This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Looks like the bulls had Christmas and New Year’s in the grain and oilseed markets. Corn finally managed to break through the resistance and trade back to levels we have not seen since June. March corn closed at 4.595 on Thursday. Not much has changed in corn as the news flow has been bullish for a while now. We have a good pace of exports on corn. Ethanol production is still well above the level needed to reach USDA’s increased estimate. The big thing that changed for corn was the soybean market stopped bleeding. Most of Brazil has had plenty of rain almost too much rain so there is no weather story there. But Argentina has turned off dry and has been facing triple digit heat and the market is quick to take note. With beans rallying, we get a reprieve from the boat anchor that has been weighing on corn. Due to their tax structure, Argentina exports more soybean products (meal and oil) than raw soybeans so the soybean meal market has also rallied on the weather news. The old grain trader saying is that a meal rally is a real rally (traders love a good rhyming cliche) so the funds have started buying back shorts. The problem with a weather rally is that there is not much to use to guess the top since it all depends on the next forecast and then the next one. If the dryness persists and spreads north, there will be more upside in beans. If moisture starts coming into the forecast, the strength will be over as fast as it started. It will be interesting to see how well corn can hold support if beans do turn. Corn has good fundamentals on its own to try to support but could get caught up if beans selloff.
USDA’s November soybean crush report came out Thursday. Similarly to what we saw on the NOPA crush report, we set another record for November this year. November is the third month in the marketing year and that is the third monthly record we set this year. Soybean domestic demand remains very robust and enough to offset the slower pace of exports so far. The concern is that unless the new administration is supportive of biofuels, we may see domestic crush drop dramatically if demand for soyoil drops. We have an incredible pace of demand, but it is not priced in to continue to the entire year.
Volumes remain low as we finish the holiday week. Everyone is just biding time until the major report coming out next Friday, Jan 10th. The Jan USDA report gives us the “final” US crop size. The reason they call this one final is because they are able to use the information from the stocks report to adjust the estimates they have from harvest. Right or wrong they will not make any more adjustments to the US crop until the September supply and demand report at the end of the crop year. The market will also be looking for their ideas on the South American crop as we are further into the growing season. February weather makes yield in most of Brazil much like August weather makes yield in the US Midwest so we still have some time yet before the crop is made.
The markets will continue to trade mostly South American weather and position ahead of the big report on Friday. I would be selling corn and beans on this strength.