Brooks Schaffer Market Report for Tuesday January 30

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

Grain and oilseed markets start the week off on a sour note with March beans closing below $12 for the first time and March corn posting a new low close as well. Beans, corn and wheat were able to find some strength midweek last week but gave it all back by Friday. The rally in beans came after a dry stretch was forecast in Argentina but then gave it back after the models added more rain into the forecast and the Buenos Aires Grain Exchange released their updated crop production estimates late in the week. Brazilian harvest is estimated at between 10 and 11% which is well ahead of last year’s pace. Market will be watching for safrinha corn planting progress along with the harvest progress. Basis levels in Brazil have dropped so much that we saw Brazilian beans bought to come to the US east coast last week as well.

Wheat came under pressure after lack of follow through from last week’s strength from possible escalation in the Black Sea. The wheat markets have become a bit numb to headlines now that this war has been going on for over two years and wheat continues to flow. With selling in the beans and wheat, corn had no choice but to move lower. Exports are not helping as we have seen disappointing totals almost every week of the new year. Ethanol demand has slowed with the winter weather that hit much of the country but stocks have not dropped much. We need to see production rebound with the return of more mild weather. Negative macro data and news from China is also a bearish headwind. A court in Hong Kong ordered the liquidation of the troubled developer Evergrande. This has been an ongoing battle since before Covid that the government is trying to limit the fallout due to the social implications and it remains far from over. On top of all of this we have a lot of farmer owned grain that will be looking to make sales for cash flow needs. The funds continue to build short positions without any incentive to cover them. The bleeding will stop when something hits the headlines to cause the funds to cover. 

We get USDA’s latest supply and demand update next Thursday Feb 8th at 12 noon. Market is not looking for any big changes to the US balance sheet but will be watching to see what USDA does with South American production.