Chicago (US), December 11: CBOT agricultural futures closed mixed last week as the U.S. central bank looks to raise the bank lending rate to its highest level in a decade this week.
The battle against inflation will be difficult and long. Though the peak inflation has been found, a surging wage growth underpins the natural rate of inflation between 3-4 percent. Chicago-based research company AgResource holds that the slowing of demand will cause a drag on CBOT rallies.
CBOT corn futures extended recent correction slightly amid a weak export demand and collapsing cash ethanol prices. The catalyst needed to spark new buying is not yet present as Brazilian corn is still buyable and as U.S. ethanol production tends to peak seasonally in November/December.
The duration of heat and dryness in Argentina needs close monitoring. South American weather is priority number one with respect to near-term price discovery.
AgResource suggests selling supply-based rallies. Sizable yield loss in Brazil next spring will be needed to boost U.S. exports for any length of time. Corn is in a downtrend.
Wheat futures in the United States and Europe fell to new lows and a meaningful pushback against the recent bearish trend was absent. AgResource views the market as fundamentally undervalued. Russian logistics will be exposed to winter conditions moving forward. U.S. wheat is competitive with Argentine wheat.
Even assuming acreage expansion and normal weather, major exporter stocks/use will contract in 2023-2024, which is mostly due to reduced seeding in the Black Sea. And massive yields in Australia are unlikely to be repeated as La Nina ends. Wheat market is oversold, any bullish input would trigger considerable short covering from funds.
CBOT soybeans soared to a new post-harvest high. Blast furnace heat in Argentina last week along with generally arid forecasts into Dec. 22-23 is cited. AgResource notes that more soybean than corn has been exposed to drought in Argentina. Market focus will be centered on whether Argentina's climate will change in the coming weeks.
AgResource maintains a long-term bearish outlook for soybeans, as weather in Brazil will be nearly ideal in the next two weeks. Odds are high that U.S. and global inventories will increase in both the 2022-2023 and 2023-2024 crop years. The market beyond winter will be defined by competition for demand rather than the need to ration supply. AgResource suggests selling rallies as the bearish trends may resume when Argentine weather normalizes.
Source: Xinhua
