Brooks Schaffer Market Report for Friday October 27

Grain markets remain very rangebound. There is a lot in the news right now, but not a lot for the grains to pay attention to. We are getting through US harvest without any major shocks. Yields probably get trimmed a little more but nothing drastic. Farmers are selling very little so we do not have that pressuring the market but we need something to bring the buyers to the table. Having the crop put away will force the market to work a bit harder to bid it out of the bin. We saw encouraging data from weekly energy stats on wednesday. Ethanol production has been exceptional, much stronger than normal without a corresponding increase in stocks indicating strong demand. However, crude oil stocks were higher than expected and gasoline implied demand was not great for this time of year. Energy prices have already given back all of the war premium the markets put in after the new conflict between Hamas and Israel.

Exports this week were above expectations for corn and at the very top of expectations for soybeans which is encouraging even in the face of the logistical hurdles we are facing with the low water in the Mississippi and the strong US dollar. Soybean meal was also at the top end of expectations since Argentina which is one of the world’s biggest soybean meal producers is all but out of beans to crush from the drought last growing season.

South American weather continues to be a mystery. The atmospheric flow is coming out of the moist air of the tropics which typically signals the beginning of the mosoonal rains. However, the northern regions of Brazil are not receiving the typical rainfall. Eric Snograss believes the drought in the Amazon is to blame as it usually adds some more moisture to the air. The northern growing regions of Brazil remain dry while the southern growing regions have seen 40 straight days of flooding. Argentina remains very dry with the grain belt experiencing the second driest year in 30 years based on year to date precipitation. The market has not reacted to much of this yet because there is still time to catch back up. Planting progress in Brazil is still close to the 10 year average and Argentina still has time if the pattern changes. If these threats remain, the market will not be able to ignore forever.

Wheat today got a boost when it was reported that Ukraine had suspended use of their Black Sea grain corridor due to theats from Russian mines and warplanes. Ukraine later denied this but they have been struggling to achieve the same volumes they were able to export under the terms of the old agreement. It also speaks to how numb the market has gotten to this type of headlines that the market only rallied 11 cents from this news. Not that long ago wheat probably would have moved 30 or 40 cents on a headline like this. Right now Russia and Ukraine are trying to ship as much wheat on the world market as they can and do not care what price they get. This has kept pressure on wheat and pushed the market lower than where it may have been based just on the world stocks.