This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Grain markets took a big bruising on Friday with a meltdown in the precious metal market, energy markets and strength in the U.S. dollar, which led to a risk-off attitude across the board. The grains have been trading such narrow ranges recently that we had become somewhat insulated from some of the outside market volatility, but that changed on Friday. Harvest is advancing in Brazil, estimated at 10% complete on soybeans, which will be a strong headwind for soybeans this month. The South American weather is starting to turn a little more threatening, with dryness popping up in parts of Argentina and southern Brazil, while other parts of Brazil are starting to receive too much rain, hindering harvest. Right now, the weather issues are not enough to threaten the record crops in the field, but they are enough to get the market to pay closer attention. Funds have been buyers of soybeans recently and reported a minor net long on Friday’s position of traders report. This is likely in anticipation of the biofuel rules, which we are expecting to be released at any time from the administration. Weakness in energies brought some selling pressure to corn. AgRural pegs center-south second-crop corn planting in Brazil at 13% complete.
Even after Friday’s move, volatility in the grains remains very low. We do not expect that to change in the near term. February starts the crop insurance base price averaging period. We have comfortable stocks in both corn and beans, but very strong demand. Both corn and beans are waiting on and hoping for bullish biofuel policies from the administration. Corn exports have been jaw-dropping big. Last year, we thought it was front-loaded demand ahead of the incoming Trump administration, but this year’s pace is even faster so far. We need all the demand we can get to soak up the excess supplies we have. Markets will be watching South American weather and starting to see more private estimates for U.S. acres on new crop. We will get USDA’s prospective planting report at the end of March.