Brooks Schaffer Market Report for Friday February 23

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

Even many market analysts who were bearish have been surprised at how fast corn and soybean markets have dropped. The selling has been relentless and it has come in a combination of the funds building short positions and also farmer selling as they need to generate some cash. Everytime the market tries to build some momentum for a bounce, we see a lot of farmer selling and it pushes the market lower again. Watching it feels like getting hit in the face with a frying pan. The corn market is trying to do a couple jobs here: one is stimulate more demand and the second is to discourage acres. We are gaining demand. Exports are ahead of pace needed to reach USDA’s target in both commitments and actual loadings. Ethanol demand is also ahead of the pace needed. This week’s data came out on Thursday and the market expected lower ethanol production and higher stocks. We saw slightly higher production and a small decrease in stocks. Feed demand is growing as well but we have a lot of excess stocks in corn and we still need to trim new crop production. We can trim production by discouraging acres with either price or weather. It will be a little while before the weather in the US matters very much so right now the burden falls on price. Cotton is making a play for some additional new crop acres. Grain farmers need to be pulling for cotton to make a stronger run to take acres away from corn. 

The soybean picture is not nearly as challenging as corn. We need to gain acres in beans but the market is still trading Chinese demand and Brazilian harvest. The Chinese did not come back to the market in droves after their Lunar New Year’s celebration as we had hoped. Exports are behind the pace needed to reach USDA’s target but domestic usage remains well ahead to help offset. Brazilian harvest continues to advance at a rapid pace. Yields have been a bit disappointing in many areas and several analysts are lowering their production estimates but there has been enough harvest pressure to keep the sellers in control. Basis is firming on beans in the Southeast which is at least some good news. 

The million dollar question is when will the bleeding stop? I truly wish i had the answer to that question but the only thing we know for sure is that we are a lot closer to the bottom than we were three months ago. I think this is still a market we need to be sellers on any rallies. I would be more aggressive selling corn than beans right now as beans should remain more volatile. I am also anxious to get more new crop corn sales on.