This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Grain markets finally put together a couple of up days this week. The spark started with rumors of Chinese purchases. Then we finally got confirmation from USDA of some new-crop soybean sales to China, which helped put a floor in the market. The agreement between the U.S. and Iran has been confirmed by a statement from the Ayatollah of Iran. Crude has dropped dramatically this week, trading back to levels not seen since early March, when the conflict began. Several major producing countries have said they can return to full production within weeks of the full opening of the Strait of Hormuz, but some analysts are casting doubts on those claims. Crude did bounce off the lows but still had a dramatic drop this week. It is good to see the grains able to overcome the weakness in the energy markets. The selloff over the last several weeks has taken the war premium out of the grains, which helps them withstand the weakness in energy markets.
The funds are close to neutral now and unlikely to press the short side with so much growing season left in the U.S. Condition ratings are good but not at record highs. There are some trouble areas, but overall, the crop is coming along. There are some areas that have had too much rain and some that are in drought (including the Southeast). Overall, the market is comfortable where the crop is, but we do not have enough excess stocks this year that the market can afford to ignore any future weather threat to the crop. We still have to achieve big yields to add to carry out with the demand we have added.
The grain markets are closed today, Friday, June 19, for Juneteenth. They will open normally on Sunday night at 8 p.m. We have several big reports coming up quickly. The next one will be on June 30, when we get USDA’s Quarterly Stocks and Planted Acreage report. Then, on July 10, we will get updated Supply and Demand estimates and likely the first yield adjustments based on crop conditions and weather. Historically, trading has been very volatile around these reports, as we are also constantly pricing in updated weather forecasts and model runs.