This is the Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
After making multi year lows during the trading session last Monday, Feb 26th, corn managed to claw out a pretty decent week last week. The funds have built a record short position in corn and were no doubt buyers on the rally last week but we finally have another natural buyer. When the corn market was falling every single day and we were projecting a decent carryout, end users felt no need to jump in and buy any coverage for future needs. When the market finally shows some strength and has put in at least a short term bottom, it can attract end users to come back into the market and that is what we started seeing last week and to start off this week as well. Like I said last week, we do not know how long this low will hold but at least we have a little bit of hope now. March basis contracts had to be priced or rolled now and a lot of the cash farmers needed for early March payments has been raised now. I hope we have seen the lows behind us now but the corn market still has work to do. It needs to encourage demand and make sure we do not plant too many acres. If the corn market rallies too much right now, we are going to encourage too many acres to be planted. We finished setting the crop insurance base prices for corn and beans in February. Insurance base prices were down 21% last year for corn and 16% for beans. The market will also start watching US weather forecasts more as we head rapidly toward spring.
Beans were not able to get as much traction as corn as we still have not seen any interest from China. South American production estimates remain up and down with Stone X raising their production estimate just a bit from their February estimate while many other analysts are lowering theirs. Most estimates are still well below USDA so we believe USDA has more room to bring theirs down. How much USDA reduces their will help set the market direction. We get USDA’s updated number Friday, March 8th at noon. After this Friday’s USDA report, the big report we are all waiting for comes out on March 28th. It will be the prospective plantings report and quarterly stocks report. This is a big report and in some year’s has the potential to move the market. We will get a better idea of market expectations as we get closer.
The longer we continue to see strength in the corn, the better the support levels will be at the lows from last Monday. The market will be watching closely to basis numbers across the country to gauge if the farmer selling is behind us. It should come as no surprise to anyone that the EPA missed the Friday deadline to announce final rules on ethanol for Sustainable Airline Fuel. It will probably be several more weeks before we get any more information about that but the market will be watching ethanol production and stocks and also exports. Beans will trade South America harvest progress and wheat will trade headlines.