We kicked off the day with Business Inventories MoM, Export Sales. Export Prices MoM & YoY, Import Prices MoM & YoY, Retail Sales MoM & YoY, Initial Jobless Claims, Philadelphia Fed Manufacturing Index,  Retail Sales Ex Autos MoM, Continuing Jobless Claims, Jobless Claims 4-Week Average, Philly Fed Business Conditions, Philly Fed CAPEX Index, Philly Fed Employment, Philly Fed New Orders, Philly Fed Prices Paid, and Retail Sales Ex Gas/Autos MoM at 7:30 A.M.,NAHB Housing Market Index and Retail Inventories Ex Autos MoM at 9:00 A.M. EIA Natural Gas Storage at 9:30 A.M., 4-Week & 8-Week Bill Auction at 10:30 A.M., 15-Year & 30-Year Mortgage Rate at 11:00 A.M., and Fed Balance Sheet at 3:30 P.M.

Following a jump in Producer Price Inflation on Tuesday, the Bureau of Labor Statistics reported a similar uptick in Consumer Price Inflation for December. The Consumer Price Index rose 0.4% in December to 315.6. just below the record high that was set in October. The annualized inflation rate rose to a 6-month high of 2.9%. The food, housing, and medical care Indexes all set record highs in December, while the core inflation index rose for the 48^th consecutive month and set a record high. On Tuesday, the BLS reported the annualized December PPI inflation rate at 3.3%, the most since February. The Chinese PPI remained negative in December for the 27^th consecutive month, while raw materials prices, as measured by the CRB Index, marked double-digit annualized gains of 12.5% in December. At present, the CRB is on track for another month of double-digit gains and is 12.8% higher than a year ago.

Photo by Jesse Gardner on Unsplash

South American Weather Pattern Discussion

Needed Argentine Rainfall Probable Sat-Mon:

There remains uncertainty over Argentine weather details into late Jan amid model disagreement and run-to-run fluctuations, but EU ensemble model – which has been the best performer in Argentina since mid-January – is consistent in projecting needed rainfall across much of Argentina’s crop bely this weekend. The EU ensemble’s 5-day precipitation zero’s in on mis-south & southwest Argentina. Regular rain will be needed throughout February to fully salvage trend yield potential, but accumulation of .75-1.25” Sat-Mon is important. Critical areas of Cordoba & Santa Fe are favored. Weekend rainfall tempers heat in Argentina. Max temps into Friday will stay in the 90’s/low 100’s but drop into the 80’s thereafter into Jan 29^th . The top end of Argentina’s has been trimmed, but Ag Resources (ARC) doubts corn and soy production loss exceeds 2-3 MMT’s each. Note also carry-over soy supplies of 8 MMT’s provide a buffer against 24/25 yield loss. Near record Argentine soybean crush is still anticipated.

Northern Brazilian Rainfall Stays Abundant; Precipitation Expansion Occurs the Next 10 Days:

The other side of Argentine dryness is continued moisture improvement I N Brazil and consistent forecast that feature expansion of heavy rainfall into the drier southern areas Jan 20-30. Heavy rain in Mato Grosso do Sul and Parana is viewed as rather timely, and ARC notes Jan 1-15 rainfall in those states has been recorded at just 20-50% of normal. Relief is on the way. Soaking Precipitation worth 2-4” impacts Mato Grosso and Goias into the weekend. Rainfall loses intensity thereafter, which is viewed as favorable following inundating rainfall in the first half of January. Even assuming the drier forecast verifies in Mato Grosso Jan 1-29 rainfall there will be 10.9”, vs. 9.4” last year and 9.2” on average.

On the Corn Front

CBOT Corn Recovers; Int’l Futures End Week; US Interior Cash Market Less Anxious About Supply:

The corn futures are coming in weaker in the overnight to a tone of 3 cents and 3 cents + in deferred months. In yesterday’s action, CBOT’s corn rally resumed with March scoring a post-harvest high settlement. US ethanol grind remains strong amid record ethanol exports, and seasonal ethanol export demand is unlikely to wane until Brazil’s safrinha crop is harvested in summer. Cumulative ethanol grind since Sep 1 is up 3.8% year-over-year, and there’s room for USDA to hike its industrial use forecast and 15-25 Mil/Bu, which pulls end stocks closer to 1.5 Bil, vs. 1.76 in 23/24. Corn continues to outperform soybeans as new South American supplies don’t become available until Apr/May – unlike Brazilian soybeans which will be available by late Feb/Mar. ARC notes interior basis bids have weekend following USDA’s bullish WASDE. Spot basis at Cedar Rapids, IA, is quoted at $.29 under. This compares to slightly positive bids in Nov/early Dec. Supply risk stays present until more is known about Brazilian rainfall in Mar/Apr, but major adversity is needed to prevent market weakness spring onward. Leverage near term rallies with forward sales. The market is overbought.

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