This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Corn and beans continued the slide lower Monday after a disappointing close on Friday’s session. Corn gave up all of its gains for the week on Friday March corn approached a very important support level of $4.81 which is the uptrend line on the charts. It was able to hold above that support level during Monday’s trade closing at $4.825. The selling pressure has come mostly from the shift in weather in Brazil and Argentina. Many areas of Argentina that needed rain have been picking up showers and the Rosario Grain Exchange reported condition ratings improving more than expected. In Brazil, the center west production regions have gotten a much needed break in the rain. In the country as a whole, they have caught the 5 year average harvest progress in the last two weeks. Mato Grosso produces 29% of Brazilian soybeans and they have almost caught up to the 5 year average. As of Friday, they were estimated to be 69% harvested which is only 4% behind the 5 year average. Catching up on soybean harvest has allowed them to get even further ahead of the average on second crop corn planting. Mato Grosso accounts for 50% of the second crop corn and they are 67% planted which is 11 points ahead of the five year average. The whole country is 54% planted which is 15 points ahead of the five year average.
This is so important because on the last report USDA dropped Brazilian corn production based on late planting. Now that planting has caught up, will they add that lost production back or where there other factors in their decision?
Demand on corn remains very robust. Ethanol production last week stayed very strong although stocks were up more than expected. Corn exports continue a very strong pace. They have averaged 56.6 million bushels/week compared to 44.3 million bushels/week last year. While the pace of bean exports has fallen dramatically as South American beans come to the market, it was expected and so exports were respectable at the upper end of market expectations. The four week average for bean exports is 13.7 million bushels/week compared to 6.5 million bu/week last year. Wheat sales were also solid and soyoil saw a positive number after net cancellations the previous week.
The NOPA crush report came out last week and while January crush was a little below expectations, it set a new record for Jan, blowing last year’s record out of the water by 15 million bushels. Domestic demand continues to make up for slowing exports. We have set new monthly records for each of the 5 months of the new marketing year. Despite this impressive crush and soybean oil yields well above those of the last 7 years, soybean oil stocks are still at very tight levels. One concern in the crush was that with a lack of guidance on biofuel tax breaks, we would hit a wall and oil stocks would start building rather than being blended into fuel. Low soybean oil stocks will keep tailwinds behind crush even with the uncertainty we are facing on biofuels