Grain Markets and Other Stuff

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ADM's nutrition unit aided executives in earning over $70 million, but now faces investigation for accounting practices, despite contributing less than 10% to the company's revenue. Executive bonuses were heavily influenced by the nutrition sector, with stock bonuses tied to its growth between 2020 and 2021. The top seven executives received shares valued at nearly $72 million.

The world's first ethanol-to-sustainable aviation fuel (SAF) production facility, Freedom Pines Fuels, opened in Georgia, producing 10 million gallons of SAF and renewable diesel annually. The Biden administration aims to produce 3 billion gallons of SAF annually by 2030. The technology used at the facility will reduce greenhouse gas emissions by more than 70%, providing new economic opportunities for American agricultural producers. 🌱✈️🛢️

Glencore and Viterra filed a lawsuit against Louis Dreyfus, alleging the artificial inflation and manipulation of cotton prices in 2011, causing over $200 million in losses. Cotton prices tripled between July 2010 and March 2011, reaching a record high of $2.20 per pound.

US ethanol production fell by 22% last week, with stocks at 25.8 million barrels. Implied gasoline demand was down 4.8%, and on average over the last four weeks, implied US gasoline demand is slightly lower compared to the same period last year. 📉🛢️🇺🇸

Farmers in France continued protests against government regulations, cheap imports, and rising costs. Demonstrations involved road blockades, fires, and manure spraying on government buildings. Farmers demanded higher prices, citing threats to livelihoods due to falling prices after a period of high inflation. The French government is expected to propose solutions soon. 🚜🔥🇫🇷

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China is taking steps to reduce its hog herd as part of efforts to regulate the industry and stabilize prices. 🐖 The country's agriculture ministry is guiding farmers to sell their hogs, which would lead to a decrease in herd numbers. China's hog herd had expanded rapidly in recent years, resulting in oversupply and declining prices. 📉 Hog slaughter reached a nine-year high at the end of last year as producers tried to address the oversupply issue. 🐷 The reduction in the hog herd is expected to continue over the next one to two months. ⏳

Additionally, China is looking to enhance its food security and reduce reliance on imports by increasing oilseed production, particularly soybeans. 🌱 The plan involves boosting soybean yields by planting more genetically modified (GMO) soybean varieties and reducing the soybean meal ratio in animal feed. 🌾 This move aligns with China's goal to reduce imports and strengthen domestic production of key agricultural commodities. 🌍

In the United States, farmers are making slight adjustments to their planting intentions for the upcoming season. 🌽 According to a survey, corn plantings are expected to decrease by 2% to 92.8 million acres, while soybean acres are projected to increase by 1.6% to 85 million acres. 🚜 This would make it the fifth-largest soybean crop ever planted in the US. Additionally, winter wheat acres are forecasted to increase by 1.5% to 37.3 million acres, while spring wheat acres are anticipated to decline significantly by 19% to 9.1 million acres. 🌾

However, in Brazil, soybean production estimates continue to decline, with projections from various sources indicating lower crop expectations than previously anticipated. 🇧🇷 Private group AgRural's estimate is at 150.1 million tons, while Dr. Michael Cordonnier's estimate remains unchanged at 149 million tons for soybeans. 🌱 These estimates are notably lower than the USDA and Conab's projections, which are higher at 157 million tons and 155 million tons, respectively. 📉

Lastly, severe winter weather in North Dakota has disrupted oil production, causing significant losses in oil output. ❄️ The frigid temperatures have impacted one of the largest natural gas and oil resources in the US, with estimates suggesting the loss of around 700,000 barrels of oil per day. It may take weeks or even months for production to return to normal, and the extreme cold has led to numerous incidents involving leaks or equipment failures. ⛽🌨️

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Last week, California regulators granted approval for the operation of a massive renewable diesel plant by Phillips 66 in Rodeo, CA. This facility is set to become the world's largest renewable fuel production facility with a capacity of 50,000 barrels per day. It represents a significant step in the transition towards renewable energy and lower-carbon solutions. The plant's approval came after facing environmental challenges, and its operation is expected to contribute to reduced greenhouse gas emissions by 50%, as it will no longer process crude oil. This move aligns with the growing focus on sustainable and renewable energy sources. 🌱🛢️🌍

On another note, shares of Archer Daniels Midland (ADM) experienced a sharp decline, falling by 22% on Monday. This significant drop was attributed to ADM's CFO being placed on administrative leave while the company's accounting practices are under investigation. ADM, which has a history of legal issues, is also currently facing a lawsuit related to price manipulation in its ethanol business. These challenges have had a notable impact on the company's stock value. 💼📉💰

