Mixed Market Activity and Weather Concerns Impact Corn and Soybean Outlook

The soybean market experienced minimal movement yesterday, with the March 2025 contract slipping 2.75 cents to 994.50 cents per bushel (355.26 EUR/t). Meanwhile, Euronext rapeseed remained volatile but saw gains as the February 2025 contract climbed 8 EUR to 529.00 EUR/t.

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U.S. Market Update and WASDE Expectations

• The CBoT will close an hour early today in honour of former President Jimmy Carter.
• Traders are anticipating the WASDE Report, to be released on Friday, January 9th, 2024, at 18:00. Historical data shows that the March future has risen 15 times and fallen 10 times at the release of the January report since 2000, suggesting potential for upward movement.

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Weather Developments and La Niña

La Niña Weather Phenomenon:

• While La Niña has been anticipated for over a year, recent Pacific Ocean surface temperature changes indicate its potential weakening or short-lived impact.
• Dry conditions persist in Argentina and southern Brazil, with surface soil moisture already declining and rising temperatures in January posing risks.
• Mid-January Outlook:
  • Scattered showers and storms, with 50–75 mm of rain expected between January 16–22, could ease crop stress in Argentina.
  • However, conditions resembling La Niña may return later in the month, potentially worsening weather patterns.

Impact on Safrinha Corn in Brazil:

• The delayed soybean harvest may postpone the planting of Safrinha corn, which accounts for 75% of Brazil’s total corn production.
• Late planting could reduce yields, and heavy rains during the soybean harvest may disrupt progress further.

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Indonesia: Biodiesel Policy and Palm Oil

Biodiesel Regulation (B40):

• Effective January 1, Indonesia increased the biodiesel blend mandate to 40% palm oil (B40) from 35%.
• A 1.5-month transition period has been granted to upgrade technology and deplete old stock.
• Palm oil remains 400 USD/t more expensive than crude oil, straining state subsidies and potentially leading to reduced exports.

Economic and Environmental Goals:

• Indonesia’s net-zero emissions target by 2050 includes plans to increase the blend ratio to 50% by 2026, enhancing energy independence and reducing annual energy imports by an estimated 20 billion USD.
• However, the feasibility of this goal remains uncertain, as higher subsidies and export taxes may diminish the competitiveness of Indonesian palm oil in global markets.

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Summary

The corn and soybean markets face significant influences from weather patterns in South America and the potential implications of La Niña. While Argentina’s dry conditions are concerning, mid-January rain forecasts may provide relief. Brazil’s delayed soybean harvest and its impact on Safrinha corn highlight challenges for production timelines and yields.

On the biodiesel front, Indonesia’s ambitious B40 policy marks a step toward energy independence, albeit with financial and trade-offs, as higher subsidies and reduced exports could affect the global palm oil market. Traders should watch closely for further updates from the WASDE report and evolving weather developments in South America.

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