This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
There have been plenty of headlines this week on the war in Iran, trade with China and some fundamental news as well. The grains continue to distance themselves from just following energy prices based on war headlines. There have been plenty of headlines out of Iran this week and lots of volatility in crude oil, but since the grains have some headlines of their own to trade, they do not need to follow blindly.
The same weather pattern seems set to continue for at least another week. It is very wet in the Eastern Corn Belt and very dry in pretty much all other areas in the U.S. The West has been hit especially hard, and that is showing up in the wheat market. The Southeast and Midsouth may be worse, but that is not reflected in any ag market. The hard wheat in the West is suffering just like our wheat is in the Southeast. The forecast calls for a cooldown across much of the country, with some areas of Iowa possibly getting up to 2 inches of snow. Most Midwest farmers are likely holding back until we get this cold snap behind us before getting started planting. Much of the Corn Belt will likely start rolling the planters Monday.
In South America, there is still no major threat to the last of the bean crop or the second crop corn in Brazil. Argentina is getting too much rain, but not enough to cause major issues yet. We have seen some major market rallies on too much rain in Argentina at harvest in the past, so everyone will be watching closely, but there is still time.
Corn exports were very strong once again this week. Beans and wheat were at the bottom of expectations, but not much was expected. Ethanol production came in at the top end of expectations, holding steady from last week. Historically, we see a seasonal decline in ethanol production this time of year as plants struggle to get farmers to move corn, so they take downtime for maintenance. We are not seeing that this year so far. On the flip side, ethanol stocks did rise more than expected and exports slumped. We need to continue watching that to see if it is a trend. NOPA crush came out this week, and we continue to completely blow away last year’s new monthly records. Crush was below expectations, but the market was looking for very big numbers. If we continue at the current pace, USDA will likely need to raise domestic usage yet again. And with such good crush margins, we can call that probable right now.
Markets got excited Wednesday from a Trump tweet saying that China was very happy he is opening the Strait of Hormuz and President Xi would give him a big fat hug when he gets there in a few weeks. That immediately sent soybeans higher and pulled everything with it. A lot of the soybean rally is predicated on China buying more beans and the scheduled meeting with Trump and Xi happening in May. If something comes out to question that, we are going to see a quick correction in the bean market. A lot of the cotton rally is also on the hopes we see some Chinese purchases of cotton.
We will be watching for planters to start rolling in the Midwest next week. Outside markets and geopolitics will continue to create the possibility of headline risk. We are all praying for rain in the Southeast. Hopefully the cooldown will buy us a little time.