Over the past week, the EUR/USD currency pair declined by 0.0118 to 1.0308. Meanwhile, the price of US WTI light crude oil rose by $2.97 per barrel, reaching $73.96 per barrel.

Oil prices increased on Friday after reaching their highest level in over two months during the previous session. This was driven by hopes that governments worldwide might enhance support for economic growth, which could boost fuel demand. However, factory activity in Asia, Europe, and the U.S. ended 2024 sluggishly, as expectations for the new year deteriorated amid growing risks to trade. These risks stem from the potential return of Donald Trump to the U.S. presidency and the fragile economic recovery in China. U.S. crude oil inventories declined less than expected, dropping by 1.2 million barrels to 415.6 million barrels last week, compared to analysts' forecast of a 2.8 million barrel decrease.

U.S. banking system reserves, a key factor in the Federal Reserve's decision on whether to continue shrinking its balance sheet, have fallen below $3 trillion, reaching their lowest level since October 2020. Bank reserves dropped by about $326 billion in the week ending January 1, bringing the total to $2.89 trillion, according to Fed data. This represents the largest weekly decline in over two and a half years, the agency notes. As American central bankers continue quantitative tightening, Wall Street strategists are closely monitoring the lowest comfortable reserve level, estimated by some to be between $3 trillion and $3.25 trillion, including a buffer. However, a debate is intensifying over whether the Fed risks reviving memories of 2019, when reserves became too scarce, leading to a spike in key lending rates and the federal funds rate. The central bank was forced to intervene to stabilize the market.

Throughout the past week, March SRW wheat futures in Chicago declined by 17 1/4 cents to close at $5.29 1/4 per bushel.

Over the previous week, CBOT March corn futures fell by 3 1/4 cents to close at $4.50 3/4 per bushel.

For the past week, Chicago March soybean futures rose by 2 cents to close at $9.91 3/4 per bushel.

Accumulated US export sales for the week ending December 26.

*Source: USDA

Weather:

Over the past week, parts of the US Wheat Belt experienced rain and snow. In Western Europe, there were moderate rains with positive temperatures. Parts of Ukraine and Russia also saw precipitation, with snowfall limited to central Russia. In Australia, rainfall occurred only in the east. Northern and central Brazil experienced showers, but the south remained dry. Argentina had rain in central regions, while the north and south remained dry.

Forecast for the next 10 days:
In the US Corn Belt, very cold weather is expected without precipitation. Kansas will also be very cold, but snow cover is already in place. Oklahoma and Texas will remain warm. Western Europe will experience moderately warm weather with precipitation. The Balkans will see moderate warmth with light rainfall. Ukraine will have slightly positive temperatures and minimal rainfall. In Russia, cold weather will persist, with light rain in the south and snow in the central regions. India and China are expected to remain dry. Indonesia and Malaysia will have moderate rainfall. In Australia, weather will be warm to hot in the west, with moderate temperatures and rain in the south and east. In northern and central Brazil, rain will continue, while the south will remain very warm and dry. In Argentina, the weather will be warm to hot, with very light rainfall in the north.

Overall, conditions are deteriorating in southern Brazil and large parts of Argentina. While crops remain in good condition, mid-January will be a critical period as new rainfall is anticipated.

GRAIN EXPORTS:

* US (September- August)  /  * Russia, Ukraine and the EU (July- June)

Over the past week, wheat, corn, and soybean exports from the United States remained strong, but weekly export sales for all three crops significantly declined. Exports from Russia and Ukraine continued to decrease.

On Friday, grain markets dropped significantly following weak U.S. export sales data. The holiday season also contributed to the decline, but traders sought a market-moving event and found it in this data, triggering sell-offs.

Wheat

• Market Performance: On Friday, wheat futures in Chicago and Paris declined.
• U.S. Export Sales (Week ending 12/26/2024):
  • Weekly export sales: 140,591 tons (612,408 the previous week, 131,601 a year ago).
  • Export commitments: 16.91 million tons (15.27 million).
  • Weekly exports: 381,906 tons (376,240 and 285,877).
  • Season-to-date exports: 11.95 million tons (9.36 million).
    Export sales hit their lowest level since the season began, while actual exports remained strong. Taiwan is seeking to purchase 114,650 tons of wheat from the United States. In Argentina, wheat harvesting campaign is 95% complete, with the Buenos Aires Grain Exchange maintaining its production estimate at 18.6 million tons.

