This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Corn and soybeans have managed to put together a few positive closes in a row. Planting continues to progress faster than the five year average. The funds have been massive sellers of corn, soybeans and wheat the last few weeks as a result. There are some isolated spots that are being held up in the Eastern Corn Belt but nothing widespread. We will be well over 50% emerged on corn by Tuesday’s Crop Progress update (delayed from Monday due to Memorial Day) so we will see the first corn condition ratings from USDA. Much of the Western Corn belt got much needed rain this week. The Western Belt still has significant soil moisture deficits but this rain will buy them some time. It is interesting that the market was able to rally despite these beneficial rains and no other new bullish headline we can point to. We are seeing seller exhaustion after the fund driven drop. Hopefully the negative has now been priced in. There is still a lot of growing season ahead for the market to take all the weather premium out. There is growing consensus of a higher pressure ridge building over the western corn belt in the long term forecast, but the exact location is critical to know if there will be crop damage or not. If it sets up just a little further west, it will not have as much of a negative impact on many crop acres. If it moves further east, it could harm more crop acres. With all the uncertainty inherent in the long term forecasts the market will be watching closely for trends.
The rumors that are coming out of the Administration related to biofuels continue to be bearish for corn and soybeans. There are rumors that the volume obligations are going to be lower than earlier anticipated and on top of that there have been hints that the Administration may further undermine those by approving exemptions for some refiners like they did under Trump’s first term. Despite all this, new crop Dec corn has rallied 18 cents from the low of 4.35 to the close on Thursday of 4.53. Soybeans have rallied 25 cents gaining back some of what was lost last week on the soyoil induced selloff.
The weekly ethanol and export reports have been supportive though. Last week we had an unexpected drop in ethanol production below what was anticipated and despite the drop in production we had an increase in stocks. This week we saw ethanol production rebound and come in above expectations and ethanol stocks decline more than expected which was a relief to see. Exports remain very strong and are running 28% higher than last year while USDA is only projecting a 13% increase. We have averaged 50.3 million bushels per week for the last 8 weeks compared to 31 million bushels last year. We do expect exports to fall off dramatically when Brazilian second crop corn comes to market but that will be August at the earliest. Soybean sales were also at the top end of expectations.
If we get a real scare on weather, the market is going to have to react very quickly and with the funds still hold a big short position, it will happen fast. We need to be ready to sell corn whatever weather rally we get before the June 30th Planted Acreage Report. The grain markets will be closed Monday for the Memorial Day Holiday.