Brooks Schaffer Market Report for Friday May 24

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

Wheat and soybeans remain the most volatile of the row crops. Wheat is still watching Russian weather. Private analysts are trying to get a handle on how much damage has been done and how it will affect the world balance sheet. The US balance sheet may get even more comfortable with crop tours in the Eastern corn belt finding yield potential well above USDA’s record yield estimates. But as we all know, a crop is not made until it is in the bin. We are seeing wheat harvest starting in some areas of the Southeast. Yields and quality are all over the board so far depending on who got rain and who got too much rain. As we start to see harvest ramp up, we will have a better idea of production and quality. 

Soybeans are finding support on rumors that the Chinese are looking for more US origin beans. They have been a very notable absence from US exports and they have suffered. Domestic demand has made up most of the slack so if we do pick up exports it will change the balance sheet picture very quickly. The market is also trying to get a handle on how much production has been lost in Southern Brazil. It is not just production in the field that is at risk now as we have seen very large storage facilities inundated by flood waters. The risk is not over yet as the rains have been forecast to continue. 

Corn bounced back from the selling early in the week after planting progress was ahead of expectations. More rain is forecast this week and over the next 7 days for much of the midwest further slowing progress. The crop insurance final plant date is fast approaching in much of the Western belt as well. Planting in less than optimal conditions lowers yield potential and delayed planting lowers the probability of getting more than the 90 million acres of corn that was intended. So now we have real questions on both the yield and acreage the market is trying to gauge what the new risk is. We are in a much better spot than this winter when everything looked bearish. We need to keep reasonable expectations as it takes something very big to change to point toward a tight enough carryout that we would need to ration demand, but at least we need to put a growing season premium in the market. The funds have been bailing on their short positions but do not have a story big enough to jump in on the long side right now. The other difference this year vs other years where we had late planting is that the market is not rallying enough to incentivize planting after the crop insurance date. The upcoming crop reports are going to be very important and may be very volatile. We get USDA’s updated supply and demand on June 12th, then updated acreage and stocks on June 28th and then USDA will use that updated acreage information to update their supply and demand estimates on July 12th. Buckle up, hopefully it will be a fun ride because that means we will have some pricing opportunities. Be ready to take those opportunities!

Cotton even got in on the fun this week finally. The market seems to be finally waking up to the idea that it cannot afford to lose too many acres as the crop insurance plant dates approach and corn and beans have at least shown some life. We saw improving exports this week again which also helps. December cotton is making a run at 80 cents for the first time in over a month. The funds have a big short position in cotton that they are now buying back.