Brooks Schaffer Market Report for Friday October 20

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

Markets have been fairly quiet most of the week, but quietly higher which is welcome. November beans had to try a few times trading above $13 before being able to close above that level. On Thursday, December corn was finally able to break through the $5 level and close above it and closed near the highs. Beans have found strength this week first from the NOPA crush report that reported soybeans crush well above expectations indicating robust domestic demand. The market was also surprised by less soybean oil stocks showing how strong the demand is for soybean oil. Later in the week we saw soybean meal leading the charge higher pulling crush margins up and bringing soybean prices higher as well. The soybean market has already started watching South American weather very closely in anticipation of the record acres they are going to plant. The next 10 days are going to be very dry but the models are pointing to some moisture coming in after that. Planting pace is behind last year’s rapid pace but still above the five year average but at only 17% planted they still have a long way to go. 

The corn market was very quiet for much of the week but did gain some strength from wheat and also got some bullish ethanol data. The weekly ethanol grind was up 3.1% from last week and 11% higher than the same week last year yet ethanol stocks have not grown indicating robust demand. Ethanol grind was actually higher than the pace needed to reach USDA’s projected demand. Ethanol margins are now the highest they have been since 2021. We need to offset reduced export demand for corn and ethanol demand would be a good place to do that. Energy stocks data this week was also encouraging showing an uptick in gasoline demand after it had been soft for a few weeks. Wheat got a boost from Paris wheat making multi week highs and gives us confidence that a harvest low is in for that contract. There are question markets on several wheat production areas in the world including the EU, Argentina and Australia that have been ignored by the markets due to Russia flooding the market with cheap wheat and sluggish demand. The market is going to have to take notice of these issues on the supply side and I think that is starting. Ukraine has been able to load some vessels despite all of the attacks on their infrastructure and threats to the shipping but the market is pricing in near perfect movement. The wheat market is still a tinderbox but needs a spark to ignite. Over the course of this war, many headlines have rallied the market quickly only to fall back just as quickly so it is going to take a bigger spark, but that can still happen. 

The new war in the Middle East has not had much of an effect on the grain market yet. There are too many variables about who is going to jump in to know which direction and what grain flows are going to be affected. Even energy prices have had a very subdued effect from what we would expect from a conflict of this magnitude. 

If corn can hold support at $5 and beans at $13 for a few trading sessions, those would set up good support levels for the market. We are over the hump in harvest in the US so we can make a good case that the seasonal lows are behind us. I think beans have more upside potential than corn due to the tightness of the balance sheet. On the production side, all eyes will be watching South America.