Written Commentary
MORNING COMMENTS
Macroeconomics:
Both the CPI (Consumer Price Index) and the PPI (Producer Price Index) data have not changed the opinion of the market regarding the Fed’s decision next Wednesday. CPI was reported yesterday at 0.3% increase month-over-month and 2.7% year-over-year. PPI this morning was slightly higher than expected at 0.4% m/m. Unemployment claims were also reported 21K higher than expected at 242K claims. The Fed watch is currently plugging in a 98% chance that the fed cuts interest rates by -25 basis points next week to 4.25-4.50% federal interest rate. Hard to say how this will effect housing and 30-year mortgage rates, seeing mortgage rates stayed firm above 6.5% following the half point cut in September.
Ag Fundamentals:
The Brazilian Central Bank increased it’s lending rate by 1% late yesterday, now sitting at 12% rate. They are expected to raise rates twice more in 2025 to combat inflation and regain consumer confidence. Many believe if lending rates in Brazil increase to 14% in 2025 the Brazilian farmer will start to sell grain for a couple reasons. They will either want to pay off farm operating loans or sell grain to have the cash to work within interest-bearing accounts. The Brazilian soybean crop is estimated to increase above 170 million MT if the weather over the next 30 days remains favorable. If they end up recording a record bean yield above 3.6 tons/hectare or +52 bu/acre then the estimate ranges could reach as high as a record 175 million MT bean crop. To put that into perspective, it would be 54 million MT more than the largest US bean crop. In other words, Brazil has managed to add an extra Argentina equivalent volume to their production balance sheet in the last decade. Regarding corn, the funds have been active buyers over the last month while farmers entering harvest undersold are now selling into the rally causing board prices to hit a wall this morning. Funds held a record short position of 350K contracts of corn back in September. Some speculate after this week they could be closer to 150K contracts long. A 500K contract swing in 3 months with very little price movement says a lot about the timing of farmer selling this year. Ending stocks falling from 2.2 billion to 1.738 billion bushels also helps support corn. Corn and wheat tend to move together so if we continue to see strength in corn, more open interest may accumulate in $7 wheat calls. Seeing a potential double bottom on the March Chicago wheat chart.
WEEKLY EXPORT SALES
| Sales 24/25 | Est Range | Sales 25/26 | Est Range |
Wheat | 290,200 | 275-600K | 0 | 0-50K |
Corn | 946,900 | 1,100-1,900K | 0 | 0-100K |
Beans | 1,173,800 | 1,500-2,200K | 0 | 0-50K |
Meal | 176,800 | 175-450K | 0 | 0-50K |
Soyoil | 63,800 | 5-80K | 0 | 0-20K |
EXPORT & WORLD NEWS
Japan bought 113K MT of food quality wheat from the US, Canada and Australia. South Korea is looking to buy 50K food quality (non-GMO) soybeans in an international tender. Thailand is believed to have purchased up to 63K Mt of animal feed wheat and is looking to buy up to 120K MT.
Malaysian palm oil futures were up 65 ringgit overnight, at 4921.
Daily Trading Limits: Corn $0.30 (expanded $0.45); Soybeans $0.85 (expanded $1.30); Minneapolis Wheat $0.60 (expanded $0.90); KC Wheat $0.40 (expanded $0.60); Chicago Wheat $0.40 (expanded $0.60)
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