As the U.S. dollar fell to four-month lows, the wheat complex was up by double-digits, but Ettner said wheat was recovering from sharp losses. Nevertheless, he said that weaker greenback was leading to “a little bit of light macro buying across everything.”

While a large portion of the U.S. Corn Belt was struck with heavy rains and strong winds, Ettner said the market remained focused on the idea of ‘rain makes grain.’ He noted there were very few pictures online or in the news of any great amount damage from recent storms.

“I really don’t think the damage is widespread enough to make a market impact,” Ettner commented.

The broker said the market going forward will pay attention to further movements in the U.S. dollar, as the upcoming weather is to be drier with temperatures slightly below normal.

“The 10-day outlook doesn’t have anything concerning,” Ettner said.

Meanwhile, the spec funds were back building their huge short positions in soybeans and corn. The commitment of traders report from the U.S. Commodity Futures Trading Commission cited managed money, as of July 9, added 29,000 soybean contracts to their short positions. At 162,800 contracts, that brought the short position to its highest level in five years. Corn saw an increase of 10,000 contracts, that increased the short to 356,400 contracts.

Those for wheat saw Chicago short at 68,700 contracts, with Kansas City nearly at 41,000, and Minneapolis was around 23,700.

“We’re always waiting to see as to when [the spec funds] are going to start covering that,” Ettner noted, explaining the specs most often build their shorts over five to six weeks before they start to cover.

“If that’s going to happen again, then we are only in week one,” Ettner said, but stressed that this is something not to count on.

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“Yields are the big driver of this whole thing,” stated MarketsFarm analyst Bruce Burnett.

The initial projections from the USDA were based on economic models, past data, weather patterns, and essentially the department’s best estimate. The USDA is scheduled to issue its farmer survey-based projections for 2024/25 at the end of March.

For soybeans, the USDA forecast the national yield to reach 52 bushels per acre in 2024/25, up from the current year’s 50.6. Planted acres were set to rise to 87.5 million compared to 83.6 million in 2023/24, with harvested acres rising to 86.6 million from 82.4 million. That would boost production to 4.505 billion bushels from 4.165 billion.

Total domestic use for U.S. soybeans was projected to bump up to 2.525 billion bushels in 2024/25 from this year’s 2.424 billion. Exports as well are to improve to 1.875 billion bushels from 1.720 billion. That’s to see ending stocks jump to 435 million bushels from 315 million in 2023/24.

As for U.S. corn, the USDA forecast yields to rise to 181 bu./ac. in 2024/25 from 177.3. Planted acres were dropped to 91.0 million from this year’s 94.6 million. Harvest acres fell to 83.1 million from 86.5 million. With that reduced area, production was forecast to slip to 15.040 billion bushels from 2023/24’s 15.342 billion.

At 12.555 billion bushels, total domestic use was nudged up from this year’s 12.455 billion. Exports were little changed with 2.150 billion bushels in 2024/25 from 2.100 billion. This is projected to push up ending stocks to 2.532 billion bushels from 2.172 billion.

U.S. wheat was set to see reduced planted acres in 2024/25 at 47.0 million versus 49.6 million. However, harvested acres are expected to increase to 38.4 million from 37.3 million. Yields were set at 49.5 bu./ac. compared to this year’s 48.6.

There’s to be a slight decrease in wheat’s total domestic use at 1.134 million bushels, from the 1.144 billion in 2023/24. Exports for the coming year were pegged at 775 million bushels versus 725 million. The carryout is to grow to 769 million bushels from 658 million.

“That’s pretty big yields in terms of corn and beans,” commented Burnett, noting the overall effect of the Outlook Forum’s report was bearish.

— Glen Hallick reports for MarketsFarm from Winnipeg. 

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“Corn acres are to be down a couple of million from last year and soybean acres are to be up, with larger stocks [for both] as well,” Strommen said.

He pegged U.S. corn acres for 2024/25 at 91 million to 92 million, with soybeans around 87 million. He noted that the planted wheat area was likely to be lower as well at about 40 million acres.

Ending stocks are expected to increase for the most part during the coming crop year. Strommen placed those for corn at about 2.30 billion to 2.40 billion bushels, higher than the USDA’s estimate of 2.17 billion for the 2023/24 crop. For soybeans, the carryover was projected to be 350 million to 400 million bushels compared to this year’s 315 million. The carryout for wheat was projected to go either way at 600 million to 700 million bushels, compared to the 658 million for 2023/24.

