We kicked off the day with Retail Sales MoM & YoY, Retail Sales Ex Autos MoM, and Retail Sales Ex Gas/Autos MoM at 7:30 A.M., Industrial Production MoM & YoY, Capacity Utilization, and Manufacturing Production MoM & YoY at 8:15 A.M., Business Inventories, NAHB Housing Market Index, and Retail Inventories Ex Autos MoM at 9:00 A.M., NY Fed Treasury Purchases aBill at 9:30 A.M., 42-Day Bill Auction at 10:30 A.M., 20-Year Bond Auction at 12:00 P.M., API Energy Stocks and International Monetary Market (IMM) Data at 3:30 P.M., and  FOMC Meeting.

Following a surge of optimism in November the NY Empire State Manufacturing Index marked a fractional increase in December. In November, the index jumped to a 31-month high of 31.2 but rose just 0.2 points in December. The index is comprised of several sub-indexes that offered mixed results during the month. New orders index rose by 6.1 points vs. 28 in November, while shipments increased by 9.4 vs. 32.5 in the previous month. The delivery times index declined by 7.4 points compared to a 3.1-point increase in November. The labor market indicators showed a slight decline in employment, with a slightly shortage average work week. The input and selling indexes were higher but fell short of November gains. Manufacturing firms remain optimistic about the 6-month outlook but expected that inventories would continue to frow, and capital spending plans remained modest.

Photo by Jesse Gardner on Unsplash

South American Weather Pattern Discussion

La Nina Forms; Major Impact on Argentine Climate Unlikely:

South America’s climate pattern into late December will stay nearly ideal assuming precipitation forecast in Argentina and far southern Brazil verify. Ag Resources (ARC) does note that following swift cooling of the equatorial Pacific last week, La Nina has technically formed.  However, a weak and short-lived event is forecast, and ARC doubts a proper La Nina climate pattern becomes established until lat Jan/early Feb at soonest. South American weather risks today remain minimal. Regular rain persists in central and northern Brazil throughout the next two weeks. The EU, GFS, and AI models are in broad agreement that welcomed heavy rainfall impacts the northern half of Argentina’s ag belt Wed-Fri, and again 24-25. Cumulative totals upward of 2-4” are projected across key regions of Cordoba and Santa Fe. Prolonged Argentine dryness is not anticipated despite La Nina during Dec/Jan.

Central US Weather Pattern Discussion

Central US Forecast Eliminates Cold Risk; Late December to be Abnormally Warm:

The central forecast remains wet across the Delta/mid-South, with yet more drought improvement offered to AR & MS, while major snow events are absent from two-week forecast. Previously cool/cold January outlooks have trended warmer, and operational model guidance hints at well above normal temps after Christmas. The US ag market will be free from logistical disruptions in the near term. Note also Southern Mississippi River levels are set to stay above low threshold into Jan 1^st . The EU model’s two-week temp anomaly forecast has bitterly cold temps confined to the Dakota’s & Canada, while high temps in the upper 30’s, 40’s & 50’s Dec 25-30.

CBOT Corn Recovers; New Spark Needed After Dec WASDE:

Global markets ended mixed but mostly higher as March CBOT held initial chart support at $4.38. ARC’s work suggests fair value stays in a range of $4.20-$4.50 until USDA’s Jan report has come and goneuntil more is known about early/mid-January precipitation in Argentina. Unlike soybeans South American weather will be critical into Mar/Apr, but concern longer term is Chinese economic woes at soybeans at or near $8.00. It’s the future increase in US seedings that keeps supply fear absent. The pace of weekly US corn sales & shipments is less remarkable following USDA’s 150 Mil Bu hike to annual forecast last week. Cumulative US corn inspections through Dec12th total 524 Mil Bu, up 2=31% year-over-year but a rather normal 21% of USDA’s new Forecast. Key is weather front-loaded sales in Oct-Nov get shipped during the winter months.

Ethanol production margins stay negative above $4.50, but turn positive below $4.30. This defines the range into Jan 10^th . Continue to catch up on sales on rallies, as ARC’s biggest concern is the lack of a global demand driver.

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