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

The question on everyone’s mind this week is, are the corn lows finally behind us? We have only traded back to where we were early last week, but it really feels like we have a weight off of us getting a couple positive closes in a row. The selling has been relentless. Spec funds had built a record short in corn which has been the main driver. With so much momentum lower, end users were hesitant to step in and buy until we saw some indication of a bottom. Now that we have seen a key reversal and some spec fund buying, corn should be seen as a value by end users who may want to put some coverage on which brings a natural buyer to the market. Farmers who needed to sell before March to make land and equipment payments and raise cash for taxes also put pressure on the market. Now that the March futures contract has gone into delivery, hopefully some of that selling pressure is also behind us. I am hopeful we can get those lows to hold for now but we are not going to know that for sure until it’s too late. 

The corn market still has a job to do, it needs to stimulate demand and discourage acres not encourage them. Corn started discouraging production by setting a very low insurance base price through the month of February. We have seen demand get stronger with ethanol production having a good week again this week, well above the pace needed to reach USDA’s target and significantly higher than the last two years. One concerning trend that we need to be watching though is that stocks built this week and are now approaching record levels with gasoline demand getting a little stronger from last week but still below the last two years. Exports sales were also strong this week for corn. I hope the lows are behind us but I continue to believe we need to be sellers on rallies for those that need to generate cash this spring. I hope that is the wrong thing to do and we sell new crop for much higher. 

Soybeans are struggling to build support at the lows as Brazil harvest continues at a rapid pace. We estimate them to be halfway through harvest by the weekend and the biggest producing state of Mato Grosso to be approaching 85%. Analysts continue to lower production estimates for Brazil as there is concern that the later yields are not going to be big enough to offset the disaster they faced with the early crop but that is falling on deaf ears in the market as the funds continue to sell. Lack of Chinese demand is also weighing on the market. Exports have been abysmal from the US but we have very strong domestic demand to make up for the loss. Despite the weakness in the market, I continue to believe that beans have more upside potential than corn as we need to make sure we encourage US production and we are still facing a fairly tight old crop carryout. I would be more patient on bean sales right now. Southeast processor bids have strengthened as well. 

Wheat continues to trade with big ranges in both directions. Rumors of more Chinese purchases pushed the market higher and more rain in the Plains reducing the drought area has helped drag it lower. Exports are still decent and ahead of last year’s pace. But the biggest drag on the wheat market is that Ukraine and Russia continue to export all they can at rock bottom prices. Wheat still has a great deal of geopolitical risk that is not priced into the market right now.