This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Grain and oilseed markets were all off hard on Monday with front month contracts trading down double digits in corn, wheat and soybeans. The commitment of traders report on Friday after the close showed the funds were big sellers in corn and wheat through last Tuesday. They see improving crop conditions in US wheat and drought conditions receding in the corn belt. The crop is being planted at or ahead of average pace and see no reason to be long. The funds were buyers of beans last week but started off this week on the sell side.
USDA reported corn planting at 40% complete vs 41% expected and compared to 24% last week, 35% last year and 39% on average. Soybean planting was estimated at 30% complete vs 31% expected and compares to 18% last week, 24% last year and 23% on average. Soybeans are further ahead of average than corn but they are both moving along very quickly. We see a wide open window in the 6 to 10 day forecast for most of the Midwest for planting to continue at a rapid pace. That is why the funds have been sellers of corn and beans. Historically, an earlier planted crop has a higher probability of trend or above yield. But there is still a lot of growing season ahead that we have to trade through.
The weather in South America appears to be drying out as the monsoonal rains come to an end. The Southeastern areas have already seen the moisture shut off but the first crop of soybeans is done and the corn is almost done. Mato Grosso will continue to get some rainfall which is needed to complete the second crop corn.
Ukraine attacked a key Russian ag export facility this weekend but the ag markets, especially wheat did not seem to notice (or care). There have been too many headlines from the war in Ukraine but exports have not seemed to slow down. It certainly bears watching but the market is not going to react until we see a change in grain flows. Russian production estimates will also be out this week and I am sure they will be very reliable.
The May USDA supply and demand report comes out on May 12th and they will give us our first look at yield estimates. I do not see a big chance of that report giving the funds a reason to jump back in on the long side. We need some kind of story line to bring the funds back on to the long side. I think the best chances we have for that are a trade deal that includes ag commodities or threatening weather later in the growing season. The administration keeps hinting that it has some trade deals done but we have not seen them yet. There seems to be a de-escalation with China as well which is very good for ag markets, but the market did not have a full trade embargo priced in so we are probably not going to see much upside from just steps in the right direction. We are going to need to see a deal that specifically includes ag products and we are probably still a ways off from that. We need a weather scare in the US to really get the market’s attention but it needs to happen before the June 30th planted acreage report.