Brooks Schaffer Market Report for Tuesday November 14

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

In Friday’s trade the market finished pricing in the USDA report then it was off to the races on Monday. Soybean meal led the way pulling soybeans up 35 cents and dragging corn and wheat higher as well. Beans have traded back to where we were before the USDA numbers came out. After digesting the numbers and moving past the initial reaction, the market realizes we are still going to be very tight for the US carryout and there significant weather challenges building in South America. The tightness of meal in the world due to last year’s drought in Argentina is still having far reaching effects.

USDA and CONAB (the Brazilian equivalent of USDA) have not lowered their production estimates due to the adverse weather in Brazil yet. The temps are forecast to remain in triple digits and rain limited for the next 10 days. Some acreage that was planted in anticipation of the monsoonal rains arrival will have to be replanted. We will be debating how much replant will have to happen and the market will have to try to gauge. Brazil has such a long growing season, they will still be able to make a big crop if the rains return, but they will not be able to plant as many acres of a second crop. The market is paying close attention to the near daily announcements of soybean sales to China. We do not know yet if this is just routine buying or extra purchases because they are getting nervous about South American production. Biden is scheduled to meet with Chinese president Xi this week as well, so it may be buying to generate a little good will leading up to that meeting. The purchases have been smaller than the historical levels this time of year, but better than last year.

Harvest is all but over in the US now as USDA estimated soybean harvest at 95% compared to 91% last week and 96% last year. Corn is at 88% compared to 81% last week and 92% last year. Harvest pressure being behind us is a bullish force for the market. The crop has been tucked away, and now it will be up the price to pull it out of the bin where it is needed. We are starting to see that locally as corn basis has improved dramatically from harvest lows. Soybean basis is still under pressure locally but i expect a quick bounce in it once the combines get put away.

Corn has struggled to get anything positive of its own. We are not going to run out of corn this year so there is not a real narrative to bring spec money and buyers to the corn market. Low prices have done their job to increase demand. Ethanol demand has potential to get even stronger which will be a benefit to corn. I still look for corn to make another run at the $5 level, but we need to be sellers when it does!

Since we have so much two hemisphere production now, we have two weather markets a year. That is what we are in and weather markets are volatile. You need to have orders working because it can run up in the middle of the night and be down the next morning. Beans will have the most volatility based on the changing weather models.