. South American rainfall in the last 30-days has been at/above normal. Short term dryness in mid-Dec will not be an issue with December the wettest month of the year.

Global Currency Market Analysis

Chines Stimulus Fails; Yuan Down 13% Last Two Years:

Currency weakness in Brazil, Argentina, and Russia is working to boost producer revenue, while weakness in importer currencies like the Turkish Lira, Egyptian pound, and Nigerian naira – and especially the Chines yuan – have negatively impacted purchasing power. Recent efforts from the Chinese government to stimulate spending have had little impact. Chinese interest rates are in decline amid deflationary pressures, while total government debt will further exceed GDP into 2025, and the yuan this week is testing the lows of summer 2023. It’s difficult to identify that a catalyst that improves Chinese spending/economic growth on a lasting basis, and sputtering Chinese economy will make it difficult to balance major crop supply & demand in 2025. Recall the beginning of the 2020-2022 bull market was sparked by massive Chinese imports of food products. The years ahead will feature diminished Chinese imports as 2025 allows Chinese farmers to seed GM crop with a potential 5-15% yield bump.

CBOT Corn Ends Slightly Lower; World FOB Premiums Decline; 2025 Biofuel Guidance Absent:

December CBOT corn settled 2,986 positions leaving open interest at 6,416 contracts left before Friday the 13^th. March CBOT corn futures is struggling to rally beyond key chart resistance at $4.35-$4.40. The US corn market needs to confirm additional large US corn export demand to push beyond $4.40. China’s ongoing absence of world corn importer is being closely followed as their domestic cash corn price falls to a five year low – at a price that is below the cost of production. China will not want to import large tonnages of world corn when their own farmers are suffering with negative production margins. December corn stocks are likely to be no better than last year, but it’s the slowing of disappearance and recovery in South American production are future concerns. Unlike recent bear cycles, China’s economic woes and weakening importer currencies place the burden on reducing stocks with supply loss via adverse weather. Spot Midwest cash ethanol has fallen $.08/Gal to $1.55. The weekly grind stays near record large for another few weeks, but ethanol stocks build seasonally after December. The ethanol market is signaling to curtail production. And SAF credits will not be established prior to President Biden leaving office. Future biofuel uncertainty abounds. World corn prices will slowly erode.

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