This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Election day is behind us and the outcome is not in question. That is a weight off the market right now. The markets have not started pricing in policies of the new administration yet because frankly, we have no idea what that is going to look like. There was a lot said during the campaign, but we do not know yet what was just campaigning and what was serious. One thing the market will be watching closely is a change in Chinese behavior. Will they start trying to buy more US cargoes in anticipation of a trade war? Will they stop or slow the buying they were doing leading up to the election? Only time will tell.
Soybeans had found strength leading up to the election and have continued that strength afterwards. The strength in beans is coming in spite of good weather in Brazil. They have managed to catch the three year average planting pace after starting late. The long term models show some possible issues but not much stock will be placed in those until we get closer. The long term models are notoriously unreliable. The strength in beans has come from strength in the palm oil market. That has pulled bean oil along with it and dragged beans and meal as well. Exports this week were higher than even the loftiest expectations and beans were at the upper end of the range. Bean oil was also sharply higher than expectations adding more fuel to the rally.
Harvest is all but behind us now, so the market will be closely watching the USDA report that comes out this afternoon at noon eastern. We are not looking for any major adjustments but the market is expecting USDA to make at least small cuts to the size of the corn and soybean crops. The market is also looking for minor reductions in carryout for both corn and beans as well. The big adjustments will come on the January report where USDA has the added benefit of having an actual count of US stocks to go along with the harvest data. They call the January numbers the final ones because they will not make any more adjustments to the size of the crop until the very end of the crop year, next september.
Corn has supportive fundamentals of its own but cannot break out of the channel we have been trading in. Ethanol production this week was well above expectations once again and we see almost daily export sales announced. The US needs to be doing all the export business we can right now and we are. We are well ahead of last year’s pace so far this marketing year.