South American Dryness Fuels Grain Rally

Good Morning from Allendale, Inc. with the early morning commentary for January 04, 2021.

Grain Markets remain strong on South America dryness, Argentina export halts until March 2021 and stronger than expected grain sales.  Trade will continue to watch South American weather developments and newly reported grain sales as we head towards the January USDA WASDE report on January 12th.          

Last week, March corn futures were up 34.75 cents, March soybeans were up 45.50 cents, March wheat up 14.75 cents, March soymeal was up $15.00 and March soyoil was up 131 points.

CFTC Commitments of Traders report was delayed due to the New Year holiday and will be released today after the close.

Weekly corn export sales were strong last week at 964,547 metric tonnes (expecting 500,000 – 1,000,000 mt), this was 72% over the five year average for this week.  It was also the largest sale of this week since 1995.  Corn export sales have been strong with a four week average 17% over normal.

Weekly soybean export sales were strong last week as well at 1,011,198 metric tonnes (expecting 200,000 – 700,000 mt), this was 7% over last year in the same week.  The question for soybean sales is whether the previous five weeks of low numbers is old news or not?  With South America’s issues…probably not.

For the 2020 year, corn futures ended up 24.8%, soybean futures up 39.5%, Chicago wheat up 14.6%, KC wheat up 24.2% and MN wheat up 6.8%.

Drew Lerner updated his level of concern for Argentina last week saying, “The bottom line is expected to remain unfriendly for Argentina crop development in the first half of this month (January).”  He also noted, “The earliest that weather patterns could change enough to bring a better rain event in Argentina would be the second half of the month and more likely in the last week.”

February lean hog futures finished the week up $3.40.  April lean hog futures also finished the week up $1.32.  These gains could be related to China announcing they will be releasing more pork reserves into the domestic marketplace ahead of the Lunar New Year holidays in February.

February live cattle futures settled last week at $115.02.  Cash cattle traded at $112 last week (up from $110 the previous week).  This is the best cash trade seen since the first week of June.

Dressed beef values finished lower on Thursday with choice down 0.58 and select down 4.21.  The Feeder cattle index is 138.77.  Pork cut-out values were up 5.93.  There were no wholesale beef & pork reports on Friday due to the holiday.

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