Meanwhile, Brazil's soybean harvest is progressing ahead of last year's pace, with 6% of the crop harvested as of last week. This is notably higher than the 1.8% harvested at the same time last year. Despite this progress, estimates for Brazil's soybean crop have been adjusted lower, reflecting the impact of weather conditions on the crop. 🌱🇧🇷🚜

In terms of soybean shipments from the US, there was a decline reported last week. This decrease in shipments can be influenced by various factors, including global market dynamics and demand. Additionally, consumer sentiment in the US has been on the rise since November, driven by a strong labor market and expectations of decreasing inflation. However, economists anticipate economic growth to slow down in the coming year due to potential Fed rate hikes and other factors. 🇺🇸📈💼

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Fund traders have established historically large net short positions across the grain complex, particularly in corn and soybeans. According to the latest Commitment of Traders (COT) data from the CFTC, here's a summary of their positions:

Corn: Fund traders were net sellers of 34,000 contracts of corn during the week ending January 16. This has resulted in a net short position of 272,000 contracts in corn, which is the largest seen since mid-2020.

Soybeans: In the same week, fund traders sold 46,000 contracts of soybeans, leading to a net short position of 79,000 contracts. This is the largest net short position in soybeans since early 2020.

SRW Wheat: Fund traders were also net sellers of 15,000 contracts of SRW wheat during the week.

These significant net short positions suggest that fund traders are taking bearish positions, anticipating lower prices in the grain complex. This could be influenced by various factors, including market sentiment, supply and demand dynamics, and external factors such as weather conditions. It's important to keep an eye on how these positions evolve, as they can impact price movements in the grain markets. 🌾📊📉

Additionally, it's worth noting that the Brazilian soybean harvest is progressing, with 5.1% of the crop harvested so far. Safras is projecting a slightly lower soybean crop for Brazil compared to some other estimates. On the trade front, there have been significant corn export sales and a flash sale of soybeans to China reported by USDA. These developments are noteworthy for the grain markets. 🌽🌱🚢

In the cattle market, the Cattle on Feed report was viewed as friendly, with marketings performing well and placements lower. This had a positive impact on the cattle market. Meanwhile, the overall stock market experienced a rally, with technology stocks leading the way to new highs. 🐄📈💹

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Futures Rebound After Hitting Lows: 📉🌾 Corn, soybean, and HRW wheat futures hit fresh life-of-contract lows during a recent trading session but managed to close higher. While these were not considered "key" reversals, the fact that they closed higher is seen as a positive sign.

Declining Brazilian Crop Estimates: 🇧🇷🌱 Agroconsult has launched its Brazilian soybean crop tour, and its initial estimate for the crop stands at 153.8 million tons, down from its December estimate of 158.8 million tons. This reduction is attributed to adverse weather conditions in various Brazilian states, including hot and dry weather in Mato Grosso and excessive rainfall in the southern regions. Additionally, Brazilian farmers had to replant soybean acres due to extreme weather, with an estimated 7.2 million acres replanted, accounting for 6.4% of Brazil's total soybean acres.

Black Sea Grain Deal Negotiations: 🌾🌍 Negotiations are underway to potentially revive the Black Sea grain deal, with a focus on determining a structure for international partners to support Ukraine. The Black Sea grain deal expired in July 2023 when Russia withdrew from the agreement. Ukraine subsequently established an alternative shipping corridor along its western Black Sea coast, facilitating the export of 16.5 million tons of cargo, primarily food products.

Reduction in Panama Canal Traffic: 🚢🌊 Authorities in Panama have announced a 36% reduction in ship crossings through the Panama Canal until the end of April. This reduction is attributed to concerns about the water levels in the canal, which are critical for both its operations and human consumption. It is expected to cost Panama between $500 million and $700 million this year, and more than half of the country's population relies on the same lakes that fill the canal.

US Ethanol Production Decline: 🇺🇸🌽 US ethanol production saw a marginal decline last week, with weekly output at 1.5 million barrels. However, this figure represents a 12% increase compared to the same week last year. Ethanol stocks increased to 25.7 million barrels, up 8% from the same week last year. Implied gasoline demand remained strong, with a 9.4% increase compared to the same week last year.

