Brooks Schaffer Market Report for Friday May 3

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

Row crop markets finally showed some life on Thursday with corn, wheat and soybeans all closing higher. There is not one single headline that seems to explain the big move higher but a culmination of a lot of different things coming together. In the overnight session, wheat seemed to be the leader pulling corn with it. But when the morning session opened, wheat gave back all of its gains and soybeans seemed to take the lead.  I think the biggest factor was the flooding rains in Southern Brazil. Most of the country has wrapped up harvest but there are still a good bit of the crop in the field in the southern most production regions. Those areas have received a lot of rain and are forecasted to continue to receive more rain over the next 10 days. Some analysts are estimating losses between 2 and 5 million metric tons (that is 73 to 183 million bushels). 

In addition to parts of Brazil receiving too much rain, much of the US Midwest remains very wet continues to get more rain over the next 7 days. Planting pace so far has been ahead of average but that will quickly fall behind the normal pace if the current weather pattern continues. We are a long way from any yield potential losses, but it is at least enough to get the attention of the market. The funds had continued to defend their short positions in the grain and oilseeds but this may be enough to convince them they do not want to be short going into the North American growing season. 

Exports were nothing special this week but ethanol production did rebound from last week’s low which is encouraging. The ethanol production did remain below the level needed to reach USDA’s target for the week, but encouraging that it is moving back in the right direction after the dramatic drops in the previous two weeks. 

Dry weather continues to degrade the potential of the Russian wheat crop as well. The US Plains have missed out on a lot of the rain and we continue to see Hard Red Winter wheat conditions decline. Soft Red Winter wheat has benefited from the rain so far, but it will not be very long until the rain starts to degrade the quality so the market will be closely watching. 

After months of delays, the IRS released the rules for obtaining the Sustainable Aviation Fuel tax credits. Every analysis i have read about it has been confusing. This is the best explanation i have found: “Biden administration biofuel policy appears to be purposefully vague which we would interpret to mean that if they were transparent with their plan that it would not play well with the biofuel industry or rural constituency.” I will leave it at that for now.