This is the Market Report with Brooks Schaffer of Palmetto Grain. Reach him at [email protected] or 843-540-4540.
Traders are positioning for USDA’s March update that comes out today, Friday March 8th, at 12 noon. The March report is typically not a big market mover on the US balance sheet and only very minor tweaks are expected today. USDA’s estimates for the South American production are significantly higher than almost everyone else so it is widely expected they will make some cuts. How aggressive they are at cutting will probably determine the market reaction to the report barring any other surprises. Considering how conservative USDA has been in recent history on South American production changes, the market is not expecting big cuts.
On the domestic side of the balance sheet, only minor tweaks are expected. The market is expecting minor reductions to corn carryout from increased ethanol usage and possibly feed and exports. Ethanol has been consistently above the pace needed to reach USDA’s previous estimate. On soybean carryout, the average trade guess is for a slight increase in carryout but the range of estimates includes both an increase and decrease in carryout so there is no consensus going in. USDA may lower exports again due but should also increase domestic usage to offset.
This report is not typically a market mover, the big USDA report in March is the Prospective Planting and Quarterly Stocks Report that comes out on Thursday March 28th at 12 noon. I like a Thursday report release because I can update you with actual numbers on Friday morning rather than just trade guesses.
Thursday’s trade saw a decent move higher in corn and soybeans after drifting most of the week without much direction. There has been no big news to move the market so we have just been drifting a bit based on money flow. But at least the low is holding for now and building some better technical support. Ethanol grind was a bit weaker than last week but still well ahead of the pace needed and near the record. Ethanol stocks did not build much this week and gasoline demand rebounded significantly so hopefully we can start drawing down stocks. I do not think anyone was surprised that the EPA missed the deadline to release the new rules for ethanol in sustainable aviation fuel.
Exports this week were respectable for corn, middle of the range of expectations. Soybeans and soy oil were actually above the expectations but for soybeans we saw a revision lower of last week’s number which was already well below expectations. Beating expectations this week was mostly because the expectations were so low. Wheat was below expectations as we saw some Chinese cancellations. Wheat sold off to new lows Wednesday on rumors of the Chinese cancellations. Wheat has also come under pressure from Russia continuing to ship wheat out at ever lower prices.
Cotton had an impressive day despite exports that were a little disappointing. This rally has brought a lot of spec money into the cotton market so that tide could turn if they sense the expected demand is not there. Poor showing on exports this week does not build our confidence. We are expecting USDA to slightly trim cotton carryout on tomorrow’s report.