This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
The markets were closed on Monday for Martin Luther King Jr. Day, so as of this recording, the market has not traded since Friday’s close. Corn put in pretty good support last week. There was damage done to the chart, but those that wanted out were able to get out of the market on report day. We have more bushels than we thought before the report, but we also have growing demand. We blew out the old weekly record on ethanol production last week, and exports continue to set records as well. The funds are even close to even and may be hesitant to build short positions until at least the second-crop corn is planted in South America.
Rail values are staying firm and do not show any signs of weakening. The drop in the board will not help move bushels anywhere in the country, so basis is going to have to do some of the work. While I do see limited downside in corn right now, I also do not see much upside. Whatever strength we see back into the $4.30s, we need to be taking advantage of. Any price rallies would be met by farmer selling. The funds may be hesitant to push the short side of the market right now, but if the safrinha crop gets planted timely and has no issues, they may start pressing the short side again later.
Soybeans also held up well last week on good continued exports, good domestic demand and mostly positive rumors on the biofuel front. China continues to buy U.S. beans even at a premium to South America, and we are seeing those sales confirmed by USDA. NOPA crush came out for December last week, and we set a new December record and got pretty close to setting a new all-time record. With new crush capacity coming online, we need to be setting new records and growing crush every month, but we need the biofuel policies to be clarified so we know we have demand for the oil. The administration keeps kicking the can down the road and delaying the release of the rules, but last week Reuters reported it had a plan to finalize the 2026 blending quotas by early March.
According to the Reuters report, the volume quotas will be close to the initial proposals from earlier in the year, which represented a significant increase from previous years. Those volume quotas are bullish for soybean oil and therefore for soybeans, but the Reuters sources also said there is a plan to drop the plan to penalize imports of renewable fuels and feedstocks. The penalty for imported fuels and feedstocks for biofuels was part of an “America First” policy that was hailed as a victory by the soybean and biodiesel industry. U.S. refiners have warned that the new rules will disrupt fuel markets and increase costs. The administration is trying to cut consumer costs wherever it can, even at the expense of its “America First” policies. Overall, this compromise was viewed as bullish by the market, though we still have not seen the official proposals yet. Once they are announced, there will be approximately 30 days for comments before they are finalized. But that is more upbeat news than we have had in the last few months.
The funds may be hesitant to build a short position in the corn market, but there is nothing there to push them to the long side, either. Volatility has been very low for the last few years historically, with building stocks and no major weather issues. Demand has been growing as well.