This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
One of the joys of being a grain market analyst is I either have more to say than I can fit in the allotted time or there is almost nothing to say. This week has been the later. The ag markets are trading low volume and small ranges. There is no new headlines to talk much about. We got some trade deals that were splashed in the headlines but we still do not know enough details and it is unlikely there is enough in them to change agriculture flows. This is not to say that the Philippines and Japan are not important ag trading partners, it is just to say that we do not think that ag trade with them will change meaningfully. We need a deal done with Canada to preserve our ethanol exports to them. We also need to make progress with China to preserve some soybean exports to them. And Mexico has stepped up the last few years as a huge buyer of US corn due in part to crop failures. They look to have a better crop this year so they may buy less but they are still a top destination for US corn.
Weekly reports this week were mixed. The ethanol production report was not bullish corn as production declined more than expected and all but guarantees USDA’s ethanol estimate is out of reach. The market will now be looking for a 30 to 40 million bushel decline in ethanol usage from USDA. In addition, ethanol stocks rose more than expected. Offsetting the slowdown in ethanol is exports which rebounded this week and were above expectations. That pace ensures we will meet or exceed USDA’s updated estimate for corn exports.
The market reacted last week higher when the weather models were adding heat to the forecast. While temps will be very high this week and next week, the models are indicating a trend toward cooler temps as we move into August. The western belt is extremely well watered, almost too much in some areas. They will be able to handle the heat better than areas that missed some showers. There are areas in the Eastern belt that have not received as much rain and the night time temps may set some records in the east. That is where we are going to see more stress. NDVI values are average in the east and off the charts in the west going into this heat so the market will be watching closely for the trends.
The bulls are still waiting on the same things we have been for weeks now: threatening weather, trade deals or biofuel policies. The window is getting smaller by the day for weather to matter enough. We have the makings of a trend plus crop and the market is still trying to price in how big. The bulls could use some trade deals that mention ag specifically or bullish policies on biofuel. There were rumors that China was buying higher priced Brazilian beans rather than US origin to send a message. The market is holding onto hope we are making progress with China, but we need to see them start buying US beans.