We kicked off the day with Consumer Inflation Expectations and Export Inspections at 10:00 A.M., 3-Month & 6-Month Bill Auction at 10:30 A.M., and Monthly Budget Statement at 1:00 P.M.

The January employment data was surprisingly supportive for the labor force, yet US stock indexes plunged, and interest rates soared following the reports release. The non-farm payroll data showed that the US economy added 256,000 jobs in December, the most in 9 months and above expectations of 160,000 jobs. Government payrolls increased by 33,000 jobs, while private payrolls increased by 233,000. November jobs were revised down by 15,000 to 212,000 jobs. The unemployment rate declined from 4.2% to 4.1%, while the U-6 unemployment rate slipped to a 6-month low of 7.5%. The labor force participation rate was unchanged at 62.5%, while average hourly earnings rose by 3.9% from a year ago. The US labor market continues to be stubborn in its solid growth rate and the US dollar will rally farther as the US Central Bank can actually raise rates.

Photo by Jesse Gardner on Unsplash

Argentine Forecast Now Key Driver of Price; Rain Probable in 10-15 Day Period:

It’s the timing  of the return of rain in Argentina that matters most during the second half of January. The addition of sizable corn & soybean supply premium on Friday was logical, but assuming a pattern of regular rain is allowed to resume in Argentina from Jan 21 onward, Ag Resources (ARC) fears it’s back to concern of soybean oversupply and stabilization of corn yield potantil. Recall Argentina’s corn crop will be harvested in March-May, and competition for importer feed demand resumes in spring. The AI two-week model precipitation forecast shows confidence is high that welcome rain expands into S Brazil. The EU & AI models agree that heavy showers impact all but NE Argentina in the 10-15 day period. The next forecast is important.

ARC’s Analysis of USDA’s WASDE

Nass, in its Jan report, shocked the market by trimming the final US corn yield 3.8 BPA from its November estimate-which, on a percentage basis, is the second largest Nov-Jan adjustment on record-pulling end stocks down 1.54 Bil Bu. Recall that USDA, in October pegged24/25 US con end stocks at 2.0 Bil. Like last year, it’s been difficult to build US/global corn stocks due to supply issues. The January WASDE was bullish of corn. Brazilian industrial use in crop year 24/25 was increased 2 MMT’s to a record 87.5 MMT’s. This and sharply lower US end stocks put exporter stocks/use in 24/25 at just 7.5%, vs. 8.3% in December, vs. 10% a year agoand the 4thh lowest on record. The world corn market is not abundantly supplied, and there is a need for the return of rain in Argentina and trend/above trend safrinha yields in Brazil spring/summer. Spot CBOT corn’s rally to $4.60-$4.70 is justified as, unlike wheat, the world balance sheet since summer has gotten tighter. But a cut in China corn imports mutes further upside potential. ARC pegs China corn imports to fall 8-9 MMT’s vs. the WASDE forecast of 13.0 MMT’s.

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