This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
This is not the first year we have come back from the Independence Day holiday to fireworks in the grain markets. The inflation trade falling out of favor and the lack of escalation in the Iran conflict turned the funds into relentless sellers of ag commodities for weeks now. They have taken the whole war premium and weather premium out of the grain markets despite the fact we are still a long way from having a crop made. One week of record heat was not enough to scare the market, as some heat units were needed in parts of the Midwest. Now the heat is forecast to stay centered over the Midwest longer rather than moving west, as the models indicated last week. There is also more rain in the forecast for the parts of eastern Iowa that need a break from the rain. We are now starting to get more confidence in the forecasts through pollination. That is why the July 4 holiday can be such a key pivot point for the market trend. We do not know yet how far this bounce can go, but after making new lows last week and having such a significant bounce so far, the charts are looking better than they have in quite some time. A weather rally can be fickle, though, and the models can start trending the other direction, too, so caution is warranted, but we certainly feel better today than we did a week ago about the market.
Weather is key this time of year for corn yield as we get pollination in sight, but it means little for beans in the Midwest as long as they live. A nearly 50-cent rally in soybeans on Monday points to something else, in addition to weather, driving the market strength. The Chinese are shrewd traders, and they will not step in and buy when the market is dropping every week. Now that the charts have posted key reversals and look to be headed higher, this would be the kind of situation that would bring them off the sidelines if they were planning to buy U.S. corn and beans. There are rumors of Chinese buyers soliciting offers for U.S. grain, and that is adding to the bullish excitement. Wheat does not have much of a fundamental reason of its own to rally other than continued escalation between Ukraine and Russia. Throughout the long conflict, they have both been very restrained about hitting grain infrastructure, but that may be coming to an end as hostilities increase and Ukraine continues to hit Russia with increasing effectiveness.
We do have a USDA report coming out Friday, but after the lack of surprises on the stocks and acreage, the market is not looking for any surprises on the Supply and Demand report. The market will likely continue to trade weather updates and momentum. As is typical in these markets, every single news item is bearish when the market is falling and momentum is lower. Then, when the tide turns, it seems like everything turns. You can sell $12-plus cash beans for harvest after we were close to having a $9 handle in beans. Corn is back to where it was in early June. Get targets in your mind and orders working. It’s hard to sell when the market is going up every day, but it’s not as hard as selling when it is going down every day.