Soybeans continue to climb, hitting fresh highs

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Soybeans continue to climb, hitting fresh highs

Soybeans were sharply higher on commercial and technical buying, notching another round of new highs during the session. Production estimates for South America are shrinking, while the trade is trying to buy more U.S. acres ahead of U.S. planting. China bought 132,000 tons of new crop U.S. soybeans. The recent uptick in sales of U.S. soybeans is likely at least somewhat linked to the declining expectations for South American soybean production. Those declining production figures and slow farmer selling have pushed spot prices to record levels at a couple of key ports in Brazil. Soybean meal and oil were higher, with new highs for meal, on those declining expectations for Argentina, Brazil, and Paraguay, along with general commercial support. After the close, the USDA said more soybeans were crushed during December than any other month on record at 198 million bushels, a rise of 7 million from November and 5 million from December 2020. Crush margins are strong and the industry expects at least some uptick in U.S. soybean product export demand, especially for soybean oil because of strong global vegetable oil demand.

Corn was higher on commercial and technical buying. Corn is also watching conditions in Argentina and southern Brazil, with more hot, dry weather in the forecast. The trade is also monitoring the soybean harvest pace in central and northern Brazil, with that nation’s critical second corn crop planted after soybeans are harvested. StoneX now sees Brazil’s first corn crop at 25.3 million tons, compared to the previous estimate of 26.8 million. Strategie Grains projects 2022/23 global corn production at 1.167 billion tons, which would be up 1% from 2021/22. Mexico purchased 110,000 tons of old crop U.S. corn. Ethanol futures were unchanged. The U.S. Energy Information Administration’s weekly ethanol production and supply numbers are out Wednesday. The USDA says corn for ethanol use during December 2021 485.816 million bushels, up 4% on the month and 13% on the year, with DDGS production of 2,073,188 tons, an increase of 4% from the previous month and 16% from the year before.

The wheat complex was higher on commercial and technical buying. Contracts were oversold and while there is some precipitation in the forecast for the southern Plains, it’s not enough to break the drought. That will continue to be an issue for winter wheat through dormancy and will likely have an impact on spring wheat acreage in the U.S. and Canada. Strategie Grains estimates 2022/23 world wheat production at 762 million tons, which would be 3% above the 2021/22 total. Export demand remains slow but could pick up steam, depending on what happens between Russia and Ukraine. Not a lot of major developments in the Black Sea region this week, but any negative shift in rhetoric or a move towards conflict would disrupt shipping out of the Black Sea and impact exports for two of the world’s biggest sellers of wheat. Much of that vacuum would be filled by the European Union, but it could also help the pace of U.S. sales. The USDA says that 234.761 million bushels of wheat were used for flour production during the third quarter of 2021, up from both Q2 2021 and Q3 2020. Egypt’s government is reportedly looking into replacing its bread subsidy with cash payments to the poor in response to the recent global strength in wheat prices. Egypt is the world’s largest importer of wheat.