This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Market trade this week has been decidedly bearish so far. Hoping for a Friday to change the trend. Corn and beans both hit resistance levels and could not break through and have both seen a pullback with beans losing more than corn. Beans had found strength on the back of a rally in palm oil which pulled bean oil up. Bean oil has led the correction lower this week and beans have come under significant selling pressure. This selloff came right after the USDA report that was friendly for beans shows that the market’s main focus is no longer the US crop. South America is the biggest factor right now on the supply side. They have actually now exceeded the 5 year average planting pace slightly after starting off behind. The weather looks non threatening and the funds are back building a short position. We are seeing impressive exports but the market assumes some number of them will be canceled if the South American crop continues to develop without a threat. The palm rally has shown that something outside what we are normally watching can spark a rally in the beans, but in order to get a sustained rally we are probably going to need a production threat in South America.
Corn has a more positive outlook which is why it has held up better this week. Corn supply is shrinking while demand is growing. We still have a cushion in corn, but it is at least going the right direction for the bulls. Exports are still screaming along way ahead of even last year’s blistering pace. We hope a lot of those sales have shipped by the end of the year so they cannot be canceled. The ethanol production number this week set a new weekly record! And we did not see stocks jump on the increased production. One threat to corn is the fact the funds have fully exited their short positions and have started to build a small long one. We hoped for more of a rally while they were exiting but there was enough selling to allow them to exit.
Everyone is watching the news closely for the presidential appointments to try to guess the policies of the incoming administration. A short list for USDA Secretary has been reported but not confirmed. Lee Zeldin has been announced as administrator of the EPA. Former Representative Zeldin does not have an encouraging voting history for biofuels during his legislative tenure.
Markets are probing for support and the bulls hope we find it soon. Market will continue to closely watch exports and demand on corn and South American weather for beans.