Brooks Schaffer Market Report for Friday September 22

This is the Market Report with Brooks Schaffer of Palmetto Grain. Reach him at [email protected] or 843-540-4540.

Harvest pressure continues to weigh on the corn and bean markets. Even if the crop ends up being smaller than USDA’s last estimates as I believe it will, harvest is still going to put some pressure on the market. December corn broke through the previous low of 4.735 breaking the long term support and printed a new low of 4.7125 on Tuesday. But it managed to close off the lows Tuesday and close higher on Wednesday. From a technical standpoint, breaking through that support was a big bearish signal but there has not been follow through selling to try to capitalize on it so far. That new low will be the new level of support that the bulls hope to hold as we move through harvest. Soybeans did break through the psychologically important level of $13, but we are still trading at levels we have seen as recently as early August so we have not printed multi year lows like in corn. 

One thing that continues to pressure both corn and beans in addition to harvest, is the dropping water levels in the Mississippi. We need to be exporting as much as we can from the US while we have new crop before South America’s first crop comes to market and the low water levels are slowing that dramatically. The forecast indicates big rains coming to some of the Mississippi watershed over the next five days so we will hope those rains come. It is going to take several inches to replenish the parched soils and have enough to make it to the Mississippi river. 

I believe yields will continue to trend lower as we work through harvest in both corn and soybeans. Corn has enough cushion in the balance sheet that we can afford to lose a few bushels and still be comfortable but beans do not. If we lose a few tenths of a bushel the bean market is going to have to ration demand but South America is going to plant all the acres they can which could add a cushion to the world balance sheet. As a result, beans are going to remain much more volatile than corn. The market is already looking to South America weather where the monsoon rains have not started yet for much of the major production areas. There is some moisture showing up in the 10 to 14 day models but it keeps getting pushed further out in each model run never getting closer than 10 days. Brazilian producers will wait until they see the rain before beginning to plant. It is not late yet but its not early anymore. The longer their planting is delayed, the longer US exports can be competitive. 

Wheat has come under pressure as Ukraine has loaded a few ships in the Black Sea in the face of all the Russian threats of a blockade. Russia claimed it was going to start enforcing a minimum price for its wheat but the rumor in the market is that they continue to ship at prices well below.

Higher energy prices are also supportive for corn and soybeans in the long run due to ethanol and renewable diesel. Ethanol production fell from last week but is still up significantly from last year. The market will be looking forward to the USDA Quarterly Stocks report next Friday Sept 29th at noon. This report can be a market mover if USDA missed on old crop carryin. We are also looking to the next supply and demand report that comes out on October 12th at noon.