Brooks Schaffer Market Report for Tuesday November 28

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

The holiday markets were not friendly to the grain and oilseed bulls last week. There were not any new headlines to move the market, just more of the same. The market is still trying to gauge how much damage has already been done on Brazilian production and what the forecast means for prospects going forward. Widely followed Iowa extension climatologist Dr. Elwynn Taylor has pointed out that much of Brazil can still make trend crops with half of the rainfall they normally receive since the monsoonal rains they get are way more than they need for production. However they must get it timely as not many areas in Brazil have soils with residual moisture holding capacity. The dryness early in the season was accompanied by near record heat in the northern growing regions so some damage has certainly been done. There will also be losses in the southern growing regions where they have bad weeks of flooding. There are estimates as high as 20% that will have to be replanted there. Anything that has to be replanted will not be able to grow a second crop of corn as they will be out of time in the growing season. Forecasts at the end of last week were adding precipitation totals going into the weekend. The actual received totals turned out to be a little less than expected, but the extended forecasts are adding rain in the 10 day timeframe. These long term forecasts have been especially unreliable over the last year but the bulls are already on the defensive so they will be read as bearish. Argentina is picking up some showers so their production prospects are increasing at the same time Brazilian production may be decreasing. Argentine farmers also have incentive to plant more since the election of Milei as they believe the “confiscation taxes” on soybeans will go away. Beans were able to hold on close to unchanged on Monday on the weather uncertainty despite weakness in wheat and corn. 

Wheat has come under pressure from improving US conditions, Chinese purchases from other origins, Russia lowering export taxes on grain even further, and Ukrainian announcement that they are using ship convoys hugging the coastline of other Black Sea countries to try to up grain shipments. Wheat had gotten a boost from the idea that China is going to have to import a significant amount of wheat due to their loss of quality but recent purchases from Canada scares the market into thinking the US will be left out once again. Russia and Ukraine continue to ship all they can at rock bottom prices weighing on the world market. The price of wheat continues to trade below where one would expect based on current world supply, but it needs something to get traders excited about and that has not happened in a while now. 

The weakness in wheat has been weighing on corn as well since corn does not have enough directional convection of its own. Exports were disappointing on corn and the department of energy data from last week was not encouraging. It showed a decrease in ethanol production and an increase in stocks. The market has been taking some comfort in the strong ethanol production and dwindling of stocks so that was a real gut punch. However, the market should have decent support as the bulk of harvest is now behind us in the US.