Drought Monitor Data: 🌧️🌡️ The USDA released its weekly drought monitor data, showing significant improvement in drought conditions across parts of the Corn Belt. Precipitation in these areas was more than 200% of the weekly average, leading to notable drought improvement in regions including southeast Iowa, southeast Missouri, southern Illinois, Indiana, western Ohio, and Kentucky. However, the High Plains experienced winter storms and cold temperatures, resulting in little to no change in drought conditions.

These developments underscore the dynamics of commodity futures, Brazilian crop challenges, international negotiations, water resource concerns, ethanol production, and drought conditions in key agricultural regions. 📈🌎🚢

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China's Soybean Demand Decline: 🇨🇳🌱 China's soybean imports are expected to decline by 20% in the first quarter of this year, totaling about 18.5 million tons. This reduction in demand is primarily driven by a decrease in hog numbers due to factors such as poor prices, high input costs, and outbreaks of African swine fever. At least half of these imports are expected to come from the United States. China imported a record 99.4 million metric tons of soybeans in 2023, marking an 11% increase from the previous year. The decrease in soybean demand has been influenced by increased soybean inventories.

China's Population Decline: 🇨🇳👶 China's population is on a downward trend, with around 9 million births recorded last year, which is over half a million fewer than the previous year. The total population in China decreased by 2.08 million in 2023, more than double the decline seen in 2022. Various measures, including matchmaking and cash incentives, have been employed by local governments to encourage more births, but economic uncertainty has been a significant factor contributing to the declining birth rate. In 2023, China's GDP increased by 5.2%, slightly slower than the pre-pandemic levels of over 6%.

Challenges in China's Economy: 📉🇨🇳 China's economy faced challenges in the fourth quarter of 2023, with GDP growth at 5.2%, slightly below expectations of 5.3%. For the full year, GDP increased by 5.2%, a rise from 3% in 2022 but still relatively low. The property sector saw a significant decline in investment, down by 9.6% in 2023. China's unemployment rate among people aged 16 to 24 improved to 14.9% in December, compared to 21.3% in June, the last reported figures. To maintain economic stability and growth, China may need to consider implementing substantial stimulus measures, as GDP growth is forecasted to slow to 4.6% this year.

Challenges in Mato Grosso's Soybean Yields: 🌱🇧🇷 Mato Grosso, a key soybean-producing region in Brazil, is facing challenges in its soybean yields, which are projected to be 15% below the 15-year historical trend. This decline in yields is significant and has not been seen since 2016 when yields fell 13% below trend. As a result, EarthDaily Agro forecasts Brazil's soybean crop at 149.2 million tons, notably lower than projections from Conab (155 million tons) and the USDA (157 million tons).

Strong US Retail Sales: 🛍️📊 US retail sales showed strength in December, growing by 0.6%, surpassing economists' expectations of a 0.4% increase. This growth follows a 0.3% gain in November. Excluding auto and gas sales, retail sales increased by 4.9% over the course of 2023. The robust performance of retail sales reflects a healthy economy, and experts believe that the economy is strong enough that a reduction in interest rates is not necessary to sustain it.

These developments highlight various economic and agricultural dynamics, from shifts in demand for soybeans in China to demographic trends and economic challenges in both China and Brazil, as well as the resilience of the US retail sector. 🌍📈🌽

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Record Soybean Crush in December: 🌱🏭 The National Oilseed Processors Association (NOPA) reported that its members processed 195.328 million bushels of soybeans in December, marking the largest soybean crush for any month on record. This December soybean crush was up 3.3% compared to November and 10% higher than the same month in the previous year. End-of-month soybean oil stocks also increased, reaching 1.360 billion pounds, the highest since September. While stocks rose by 12.1% compared to November, they were down 24% compared to December 2022.

Increased Soybean Shipments: 🚢🌱 US soybean shipments saw an increase last week, with 1.3 million metric tons (46 million bushels) of soybeans inspected for export during the week ending January 11. This represents a 22% increase compared to the previous week but a 42% decrease compared to the same week last year. Corn shipments, on the other hand, declined by 20% compared to the prior week, totaling 875,621 metric tons (34 million bushels), while wheat shipments were reported at 234,205 metric tons (9 million bushels), down 53% from the previous week and 28% lower than the same week last year.

USDA Flash Sale of Corn to Mexico: 🌽🇲🇽 US exporters made a flash sale of corn to Mexico, selling 126,700 metric tons (5 million bushels) of corn for delivery during the current marketing year. This marks the second flash sale of corn to Mexico in the past week, totaling 301,700 metric tons (12 million bushels).

