Morning Comments December 17, 2021

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Markets remained firm yesterday as traders continue to discuss dryness concerns in Southern Brazil, while wheat appears to have found a short-term bottom after a significant stretch of selling as well.

For the most part, the focus when it comes to South America has been on Northern and Central portions of Brazil and how well they are doing when it comes to production potential. Monsoonal moisture started early in the central parts of Brazil to the north, providing farmers an opportunity to plant their crop on the front side of the growing season and keeping conditions solid as we've worked our way towards maturity.

Excellent conditions in the north are expected to continue, with harvest for some in the region starting in the next couple of weeks.

However, to the south, there are some real issues starting to show. Portions of Rio Grande do Sul and Parana have seen around half their normal rainfall for the last 60 days, with only 3-4" falling versus the typical 10 or so generally seen by this point in the growing season. 

With the next 10 days to 2 weeks expected to remain dry while temperatures creep a touch higher, private analysts are starting to reduce their production estimates. One group lowered their overall Brazilian soybean production estimate to 144.7 mmt down from 145.4 mmt expected last month.

To put it into perspective though, 144.7 million metric tons is 5.32 billion bushels. Total US production in 2021 was 4.43 billion bushels, Brazil produced just over 5 billion bushels a year ago. 

So while concerns are valid when it comes to drier weather in Southern Brazil, as a whole when it comes to soybean production it's unlikely to move the needle even back to where we were a year ago production-wise.

When it comes to corn, however, the concerns are valid as a decent portion of Brazil's first corn crop is grown in the regions struggling the most with dryness. These concerns regarding Southern Brazil production will put that much more emphasis on Argentina corn production as well as the kind of start Brazil's Safrinha crop sees.

Forecasts at this point continue to bring much needed but relatively scattered rains into much of Argentina throughout the next couple weeks, with some models and atmospheric developments pointing to a possible pattern shift for Southern Brazil some time in January.

Export sales yesterday came in better than expected for wheat, on the high end of expectations for beans and extremely stout for corn. Corn sales of just over 1.9 million metric tons were a marketing year high and at first glance a little shocking, but once one remembered this week's numbers included the massive sale to Mexico announced late last week, they made a bit more sense. 

We continue to hear rumors of China needing to book US corn, with another round of May forward purchases confirmed out of Ukraine yesterday. At this point import margins continue to point to the potential of US imports, though it appears China is working to exhaust all other global feed grain seller's supplies first.

Looking ahead it is the final day of the year for many, with folks opting to take the next two weeks to enjoy family and not think about markets. Interesting to note we are seeing many large businesses backtrack on return to office plans, with some even delaying their return date indefinitely. How this impacts gasoline demand, as well as other facets of the economy, will be interesting to watch. 

We also got news yesterday that Senate Democrats will abandon their push to get Biden's Build Back Better bill passed before the end of the year. Some political analysts feel a return to passing the bill after the New Year is highly unlikely as well as politicians return home for the holidays likely to get an earful about rising consumer prices and inflation. With the turn of the calendar to 2022, we start to focus on midterm elections and the outlook is not great for many currently serving that are planning to run for reelection. 

Market-wise, an expected thin trade will most likely result in some volatility. 

Corn steady to higher

Beans 4-5 higher