Brooks Schaffer Market Report for Friday January 5

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

Grain markets started off the New Year on a bearish note led lower by beans and wheat. Corn is still just along for the ride. The weakness came mostly from weather as the Northern growing region of Brazil is forecast to get widespread general soaking rains over the next two weeks starting this week. There are totals modeled of up to 8 inches in some areas. These would be the first widespread general rains of their growing season. The growing regions of Southern Brazil are also going to get a break from the flooding rains they have been plagued with almost the entire growing season. The crop has suffered greatly through the heat and drought but the loss of production will be widely debated until after the combines roll. There was some bullish news on soybean usage this week but with these huge rain totals coming, the path of least resistance is down for now. When trying to estimate how much damage has been done, interesting to note that in Mato Grosso, one of the largest producing states, 75% of the crop was planted in October with 50% actually planted in the first half of October. That crop has suffered since then until now. There will be some production that will not come back from rain falling now. Argentina will see a significant rebound in production from the devastating drought last year as they continue to receive good rains. They can make up for some of the loss in Brazil but there is still a lot of unknowns. Production estimates and other demand side information will matter more when the weather pattern changes, right now the market is just looking at the precip totals and forecasts. 

On the bullish side, the NOPA crush report came out Tuesday showing US crush setting a record for November. We have set a record for every month of the marketing year so far, Sept Oct and now Nov. Despite crush being higher than expected, soybean oil stocks are not rising at an alarming rate showing strong demand. The market is selling off due to rain in Brazil, but the domestic market remains very strong. 

Wheat has given up a lot of the risk premium priced in the last few weeks and with beans and wheat down, corn had no choice but to follow lower. Rain in the US Plains is seen as beneficial to the US wheat crop as the areas of drought have finally started shrinking. China has not bought any additional US wheat in several weeks and despite increased Russian attacks, grain continues to flow out of the Black Sea. The US dollar dropped to near par last week and continued weakness would have been bullish for wheat, but it rebounded up to almost 103 which was another bearish headwind. 

The grain markets have no news to spark any buying and everything feels bearish right now but we do not need to forget there are a lot of geopolitical risks that are simmering right now even if they are not driving the market. Open conflict in the Middle East that could spill out into new areas, Iran sponsored terrorist attacks on shipping in the Red Sea, hawkish comments by the Chinese President in his New Year’s address and the continued war between Russia and Ukraine. 

Beans will continue to trade weather as we approach USDA’s much awaited January Supply and Demand update next Friday Jan 12th at noon. This report will give us “final” US crop yield for 2023 and updated demand estimates as well as South American production estimates. Market is not looking for big changes on the US supply or demand side but will be interested to see what USDA does with South America. The last few years they have been very slow to make changes despite a lot of private estimates already lowering production. Wheat will be watching the US dollar, rain in the Plains and geo political headlines. Corn will be mostly a follower right now.