Lowered Brazilian Soybean Estimates: 🇧🇷🌱 Aprosoja Brasil, a Brazilian farmer lobbying group, has lowered its forecast for Brazil's soybean crop to 135 million tons due to hot and dry weather conditions, as well as heavy rains disrupting harvest. This estimate is significantly lower than Conab's projection of 155 million tons and the USDA's estimate of 157 million tons. The adjustment in crop prediction has impacted soybean futures.

Strong Forecasts for Argentina: 🇦🇷🌽🌱 Argentina's soybean and corn crops are expected to yield exceptional results due to ample rainfall. The Rosario grain exchange anticipates that these forecasts will continue to rise. Currently, the exchange projects Argentina's corn crop at 59 million tons, set to be a record-high, and its soybean crop at 52 million tons, the highest since 2019.

Iowa Farmers' Support for Trump: 🗳️🚜 Farmer support in Iowa played a pivotal role in Donald Trump's win in the Republican nomination on Monday. Despite concerns about the potential re-ignition of a trade war with China, farmers in Iowa continue to back Trump. A recent poll indicated that 39% of farmers across the nation support Trump, highlighting the continued loyalty of farmers to the former president, who provided significant financial assistance to farmers during his time in office.

These developments reflect the dynamic nature of the agricultural industry, with factors like processing records, export changes, and political support influencing the market. 🌾📈🌎

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US Corn and Soybean Crop Estimates: 🌽🌱 The USDA increased its estimates for the 2023 US corn and soybean crops. The corn production estimate rose to a record 15.342 billion bushels, with a record yield of 177.3 bushels per acre. The soybean crop estimate increased to 4.165 billion bushels, with a national yield of 50.6 bushels per acre. These increases were unexpected and led to sharp declines in grain and oilseed futures. 😲📈

US Winter Wheat Seedings: 🌾❄️ Winter wheat seedings in the US were below expectations, with all winter wheat seedings pegged at 34.4 million acres compared to the average pre-report guess of 35.8 million acres. Hard Red Winter (HRW) seedings were lower than trade expectations at 24.0 million acres, and Soft Red Winter (SRW) seedings were also below expectations at 6.86 million acres. 📉🚜

Money Managers' Positions: 💼💰 Large money managers increased their net short position in the corn market, with the net short position reaching 237,000 contracts, the largest since mid-2020. Funds were also net sellers of 24,000 contracts of soybeans. 📊🌽

Brazilian Soybean Crop Estimates: 🇧🇷🌱 Brazilian soybean crop estimates continue to decline, with AgRural projecting a crop of 150.1 million tons, down from its December projection of 159.1 million tons. The reduction is attributed to high temperatures and insufficient rainfall. ☀️🌧️

Shipping Rates Surge: 🚢💥 Container shipping rates for major global trade routes surged due to unrest in the Red Sea. US and British airstrikes on Yemen in response to Houthi attacks on Red Sea shipping contributed to the spike in rates. Shipping companies expect rates to remain high for at least the next two months. 🌊📈

Ukraine Peace Plan Meeting: 🇺🇦🕊️ A meeting in Davos focused on Ukraine's peace plan yielded no clear results. Ukraine's 10-point peace blueprint aims for the full withdrawal of Russian troops. However, the meeting ended without a clear path forward or future meetings scheduled. 🤝🗳️

Wholesale Price Declines: 💼💲 Wholesale prices have declined for three consecutive months, with the December Producer Price Index (PPI) falling 0.1% compared to the previous month. This decline is partly attributed to a 12.4% drop in the cost of diesel fuel. While annual PPI increased by 1% in December, lower wholesale prices may lead to expectations of continued downward inflation trends in the coming year. 📉🛢️💱

These developments highlight the dynamic nature of the agricultural and global economic landscape, with multiple factors influencing commodity markets, trade, and geopolitical tensions. 🌍🌾🌐

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Today, the USDA is set to release several important reports at 11:00 AM CST, which include the quarterly Grain Stocks report, the monthly Crop Production/WASDE report, and the Winter Wheat Seedings report. The January report is known to be influential in the market and has previously been associated with trend changes. It includes the "final" 2023 US corn and soybean production numbers, which will be closely watched by traders, along with any updates on South American production estimates. 🌾📊