Strommen said prices for the three commodities might not continue to grind lower, pointing out “we’re at contract lows pretty early in the season.”

“We’ll have some acre competition. Usually we have some kind of a spring rally,” he continued, noting the U.S. dollar was at or near three month highs which was a major factor in driving prices lower.

Another major factor Strommen pointed to were the very large short positions in corn and wheat, and soybeans to a lesser extent, held by the speculative funds.

“They need some positive news to their minds and reverse their trend to the top side,” he stated.

— Glen Hallick reports for MarketsFarm from Winnipeg. 

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Before news of the accounting issues broke and sent ADM shares tumbling 24 per cent on Monday, the biggest fall since 1929, according to the Center for Research in Security Prices, the company had been forecasting the Nutrition unit it has been expanding for much of the past decade would return to profit growth in 2024.

The recovery in the business segment that generated about 11 per cent of profit for ADM in 2022 would have helped cushion the blow from thinning margins in soybean crushing and ethanol, and from lower crop prices as global supplies of corn and soy rise, analysts said.

“It is now uncertain whether Nutrition operating profits will return to (year-over-year) growth in 2024,” said Arun Sundaram, senior equity analyst at CFRA Research.

“We expect the investigation and uncertain outlook to cast a shadow over ADM’s shares, as the Nutrition segment was once the fastest growing and most profitable segment,” he said.

CFRA cut its 12-month price target for ADM to $61 a share from $76 previously, one of several analysts that downgraded ADM share targets Monday.

Shares were up 1.6 per cent on Tuesday after sinking to a nearly three-year low the previous day.

ADM and its crop processing and trading rivals cashed in on historically wide soy crushing margins over the past two years due to strong demand for vegetable oil to make biofuel, and reduced soy product supplies from drought-hit Argentina. Those margins are now thinning due to expanded U.S. processing capacity and a projected crop rebound in Argentina.

Meanwhile, margins for producing ethanol biofuel, a cornerstone of ADM’s portfolio, have narrowed and a global grain glut has curbed crop exports from the United States, home to the bulk of ADM’s operations.

Rivals including Bunge BG.N have more of an export base in Argentina and Brazil.

Lowered outlook

ADM on Sunday put its CFO Vikram Luthar on administrative leave and postponed the upcoming release of fourth-quarter results and its annual 10-K filing with the U.S. Securities and Exchange Commission (SEC).

The investigation started in response to a voluntary document request by the SEC. ADM said it was cooperating with the regulator. An SEC spokesperson declined to comment about the voluntary document request and if the agency is investigating ADM.

The company also cut its adjusted earnings forecast to “above $6.90” per share for 2023 from an “excess of $7 a share” view earlier, and withdrew all of its forward-looking outlooks for Nutrition.

ADM has invested billions of dollars over the past decade in Nutrition, the smallest yet fastest growing of its three main business units, starting with its $3 billion acquisition of WILD Flavors in 2014. In that time, annual adjusted earnings per share swelled from $2 to $3 a share to a record $7.85 in 2022.

ADM executives frequently tout the segment as the future of the company, aiming to capitalize on healthier eating trends and rising consumer demand for natural ingredients and flavorings.

The unit also provided more earnings stability as company results were tied less directly to the highly cyclical commodities market.

It was unclear if two recent Nutrition unit acquisitions due to close early this year would be impacted. ADM announced the purchase of Revela Foods, a Wisconsin-based developer and manufacturer of dairy flavor ingredients, and UK-based flavor and ingredient firm FDL late last year. Analysts also struggled to gauge future returns for the Nutrition segment.

“If we can’t rely on the financial statements, it’s hard to judge the return that they are getting for all these acquisitions if there is going to be a massive restate of profits that affects multiple years,” said Seth Goldstein, strategist with Morningstar.

–Additional reporting for Reuters by David Gaffen and Tom Polansek.

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The Food and Agriculture Organization’s (FAO) price index, which tracks the most globally traded food commodities, averaged 118.5 points in December, down 1.5 per cent from November and 10.1 per cent below December 2022 levels.

For 2023 as a whole, the index averaged 13.7 per cent below year earlier levels, with only sugar prices higher over the period. The FAO’s sugar price index did, however, decline 16.6 per cent in December from November.

This was “mainly driven by the strong pace of production in Brazil, along with reduced use of sugarcane for ethanol production in India,” the UN agency said in a statement.