Corn

• Market Performance: On Friday, corn futures declined in Chicago and Paris.
• U.S. Export Sales (Week ending 12/26/2024):
  • Weekly export sales: 776,992 tons (1,711,266 and 367,484).
  • Export commitments: 38.80 million tons (29.79 million).
  • Weekly exports: 1,002,503 tons (1,123,883 and 681,465).
  • Season-to-date exports: 15.75 million tons (12.39 million).
    In December, Brazil exported 3.62 million tons of corn, down 11.7% from last week’s estimate (Anec). StoneX revised its 2024/25 Brazilian corn production forecast from 128.3 million tons to 128.6 million tons.

Soybeans

• Market Performance: On Friday, the soybean complex in Chicago, rapeseed futures in Paris, and canola futures in Canada declined.
• U.S. Export Sales (Week ending 12/26/2024):
  • Weekly export sales: 484,679 tons (978,351 and 201,646).
  • Export commitments: 40.17 million tons (36.33 million).
  • Weekly exports: 1,704,121 tons (1,573,186 and 1,000,620).
  • Season-to-date exports: 28.45 million tons (22.70 million).
    Soymeal sales: 203,814 tons.
    Soyoil sales: 38,147 tons.
    Weekly soybean export sales hit their lowest point of the season. In December, Brazil exported 1.47 million tons of soybeans, slightly below previous estimates (Anec).

In Argentina, optimal soil moisture for soybean crops decreased to 81% (88% the previous week). Over the last 30 days, rainfall has been below average across the country. Timely moderate rainfall helped save crops in some areas, but the situation remains precarious. Over the next two weeks, high temperatures and minimal rainfall are expected, posing risks to early-planted corn, which is in a critical pollination or grain-filling phase. Southern Brazil faces similar challenges, though crops there are less advanced.

StoneX increased its forecast for Brazil’s 2024/25 soybean production from 166.2 million tons to 171.4 million tons (+14.4% year-on-year) due to expanded planting areas. The export forecast was also raised to 107 million tons (from 103 million). With expected record yields, weather will now be the decisive factor.

Palm Oil and Vegetable Oils

In December, India’s palm oil imports dropped to a nine-month low due to high prices, while imports of the cheaper soyoil increased.

• Palm oil imports: 503,000 tons (-40% from November), the lowest since March 2023.
• Soyoil imports: 420,000 tons (highest in four months).
• Sunseed oil imports: 265,000 tons (-22%).
  Total December oil imports: 1.19 million tons (-25%).

Upcoming USDA Report

The January USDA report, final for 2024, will be released this week. Its data will have significant implications for the coming months. However, predicting the outcomes is difficult, as all scenarios seem equally likely—expect the unexpected.

U.S.-China Trade Risks

A new study highlights alarming risks for US farmers if a new trade war with China unfolds:

• If China reinstates its old export tariffs, U.S. soybean exports to China could drop by 14 million tons to 16 million tons, and corn exports by 2.2 million tons.
• A harsher scenario with a 60% import tariff (essentially a ban) would reduce soybean exports by 25 million tons and corn exports by 90%.
• Soybean prices could fall by 1 USD/bushel, and corn prices by 0.13 USD/bushel.

In a worst-case scenario, if other countries also raise tariffs on US products by 10%, American farmers will face higher costs for machinery, fertilizers, and inputs, further squeezing already thin profit margins. Meanwhile, Brazil, Argentina, and Ukraine are expected to capitalize on the situation, though their export prices may remain subdued as buyers shift to lower-priced U.S. products.

Changes in FOB prices of major exporters in recent days:

During the week, FOB prices for crops showed mixed trends.

Wheat – FOB wheat prices increased slightly, while prices in Ukraine adjusted from their high levels. The FOB price of Bulgarian wheat is at 237 USD/ton (+$3/ton for the week and +$4/ton the week prior). Australian milling wheat is at 228 USD/ton (+$1 for the week and -$1 the week before), 10% protein wheat is priced at 222 USD/ton (+$1 for the week and -$1 the week prior), and the FOB price of Australian feed wheat is at 192 USD/ton (unchanged from the previous week). Australian wheat prices are highly competitive at the start of their export season.

Corn – FOB corn prices saw minimal increases. The FOB price of Brazilian corn prices remained unchanged at 213 USD/ton (+$3 the week prior).

Soybeans – FOB soybean prices were mixed. Brazilian soybean prices dropped by 10 USD/ton (-$8 the week prior) to 374 USD/ton. Brazil is harvesting its soybean crop, with expectations for record results. For the first time in a long while, U.S. soybeans are more expensive than Brazilian ones.

Over the past week, global oilseed prices increased slightly.

Export prices Black Sea, USD/mt (compared to the previous week):