China is taking steps to increase its corn stockpiles by purchasing corn from northeastern China and other key producing regions. This move is aimed at bolstering its reserves. USDA data has estimated China's 2023 corn crop at 277 million tons, which would be the second-largest on record, coming close to the all-time high of 277.2 million tons in 2022. 🌽🇨🇳

Argentina's corn crop is expected to reach a record size, with projections from the Rosario grain exchange estimating a harvest of 59 million tons, an increase of 3 million tons from previous estimates. This boost is attributed to ample rainfall. The exchange has also raised its estimate for Argentina's soybean crop to 52 million tons, up from the earlier forecast of 50 million tons. 🌽🌱🇦🇷

US corn export sales have shown an increase in the past week, with net sales of 487,600 metric tons (19 million bushels). This represents a 33% increase from the previous week. However, soybean sales fell below expectations at 280,400 metric tons (10 million bushels), albeit showing a 39% increase from the previous week. Wheat sales were also below expectations, totaling 128,100 metric tons (5 million bushels). China was the largest buyer of wheat for the week. 🌽🌾🚢

A recent flash sale of corn to Mexico was reported by the USDA, with 175,000 metric tons (7 million bushels) sold for delivery during the current marketing year. This marks the first flash sale since December 19th and the first flash sale of US corn since December 8th. 🌽🇲🇽🚢

Inflation has risen more than expected, with the December Consumer Price Index (CPI) showing a 0.3% increase compared to the previous month, slightly surpassing the anticipated 0.2%. On a yearly basis, CPI increased by 3.4% in December, exceeding economists' projections of 3.2%. Shelter costs played a significant role in this increase, with a monthly rise of 0.5% and an annual increase of 6.2%. Despite this, the markets are still projecting a 69% likelihood of the Federal Reserve starting to cut rates in March. The December Producer Price Index (PPI) report, expected later today, will provide further insights. 💹📈💰

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Conab, Brazil's equivalent to the USDA, has reduced its forecasts for both Brazil's soybean and corn crops. The soybean estimate has been lowered by 4.2% to 155.3 million tons, but despite this reduction, Brazil is still on track to achieve a record soybean crop this season. Additionally, Brazil is expected to maintain its position as the world's leading soybean exporter, with an estimated export volume of 98.4 million tons. Conab has also downgraded its projection for Brazil's corn crop by nearly 11%, estimating it at 117.6 million tons. Corn exports are anticipated to decline to 35 million tons, down from 56 million tons in the previous year. 🌱🌽🇧🇷

Winter Storm Gerri is set to bring more winter weather to the Plains and Midwest. This storm is forecast to bring heavy snowfall and gusty winds to various regions. It is expected to drop snow across the Central Plains, moving eastward into southern Wisconsin, northern Illinois, and northern Indiana. The Midwest is likely to experience persistent snowfall and gusty winds throughout Friday. Some areas, particularly in northern Illinois and Michigan, could see more than 6 inches of snow accumulation. ❄️🌬️

US ethanol production increased during the past week, with a weekly output of 1.06 million barrels, marking a 1.2% increase compared to the previous week and a substantial 26% increase year-over-year. Ethanol stocks reached 24.4 million barrels, showing a 3.4% rise compared to the previous week but a slight decrease compared to the same period last year. Implied gasoline demand also saw positive growth, rising by 4.7% compared to the previous week and by 11% year-over-year. Over the last four weeks, implied US gasoline demand has increased by 1.2% compared to the same period in the previous year. 🌽🛢️🚗

Economists are anticipating an increase in inflation for the month of December. The expected rise is estimated at 0.2% compared to the previous month and a year-over-year increase of 3.2%. This potential uptick in inflation could have implications for the Federal Reserve's plans regarding interest rates. While the Fed had previously indicated three quarter-percentage-point rate cuts by the end of the year, the markets are anticipating a total of six rate cuts. Fed officials have suggested that rate hikes may be finished, but the possibility of rate cuts remains uncertain. The December CPI report, which could provide further insight, is set to be released today. 💹🏦💲

The US Securities and Exchange Commission (SEC) has approved 11 spot-bitcoin exchange-traded funds (ETFs). This decision allows everyday traders to buy and sell bitcoin through these ETFs without needing to own the cryptocurrency directly. The new ETFs began trading on the same day they were approved. Bitcoin settled just below $46,000 on the day of the announcement, following a substantial increase in its value since January 2023, when it was approximately $17,000 lower. Some critics argue that this approval could pose challenges for the SEC in terms of investor protection. 📈💰🪙