This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Last week, corn had its fifth consecutive weekly loss, while wheat had its ninth consecutive weekly loss. The market continues to price in the corn crop USDA gave us, and maybe an even bigger one. That is despite the fact that yield reports we are seeing are very mixed on corn. We are also not seeing corn basis collapse like one would expect if we really had a much bigger crop than anticipated. The futures market is pricing in a lot of corn, but so far, the cash market is not telling us the same story.
Bean yields continue to come in very good, so many are expecting USDA to possibly increase soybean yield on the next report. Funds have been aggressive sellers of soybeans, as they are not convinced the super El Niño is going to negatively affect production in South America. There is no significant weather threat to the South American crop yet, and planting has been progressing well. But there is still a lot of growing season ahead. The market seems very comfortable pricing in a big South American crop before much of it is even out of the ground.
We did get some encouraging news on the demand side Monday with a flash sale of 1.7 million metric tons of corn to Mexico. Of that, 1.1 million metric tons was for the current crop year. There has been growing concern about the lack of corn export sales since we have fallen behind last year’s pace. But we have to remember that at this point last year, China had not bought any U.S. beans, so we were getting more export business in corn. This year, China has been aggressively buying beans. Even with corn sales lagging last year, the pace is still the second strongest in history. Hopefully, this big sale to Mexico is a sign that corn has gotten cheap enough to bring some buyers back into the market. We need to see more sales like this to convince the funds to quit selling.
USDA released updated harvest progress Monday afternoon, and as expected, farmers made a lot of progress last week. Corn harvest advanced 14 percentage points to 74% complete. That was just ahead of trade expectations and has almost caught the seven-year average of 77% complete. Soybean harvest advanced nine percentage points to 88% complete, exactly in line with expectations and four points ahead of average. There is some wet weather moving across much of the country this week that will slow progress a bit, but we are getting close to having harvest behind us. That should start taking some of the harvest selling pressure off the market. It does not guarantee a rally, but it removes one of the things that has been weighing on prices.
There is still plenty going on in the outside markets. Ukraine resumed attacks on Russian refineries Friday after a two-week pause following escalating Russian attacks on Ukrainian infrastructure. Meanwhile, crude oil was sharply lower Monday on reports that the U.S. and Iran may resume talks. That is quite a change from last week, when Trump was talking about possibly resuming attacks on Iran ahead of the election. The headlines can change quickly, and so can the money flow in commodities.
The big question now is what will convince the funds to come back into the grain markets. Harvest pressure should begin easing, corn export demand is still historically strong, and there is a lot of growing season left in South America. But right now, the funds are not interested in buying. We need to see more evidence of strong demand or something change in the South American weather forecast to get the market excited again. Until then, it may be difficult to get much of a sustained rally.