Brooks Schaffer Market Report for Friday, May 1st

Wheat has been the leader once again, with several factors driving the bulls. The wheat crop in the U.S. Plains looks like a disaster. Every time rain is in the forecast, it disappears as it gets closer and then does not come. That sounds familiar to many of us in the Southeast over the last few months. The crop is rated very poorly, and things are not getting any better. The funds are estimated to have a four-year record long position in Kansas City wheat. Conditions in the Eastern Corn Belt, where soft red wheat is grown, have been better. It has been too wet in some areas, but that crop is in much better shape. Chicago wheat is rallying as well, just being pulled by the KC wheat. Possible damage to wheat in Eastern Europe from cold temperatures is also bringing speculative money into wheat. But a bigger factor right now is just a reignition of the inflation trade. Energies are starting to price in longer blockades of the Strait of Hormuz than we were talking about even just last week. No progress on talks seems to be happening, and both sides are digging in. There is not the dramatic talk of wiping out civilizations anymore, but there is just no visible progress. As energies move higher, that reignites the interest in the inflation trade, and wheat attracts a lot of attention from the funds. So we are seeing a lot of money flow coming into wheat. The strength in wheat is pulling corn and, to a lesser degree, beans higher as well. That was apparent on Thursday, when wheat saw a significant correction lower, and corn and beans fell along with it. After soybean oil was able to stage a recovery and trade higher, it pulled beans higher, and that helped bring corn off the lows.

Another headline helping support corn is how much moisture has fallen in parts of the Eastern Corn Belt. Some areas of Michigan have flipped from drought conditions to the wettest March and April in 134 years. Headlines of planting delays may bring some fund money to the market, but there is still plenty of time to get the crop in the ground. There are also some headlines about the end of the seasonal rains in Brazil. It is a bit early and will catch some of the second-crop corn, but most of it was planted early and is already mature. Currently, it looks like any loss in production in Brazil will be made up by increases in production in Argentina, but, as they say, it is not made until it is in the bin. So that could change.

It is easy to get busy in the field this time of year and not check the market as much, especially since there has not been much exciting to look at for a while. New-crop corn and beans have managed to trade to new highs without a lot of attention. The high pressure that was blocking all the moisture in the Southeast has broken down, and most have gotten at least a little rain. For many, it does not start to dig out of the hole, but at least we stopped going backward. With corn and beans at new highs and our crops getting a little drink, everyone needs to think about pricing some new crop.