The FAO’s cereal price index rose 1.5 per cent in December from November, as wheat, maize, rice and barley prices all rose amid hindered shipments from major exporting countries.

For the year as a whole however, cereal prices were 15.4 per cent below their 2022 average as markets are well supplied with the exception of rice.

The largest price falls were in vegetable oils, with the price index slumping 1.4 per cent in December, from November, and a substantial 32.7 per cent drop for the year as a whole.

The FAO’s meat price index dipped 1.0 per cent in December from November and was down 1.8 per cent year-on-year, while the December dairy price index rose 1.6 per cent month-on-month, but was down 16.1 per cent from a year earlier.

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“We forecast commodity prices to rise by an average of 2% in 2024 and fall by 4% in 2025,” HSBC wrote in a note.

HSBC expects China’s growth recovery and ongoing supply constraints will keep commodity prices supported this year.

It said geopolitical risks and expectations of looser monetary policy in the second half of 2024 will add to the upside, while downside risks include the ongoing slowdown in global growth.

Cocoa and iron ore prices surged in 2023, while natural gas and coal prices tumbled, with most agricultural products expected to outperform energy and industrial metals in the New Year amid supply constraints and dry weather.

HSBC projected Brent to average $82.5 per barrel and U.S. Henry Hub natural gas prices to average $3.75 per million British thermal units.

Crude futures lost more than 10 per cent in 2023 during a tumultuous year of trading marked by geopolitical turmoil and concerns about oil output levels of major global producers.

U.S. natural gas futures recorded their biggest percentage fall for the year since 2006, under pressure from record production, ample inventories in storage and relatively mild weather conditions.

HSBC also predicts gold prices will average $1,825 an ounce in 2024, predicting the first rate cut from the Federal Reserve in June 2024.

Gold investors anticipate record high prices this year, when the fundamentals of a dovish pivot in U.S. interest rates, continued geopolitical risk, and central bank buying are expected to support the market.

–Reporting for Reuters by Ashitha Shivaprasad, additional reporting by Deep Vakil in Bengaluru.

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In the federal agency’s report, it increased canola production for 2023/24 from its September estimate by about 900,000 tonnes at 18.3 million, which was the average trade guess ahead of the report.

While the canola number was in line with the average trade guess Klassen also said it surprised many participants. He suggested the trade was now wondering if there is actually more canola out there than what StatCan calculated.

Since the report was issued, the January canola contract dropped C$30.60 per tonne on the Intercontinental Exchange, closing out Dec. 6 at C$649.90. And this was despite 2023/24 canola production being two per cent lower than what came off of the fields last year.

Klassen said major importers of Canadian canola and domestic crushers were backing away from their purchases with both seeing supplies being sufficient enough.

The most recent numbers from the Canadian Grain Commission placed year-to-date canola exports at about 2.03 million tonnes, less than the 2.64 million the same time last year. However, so far through the 2023/24 marketing year domestic usage remained ahead of last year at 3.48 million tonnes versus 3.17 million.

“With the larger crop, the trade is now anticipating we are going to get overwhelmed with deliveries,” Klassen stated.

The CGC reported producer deliveries of canola lagged behind those from last year at 5.59 million tonnes compared to 6.52 million.

“On top of that, you got the spec funds pouring it on,” Klassen said.

The latest numbers from the United States Commodity Futures Trading Commission reported the net managed money short position in canola was at 81,770, with 88,688 short and 6,918 long as of Nov. 28.

Klassen said that the declines in the global vegetable oil market have added to the bearish tone in ICE canola futures.

“You’re not going to see things turn around before the end of the month,” he stated, noting that January and February are traditionally quite bearish for canola as that’s when farmers often bring in more of the oilseed.

— Glen Hallick reports for MarketsFarm from Winnipeg.

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There were gains in Minneapolis spring wheat, while Kansas City and Chicago winter wheat contracts slipped back.

At the beginning of the week there were steep increases for wheat as Russian launched missile and drone attacks on Ukraine’s ports on the Black Sea, but also its ports on the Danube River. By Wednesday those gains had been erased as concerns over the war subsided.

The reduced severity of drought conditions across the Canadian Prairies and the United States Plains provided additional pressure on wheat.

Average Canadian Western Red Spring Wheat (CWRS, 13.5%) wheat prices declined 30 cents to C$5.40 per tonne, according to price quotes from a cross-section of delivery points compiled by PDQ (Price and Data Quotes). Those prices ranged from about C$387.10 per tonne in southeastern Saskatchewan to C$408.00 per tonne in northern Alberta.   

