This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Soybeans continue to be the leader this week, trying to put together some strength. The rumors all week are of huge Chinese purchases of U.S. beans, but the sales confirmed by the USDA so far have been disappointing. There is talk that sales just this week could total over 1 million metric ton, but if we do not start seeing these confirmed by USDA flash sales, the market is going to run back into the risk of giving up the hard-won gains and more. Domestic bean basis is gaining some strength as processors are trying desperately to get cash beans to move.
Corn found some strength early in the week but has been unable to push through the $4.50 level so far. There is enough support to keep the market from dropping so far, but not enough bullish momentum to go much higher, so we are just caught right in the same trading range we have been in for quite some time now.
Wheat has managed to put together a little momentum of its own, trading more than 22 cents higher than the lows in Thursday’s session. There is not a lot of new news in wheat. We have not read much about progress with Ukraine and Russia this week, since most of the news has been about Venezuela. I do not think the market is sure if the end of the war in Ukraine is even bullish or bearish for wheat. World stocks are building, and there is no new weather or geopolitical crisis in wheat right now, so it has been hard to build any momentum. We did get winter wheat conditions from some states this week, with Kansas’ good/excellent rating dropping 10 points since the beginning of December to 60%. But there is still a lot of time before the crop is made.
We do have the trading volume back now after the holidays. The market has a lot of crosscurrent forces right now that can be hard to interpret. There is positioning ahead of the all-important USDA crop report on Monday and index fund rebalancing in the new year. Funds that track commodity indices need to buy and sell different commodity holdings to match the index that they are tracking when changes are announced at the beginning of the year. We’re seeing a lot of that happen this week.
Monday’s USDA report is one of the biggest of the year and sometimes contains big surprises. The market is only expecting minor tweaks to the corn and bean balance sheets. We are looking for corn production to be down a little, but that to be offset by reductions in feed demand, leaving only very minor reduction to the corn carryout. USDA has kept a suspiciously high number for feed demand through the fall, in what the market believes is anticipation of a final reduction in yield. We look for corn carryout to be somewhere around 2 billion bushels. Market is looking for an even smaller reduction to bean yield and production, but to be more than offset by reductions to exports, leaving carryout slightly higher than the last estimate. These are the expectations, but again, this report has a history of surprises, so buckle up. This report could set the tone of the market for a few weeks as we watch weather in South America and then start looking to U.S. acreage allocation.