This is the Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
The second week of 2024 is not starting off any more friendly for the grain bulls as the first week. Soybeans started off the week down double digits, corn down a nickel and wheat down almost 20 cents. Exports from last week were below even the lower end of expectations. Soybeans and wheat were the leaders in the selloff. Soybeans are still under pressure from the general soaking rains falling in Brazil. There is some damage that is unrecoverable from the three months of heat and dry weather but right now rain makes grain and the market continues under pressure. The rebound in Argentine production will also help offset some of the loss in Brazil. The US continues to see record domestic crush but crush margins have recently dropped so that might ease up demand some. Wheat has come under pressure from beneficial moisture falling in the US Plains, lack of Chinese interest in additional purchases, and Ukrainian grain movement despite stepped up Russian attacks.
Outside markets have not been friendly for the grains either as energy prices drop and the US dollar is rallying. The dollar saw some weakness toward the end of the year which we were hoping would continue but as the market dialed back expectations for rate cuts in the upcoming year, the dollar turned the trend around and has been trading higher. Energy prices are soft as Saudi Arabia announced they were lowering the price of their oil to mostly their Asian customers. They seem to be worried about demand and economic growth and are trying to nudge the economy.
We get USDA’s updated supply and demand report on Friday. The January report is a big one as there are a lot of things they will be updating on both the supply and demand side of the balance sheet. USDA will be updating their US crop yields and this will be the “final” US crop number. There is a lot of chatter in the market USDA may raise US corn yield to 175 bu/acre. There is not much consensus among market participants if USDA trims or adds to soybean yield. On the demand side, some are making a case for corn exports to be trimmed a bit but ethanol and feed usage is up enough that USDA will probably increase demand enough to offset any increased production. On soybeans, the market is anticipating exports being trimmed and therefore the US balance sheet may get a little larger even if US domestic demand is bumped a little higher. China has been very quiet after the New Year and we have not seen any new purchases so far.
CONAB (the Brazilian equivalent of USDA) will be out Wednesday with their updated production estimates before USDA gives us their estimates on Friday’s report. Market will be closely watching both. One positive thing about a big selloff before a USDA report is that the market will have a bearish number already priced in so we may not see a bearish reaction.