Quoted basis levels varied from location to location and ranged from C$54.90 to C$75.80 per tonne above the futures when using the grain company methodology of quoting the basis as the difference between the U.S. dollar denominated futures and the Canadian dollar cash bids.

When accounting for currency exchange rates by adjusting Canadian prices to United States dollars (C$1=US$0.7575), CWRS bids ranged from US$293.30 to US$309.10 per tonne. That would put the currency adjusted basis levels at about US$23.20 to US$39.00 below the futures.

Looking at it the other way around, if the Minneapolis futures are converted to Canadian dollars, CWRS basis levels across Western Canada ranged from C$17.60 to C$29.50 below the futures.

Average Canada Prairie Red Spring (CPRS, 11.5%) wheat prices lost C$5.70 to C$12.70 per tonne. Bids ranged from C$362.90 per tonne in southeastern Saskatchewan to C$381.20 per tonne in northern Alberta.

Average Canadian Western Amber Durum (CWAD) prices jumped C$42.00 to C$58.90 per tonne, with bids ranging from C$459.20 per tonne in southern Alberta to C$471.90 per tonne in western Manitoba.

The September spring wheat contract in Minneapolis, which most CWRS contracts Canada are based off of, was quoted at US$9.0425 per bushel on July 27, bumping up 2.25 cents on the week.

The Kansas City hard red winter wheat futures, which are now traded in Chicago, are more closely linked to CPRS in Canada. The September Kansas City wheat contract was quoted at US$8.6650 per bushel on July 27, adding 8.25 cents compared to a week ago.

 The September Chicago Board of Trade soft wheat contract settled at US$7.1275 per bushel on July 27, dropping 14.25 cents from the previous week.

The Canadian dollar eased back 0.17 of a cent at 75.75 U.S. cents, which provided some support to Canadian prices. However, during the week, the loonie pushed towards 76 U.S. cents before retreating.

— Glen Hallick reports for MarketsFarm from Winnipeg.

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As of July 18, 2023, the net managed money long position in canola futures came in at 13,004 contracts (37,226 long/24,222 short), a move of about 17,000 contracts from the 3,899-contract net short posted the previous week. The last time the market was showing a net long position was the first week of January 2023.

Open interest in the canola market came in at 209,329 contracts on July 18, which was up by 3,369 from the previous week.

At the Chicago Board of Trade, fund traders were holding a net long of about 95,000 contracts in soybeans which was up by about 11,000 from the previous week. Meanwhile, the managed money short position in corn declined by about 10,000 contracts, to 46,150.

In wheat, the Chicago soft wheat market reported a net short position of about 57,000 contracts. The net long in Kansas City red winter wheat came in at roughly 13,300 contracts. In Minneapolis spring wheat, managed money traders were holding a net long of around 6,500 contracts.

— Phil Franz-Warkentin is an associate editor/analyst with MarketsFarm in Winnipeg.

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“We’re actually at prices where it was in early August,” Ettner said, pointing to something of a back-and-forth shifting in the soyoil/soymeal spread.

“You have people selling the oil and buying the meal, he added, suggesting there’s little need to worry about unless the nearby May soyoil contract were to lose a couple of more cents dropping to 58 U.S. cents/lb.

As for soybeans, Ettner said pressure has been coming from “solid rains in Argentina” during the weekend, with more rain in the country’s 10-day forecast.

As for the soybean crop itself, that much-needed moisture for drought-stricken Argentina arrived in the nick of time.

“The rain is probably not going to able to raise production estimates back up to where they were, but there’s a solid case for not needing to lower them anymore,” he said.

On Wednesday, Oil Watch issued its call on the 2022-23 soybean crop in Argentina, pegging it at only 34 million tonnes. Recent projections from other sources include the Rosario Grain Exchange at 37 million tonnes, Soybean and Corn Advisor at 39 million, the Buenos Aires Grain Exchange at 41 million, and the U.S. Department of Agriculture optimistically at 45.5 million.

As for corn, Ettner said that commodity most often cools after USDA has released its January report and doesn’t follow the South American weather as much as the soybean market does.

“Corn doesn’t have too much to look forward to, in the way of major reports, until the traders start thinking about acreage,” he said.

That has been somewhat different this January, as he pointed to significant volumes in corn trading. Only on Wednesday were the volumes notably lower.

— Glen Hallick reports for MarketsFarm from Winnipeg.

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