CHICAGO, Jan. 2 (Xinhua) -- Chicago Board of Trade (CBOT) agricultural futures closed lower in the past week as the U.S. dollar continued to rally as the Federal Reserve became hawkish on its future interest rate policy, Chicago-based research company AgResource noted.
AgResource calls for choppiness in the weeks ahead amid a bullish technical outlook.
Corn futures ended steady to slightly lower amid modest profit taking. Spotty showers impacted the drier regions of Mato Grosso do Sul and Parana at mid-week while March CBOT touched overbought technical levels.
South American drought concern has been centered on southern Brazil, where summer production has already been trimmed by 4-5 million metric tons relative to initial CONAB estimates. This crop loss alone mandates rationing in Brazil. Weather focus shifts to Argentina in the next 30 days.
AgResource's message is combined production loss in Argentina, Paraguay and Brazil reaches 14-18 million metric tons without a pattern change by mid-January. Exporter stocks/use will be record low and importer feed demand will be funneled to the United States amid low South American carryover supplies and lofty feed wheat prices.
Normal seasonal price lows occurred in early September/October with the damage assessed to the Gulf from Hurricane Ida. Further price rise will depend on South American weather and the coming U.S. Department of Agriculture (USDA) January Crop report. It is supply that will direct U.S. and world corn prices in early 2022.
U.S. wheat futures ended sharply lower. Wheat markets worldwide have lacked input as cash traders take an extended holiday break. Additionally, large Southern Hemisphere supplies on the margin are reducing Northern Hemisphere exporters' supply burden.
Record Southern Hemisphere is noted, but AgResource's long-term thesis centers on historically tight exporter stocks/use balances and that Russia will not export 36 million metric tons in 2021-2022. Exporter stocks/use will tighten further in 2022-2023 unless record yields are recorded in all Northern Hemisphere exporting countries next July/August. World wheat consumption/trade will rise another 5-7 million metric tons in 2022-2023 following this year's 10-million-metric-ton drop in exporter stock.
A 15-million-metric-ton new crop production gain is needed. Such a production gain is unlikely amid reduced winter seedings in Russia and as drought expansion is ongoing across the U.S. Plains, with extreme drought now in place in key areas of Texas, Oklahoma, Colorado, Western Kansas and Montana.
CBOT wheat's monthly chart shows a longer-term bullish trend, but with extreme market volatility ahead through mid-2022.
Soybean futures were higher in early week trade and then gave back gains ahead of the weekend. Initial support came from worsening crop conditions in Southern Brazil and fears that crop losses could potentially exceed 10 million metric tons if significant rainfall does not soon develop. Late week selling was related to end of year profit taking as most traders planned for a three-day holiday weekend.
Brazilian crop losses could produce stronger late year U.S. soybean exports. An additional 100-150 million bushels of summer exports would quickly deplete U.S. soybean stocks. This places increased importance on the January Crop Report and leaves little room for any decline in the U.S. yield or production.
It is all about South American weather and crop assessments. Enditem