This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Corn and soybeans were able to find follow through strength for most of the week until Thursday. On Thursday, weakness in the soybeans was a drag on everything. There has not been a noticeable shift in the weather in South America that brought in the sellers. It is still very dry and hot in Argentina and parts of Southern Brazil. However, the bulk of the Center West growing regions of Brazil where the bulk of the soybeans are produced continue to get adequate rain. All bull markets need to be fed to continue and this one more so since it is in the face of growing world balance sheets. We can say that the South American weather market has not turned bearish, but it is not bullish enough to keep the bull fed. Which brought out the sellers. Corn held on fairly well in the face of the selloff in beans. The US still has the cheapest corn in the world and we see that reflected in strong exports. Exports this week were strong and well above pretty lofty expectations for corn. They were also well above expectations for wheat and middle of the range for beans. Interesting to note that on soybean oil, USDA raised their export target for the entire year and we are already above it again.
We got the NOPA crush report this week as well. It is no surprise but still encouraging that we broke the all time record crush again. We had just set a new record in October and December’s crush blew that away. This increasing crush is from the new crush capacity we are adding in the US in response to government incentives for biofuels. With the biofuel policy of the new administration still unknown, there have been some crush plants idled at the end of the year when the $1.00 per gallon blender tax credit expired. There may be more plants idled if we do not get some guidance or at least hints of direction from the new administration. Ethanol production dropped a little from last week but still remains at very high levels and well above the pace needed to reach USDA’s estimate for the year.
Going forward the market is going to be watching South American weather and looking for some guidance or at least hints of what the biofuel policy is going to look like. The inauguration is quickly approaching and while the market thinks it has priced in what will happen, there could always be a surprise. Grain markets will be closed Monday for the MLK Holiday. They will open Monday night at 8pm eastern.