This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Corn, wheat and soybeans took a bit of a breather on Monday after a very strong run last week. It has been a while since wheat was the leader to the upside, but that is exactly what we saw last week as grain traffic comes to a standstill in the Black Sea. Russia and Ukraine continue to hit each other’s grain infrastructure and shipping. Wheat pulled back Monday after Turkey announced they were trying to talk Russia and Ukraine into implementing some version of the Black Sea Grain Initiative that was so successful in moving grain early in the conflict. The surprising thing on Monday was that corn was able to hold onto gains despite the pullback in wheat.
Corn and beans continue to rally despite U.S. harvest looming ahead. Years of depressed prices have stimulated a lot of demand, so now this supply scare has really gotten the market moving. It will take a lot of work to slow demand. The Pro Farmer Tour highlighted unexpected production issues from the heat early in the season, which got the market’s attention. At the time, the weather looked very benign for August, but now it has turned hot and dry in areas with disease pressure, prematurely ending the growing season. That will affect both corn and bean yields. The funds have been big buyers of all ag futures in the last few weeks, building very large long positions. There have been no natural sellers ahead of harvest, but we will likely see more selling pressure as we move into harvest at very high price levels. Look for the market to continue to be volatile. USDA will release its September Supply and Demand update Friday, Sept. 11, at noon.
The market is anxiously awaiting an EPA ruling that will affect biofuel policy. The administration is desperate to do anything it can to lower fuel prices ahead of the election since we are making no progress in the Middle East. The bulls fear they may try to undermine some biofuel policy to appease big oil interests. Several times last week, the ruling was rumored to be imminent but never came out. Each time its release was rumored to be coming, the soybean oil market faced selling pressure, pulling on soybeans. Good, bad or ugly, it will be good to get it out so the market will quit worrying about it. In the meantime, beans continue to rally on weather, disease pressure in the U.S. and the fact that we have nearly daily new purchases by China announced.
The market has given us a gift. The market is overbought and due for a correction, but one is not guaranteed even with harvest dead ahead for much of the Northern Hemisphere. It is hard to sell when the market seems to go up every day, but it is not as hard as selling when it keeps going down and we are praying for a bounce. Work orders to get some sales made on this rally.