We kicked off the day with MBA 30-Year Mortgage Rate, MBA Mortgage Applications, MBA Mortgage Market Index, MBA Mortgage Refinance Index, and MBA Purchase Index at 6:00 A.M., Building Permits Prel, Building Permits MoM Prel, Current Account, Housing Starts, and Housing Starts MoM at 7:30 A.M., EIA Energy Stocks at 9:30 A.M., 17-Week Bill Auction at 10:30 A.M., Fed Interest Rate Decision at 1:00 P.M., Fed Press Conference at 1:30 P.M.,, and Dairy Products Sales at 2:00 P.M.The Fed is expected to make its last cut in a while at ¼ of a point on interest rates. Also on Tuesday, the Federal Reserve reported that US industrial production in November remained stagnant. Production shrank by o.1% from November, marking the 3^rd consecutive month lower. This aligned with other surveys that showed that the US manufacturing industry continues to struggle. Compared to a year ago, industrial production was down 0.90%, marking the 25^th consecutive month that production changed (up or down) by less than 2%. Manufacturing production, which accounts for 80% of industrial production, was down 1% from a year ago to mark the 5^th consecutive month of annualized declines. Capacity Utilization declined 76.8%, the lowest since April 2021 and 2% below the long-term average. At the same time, the Census Bureau reported retail sales rose for the third consecutive month. However, Business Inventories rose for the 7^th consecutive month.Photo by Jesse Gardner on Unsplash
South American Weather Pattern DiscussionArgentine Soil Moisture Adequate to Abundant; Brazilian Monsoon Stays Active Next 2-4 Weeks:The South American forecast is consistent with prior runs and prolonged heat/dryness remains absent into the latter part of December. Infact, a pattern of above normal rainfall is most probable across Paraguay and Brazil into mid-winter. Recent unexpected but abundant rainfall has allowed subsoil moisture to be fully replenished in all but La Pampa and the fringe producing areas in the far north of the country. The north central has water needs with current soil moisture. Otherwise, moisture is adequate across the core of Argentina’s Ag Belt., and is currently abundant in pockets of Buenos Aires. The 10-day forecast maintains near daily rain chances across Brazil & Paraguay, while regionally heavy rainfall of 1-3” impacts Cordoba and much of northern Argentina – where it will be most welcomed – Dec 18-20. All but SW Argentina will be well watered by the late month. The strong correlation between December Rainfall and corn yield performance in Argentina is due to some 25-35% of the crop there being planted in Oct & early Nov on average. Additionally, early planted fields yield better than later planted ones. This year40% of the crop was planted prior to Nov 15^th, and so Dec/very early Jan weather is even more important. Rainfall of 11” or more favors trend/above yields. Rainfall of less than 9” in the period nearly guarantees yield loss. Assuming two-week forecasts verify, most probably Argentine corn yield in 24/25 will beat to 5% above trend. A wetter than normal January raises yield to 5-19% above trend, at which point Argentina’s corn production reach 52-53 MMT’s, vs. 50 last year and USDA’s projected 51. USDA’s balance sheet and ARC agrees, total Argentine corn supply will be 55 MMT’s vs. 52 last year. Exports from March 2025 to Feb 2026 will total 36 MMT’s, vs. an estimated 33 MMT’s in the current year and the largest since 2020. The Argentine cash market bottomed at much higher than anticipated prices in June – which in turn funneled sizable demand to the US thereafter – but ARC expects the market has also scored an earlier than normal seasonal top. Spot fob premiums in Argentina tend to begin the process of weakening in Jan-Feb, and then collapse once Argentine harvest reaches 30% complete. ARC expected Argentina’s corn harvest to reach 30% complete this season on April 20^th vs. May 12^th a year ago. The US has dominated world corn trade since summer 2024, but clients must be prepared for another reshuffling of trade flows beginning in spring 2025. Assuming the Brazilian wet season is extended into April, combined South American corn production in calendar year 2025 will be up 240 Mil Bu year-over-year. Much of that increased supply will be pushed in the global market between April and August.
Corn Comment AnalysisCBOT Corn Does Little; Tight Exporter Stocks Balanced Against Global Demand Contraction:CBOT corn remains stuck between $4.30 and $4.50, and new input is being sought. ARC does note USDA pegs exporter corn stocks/use in 24/25 at just 8.3%, vs. 9.5% in 23/24 and the 4^th lowest on record. ARC doubts chart support at $4.30-$4.35 is broken until USDA’s final yield and Dec 1^st stocks data released in early January. However, ARC’s fear remains centered on a loosening of USDA’s balance sheet amid anemic Chinese imports and enlarged South American production . Spot Dalian corn in China has fallen to a newer 4.5 month low at $2.90/MT. This compares to $3.40/MT a year ago, and break in Chinese value continues to despite a near complete lack of imports. Chinese corn supplies are adequate/abundant relative to current consumption. ARC fears final 24/25 Chinese imports drop to 8-10MMT’s, 4-6MMT’s below last year. China and a weak Brazilian currency 9real) are concerns. Urgency is securing US corn wanes after winter. Rallies will continue to be sold at $4.50+ as it is viewed overvalued.More By This Author:Foreign Investment To Add 100K U.S. Jobs – The Corn & Ethanol Report
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