Soybeans and Soymeal: Drought Concerns Drive Price Surge
On December 26, the March soybean futures contract on CBOT rose by 16 cents, closing at $9.97-1/4 per bushel, a gain of 1.6%. Soymeal futures performed even better, rising by $13.30, a 4.4% increase, to settle at $314.90 per short ton, briefly touching $315.40, a two-month high during the day.
Market concerns over drought in Argentina have been a significant driver of the price increase. As the world's largest exporter of soymeal and soybean oil, Argentina could see further reductions in crop yield due to dry weather over the next two weeks, exacerbating supply tightness. Additionally, short covering in soymeal futures accelerated the price increase. Furthermore, a temporary closure of a soybean processing plant in Illinois due to a fire has increased market concerns about supply disruptions, supporting soybean and soymeal prices.
Corn: Tight Supply Expectations Boost Prices
March corn futures rose by 5-1/4 cents, closing at $4.53-3/4 per bushel, reaching a six-month high of $4.54-1/4 during the session. The market expects the USDA to further lower U.S. corn stock estimates in its supply and demand report on January 10, continuing the trend of supply reductions.
Although U.S. corn barge basis offers remained generally soft, international purchasing activities provided spillover support for corn prices. Algeria's purchase of approximately 1.17 million tons of wheat in a large international tender this week indirectly boosted corn market prices.
Wheat: International Purchases and Lower Export Expectations Drive Gains
March wheat futures rose by 6-1/4 cents, closing at $5.41 per bushel. A Russian agriculture consulting company expects wheat exports in the 2025/26 season to fall to 41 million tons, down from the current 43.5 million tons. This reduction in export expectations, combined with Algeria's purchasing actions, drove wheat prices higher. The basis offers for hard red winter wheat remained stable, with Kansas City March wheat futures rising by 7-3/4 cents to $5.51-1/2.
Outlook and Trend Forecast
As the year-end approaches, market trading tends to be light, but factors such as Argentine weather conditions, international purchasing activities, and the forthcoming supply and demand report support bullish sentiment in the grain markets.
- Soybeans and Soymeal: Argentine drought will continue to impact price trends, with tight supply potentially sustaining strong prices.
- Corn: Lower stock expectations and purchasing support prices, but softening basis indicates international demand is gradually shifting to South America, potentially limiting future U.S. corn export space.
- Wheat: Increased global purchasing activity and declining Russian export expectations provide support for the wheat market.
While South American supply expectations may challenge U.S. exports, the grain markets are likely to be driven by favorable factors such as weather and inventory adjustments in the short term, maintaining a relatively strong operational stance.
