Brooks Schaffer Market Report for Friday May 31

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

Markets opened back up Tuesday with a bang with corn wheat and soybeans all trading sharply higher. The strength could not hold and the markets closed the session well off the highs. All USDA weekly reports were delayed by a day due to the Memorial Day holiday. We got planting progress on Tuesday afternoon. USDA estimated corn planting at 83% complete which was right on the money to expectations. That is compared to 70% last week, 89% last year and 82% five year average. Soybean planting was estimated at 68% complete compared to 66% expected. That is compared to 52% last week, 78% last year, and 63% average. Now that the bulk of planting is behind us and we are at the average pace, the market is not overly concerned about planting right now despite continued widespread rains moving back across the Midwest. Spec money has flipped from worried about planting delays to the thought that rain makes grain. That mindset has pressured corn and bean markets this week. At the end of last week the commitment of traders revealed the funds had not bought back as much of their short positions as was widely believed. Market expectations were for the funds to be short only 60k corn contracts but they were short 115k. With what we know right now, I do not anticipate a huge bull run in corn or beans. BUT I still think we have a good case for carryout to be trimmed further this year. Using USDA’s number of 90 million acres of corn intended and record yield at 181 bushels per acre, we do not add anything extra to the balance sheet. After the planting conditions and the challenges for getting the last of the crop in the ground, it does not look likely we will exceed the intended acres. Any less production from acres or yield would come right off the carryout. The market is far from a situation where we need to ration demand, but we also do not need to take all the risk premium out of the market yet either. We will get USDA’s first corn condition ratings next Monday at 4pm which will be very important (even though initial ratings have low correlation with final yield). 

Ethanol stats this week were encouraging on the demand side. Ethanol production rose more than expected and was at a 8 week high. Despite this big production boost, ethanol stocks were lower than expected and came in at a 23 week low. Although one part of the report was not bullish was gasoline demand that was lower than a week ago but remains near year ago levels. We did not get exports yet as they were delayed by a day and will be out this morning after this report is recorded. 

Outside markets exerted a fair amount of pressure on the grains as well as equities and energies were sharply lower this week and the US dollar rallied back to multi-month highs. Wheat has come under pressure from US harvest progress. Yields so far in the Plains have exceeded expectations. Wheat still faces the world challenges that rallied the market with frost following dry weather in Ukraine and Russia. The wheat market will remain volatile.