This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
The close on Friday was very disappointing, but it happened on low holiday volume, and corn and beans both at least closed off the lows. The first full week back from the holidays started off on the right note. Soybeans closed up solidly double digits, leading the way, but corn was also able to recover about half of last week’s losses, just as a follower.
We knew a rally in beans would take either a weather headline from South America or a trade headline from China. Monday’s rally was mostly from the latter. The rumors on Monday were that China had bought as much as 14 cargoes of soybeans. These rumors will need to be confirmed by USDA’s flash sale announcement this morning, or the market will give back a lot of those gains.
If the rumors are confirmed by USDA, rough math has China with around 10 million metric tons of soybeans on the books, leaving only 2 million metric tons to reach the 12 million metric tons target the U.S. side has touted. But that number has still never been confirmed by the Chinese side. Many (full disclosure, that includes me) were skeptical that the 12 million metric tons target could or would be achieved, but we are very close to doing it now.
Unfortunately, though, even with 12 million metric tons of beans sold to China, USDA may still be forced to lower its export estimate. There is still a good deal of buffer in its export estimate.
Corn was mostly a follower on Monday, but it still trades solidly in the middle of the recent trading range. The market is mostly treading water, waiting on the all-important Jan. 12 Supply and Demand update and Stocks Report. This is one of the biggest reports of the year because it gives us the “final” crop size and is the first stocks report of the new crop. There is even more risk for a surprise this year since the government shutdown canceled some monthly reports.
There is a little talk of dryness in Argentina, but not enough yet to cause production concern. The markets are still pricing in near-perfect crops in South America. If there is a legitimate weather threat that changes that, the market will have to get that new reality priced in quickly.