This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
After seeing Monday’s selloff, it did not seem like we would be able to salvage much in the market this week. Yet by Thursday’s session, both May and December corn managed new high closes for the move. Both have traded higher, but we had not closed higher previously. Trump did confirm he was going to postpone his trip to China, so soybeans have not recovered all of their losses from Monday. Most of that selloff was concentrated in the old-crop beans. It was the old-crop contracts that were locked limit lower, 70 cents. The new crop was down 40 cents. The old-crop market was adjusting expectations for more Chinese purchases. New crop has already recovered about half of the losses from Monday.
With some exceptions that are only really clear in hindsight, the fundamentals—which is to say, the supply and demand for corn and soybeans—do not really matter as much right now. What happens in the Middle East is the bigger driver of market direction. Crude has continued to move higher through much of the week, which has brought the spec money buying back into corn and beans. The U.S. administration and world governments have tried to do everything they can to keep a lid on energy prices. Iran has tried to do everything it can to keep as few ships as possible moving through the strait. Early in the week, markets were thinking we may be seeing at least some sort of equilibrium in Iran, and energy markets were trading sideways. Then, later in the week, missiles and drones started hitting more energy infrastructure. Before this week, there have been some hits on energy targets, but overall it was the exception, not the rule. That may be changing this week, and if it is, it could drastically change the nature of the conflict and the fallout.
The futures market’s job is to digest all the uncertainty and give us the best guess of what is going to happen in the future. Usually, when we are reading the tea leaves, so to speak, we are talking about acres and yield or demand and saying, “If this happens, we will see the market do this.” Right now, all of that supply and demand is a moot point. What matters more is what the Iranians do and what happens next in the war. The geopolitical risk is enormous, and things can change so fast now and can happen at any time. The only way to manage this risk is to keep making sales when the market gives us higher prices. There is no way to know where the top will be until it is behind us. We cannot sell our whole crop at the top. The only way is to do a little bit at a time.
We get a big report on March 31, but I do not know how much the market is going to watch it this year. The prospective plantings report can be a big market mover, but those planting intentions are as of March 1. A lot has changed this year since March 1. Is the data even still relevant? We will not know until we see the data and also see the market’s reaction. Last year, the numbers looked very bullish, but the market did not react very much. Later, it was clear that the numbers were just wrong, and the market knew it.
Buckle up and hold on. This ride is far from over. Get objectives in your mind and orders in the market.