This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
USDA elected to continue to kick the proverbial can down the road with their March supply and demand update. They have not made any changes to US corn or bean carryout since the Jan report now. One can understand a wait and see approach to demand based on all the geopolitical uncertainty we currently face, but corn export sales are up 26% from last year and USDA is only projecting a 7% increase. Either we are going to have to see exports slow way down very soon or they are going to be forced to trim old crop carryout soon. The stocks report on March 31st may force a change on the April supply and demand report. The beans face more uncertainty of demand with domestic crush slowing. Domestic crush has made up for slow exports but without any guidance on biofuel policy from the new administration we may hit a wall.
Even if I think its a bit of a stretch, I can see justification for no changes to the domestic corn and bean carryout. I struggle more to see how they can leave all their South American numbers unchanged. We have had a month of prime growing season in Argentina and Southern Brazil and the bulk of harvest completed in the center west growing region of Brazil. We should have a much better idea of the crop but USDA is sticking with their Feb numbers despite the new information.
The market was disappointed when USDA made no changes on the February report and sold off on report day. Since the grains have been so beat up the last few weeks, we did not see any bearish reaction to the March report. The grain market continues to bounce up and down based on headlines. Equities continue their downward slide without much of a recover bounce yet but grains have had some decent recovery bounces. This is because the grains still have to trade the fundamentals of supply and demand. A lot of managed fund speculative money has been taken out of the ag markets with the panic in the last few weeks. I continue to believe that will help insulate grains from some of the volatility. Not all of it because in cases where threats lead to real changes in demand, the market is going to adjust for that. For example, Wednesday’s selloff seemed to be in response to comments by the EU that they were going to tariff ag imports to the bloc. Then the market recovered much of those losses on Thursday after we saw strong exports.
The March 31st Prospective Planting and Quarterly Stocks report will snap the market’s attention back to US fundamentals for better or worse. The surveys that are used to compile that data have been going out this week. Market is expecting more corn and less beans and cotton. This report has a history of surprises and whatever we see on that Monday will set the tone for the next few months. Until then, we will continue to trade headlines but hopefully with a little less volatility.