Brooks Schaffer Market Report for Friday May 17

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

Corn market slipped a little late week as fund buying has slowed. We estimate they have bought back most of their short position in corn and beans. Now that the spec money is close to net neutral, look for the market to trade sideways while we watch planting progress. There will be a window to plant over the next couple of days until the next round of showers comes in on Sunday for much of the corn belt. We will see if planting is falling further behind the average when we see USDA’s planting progress report on Monday at 4pm. Ethanol data this week showed ethanol production bounced back and was even better than expectations. However we saw a building of ethanol stocks on flat demand. We also had a big corn flash sale announced to Mexico this week but the export report was at the low end of expectations. New crop Dec corn made a new recent high trading to $4.9675 before dropping and closing lower on the day. From a technical standpoint this is a key reversal and could bring some selling into the market but the fundamentals rule over the technicals so if planting is delayed further we could see the market push back through that level. 

Soybeans had a lot of volatility this week as continued flooding in Southern Brazil damages the crop left in the field and threatens some storage facilities. Some areas have received over 25 inches of rain since April and many are forecast to get 10 more over the next 10 days. It will take a while to fully assess the damage. Early in the week there were rumors veg oil would be on the list of things the Biden administration was going to add tariffs to coming from China. Bean oil rallied and pulled soybeans with it since the veg oil competes with bean oil. When the tariffs were announced to only include electric vehicles and car parts, bean oil fell and pulled beans with it. NOPA crush came out this week as well showing April crush below expectations and broke a streak of record monthly crush numbers going all the way back to the first month of the marketing year (September). Soybean oil stocks were below expectations which took a little of the sting out. Crush is still at a pace to be at USDA’s estimate or above but many were expecting USDA to have to dramatically raise their domestic crush estimate and that may not have to happen if this trend remains. 

Wheat also posted a technical key reversal on Wednesday after making new highs midday and then closing lower. But fundamentals easily trump technicals when it comes to production issues. Headlines from Russia continue to dominate the market but they are about weather not the war. Parts of the key production regions have seen 20 to 40% of normal rainfall in the last three months. Then they were hit by two cold snaps that brought two consecutive late frost events. A Russian agency reported that over a million acres of wheat will need to be replanted. As long as the headlines continue, wheat should stay supported but if the market feels the damage has been priced in wheat can give up the gains quickly.