This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
The week of Thanksgiving is always fun in the grain markets because we typically have thin volume, which can mean a lack of liquidity if there is a big market-moving headline. Also, first notice day for December futures falls on the Friday after Thanksgiving. This means that any basis contracts that are against the December futures have to be priced or rolled before Friday. Luckily, the market bounce this fall has given us an opportunity to price at least some bushels, so not nearly as many basis contracts remain as we had right after harvest. But there are still a good number of contracts that are on basis vs. December.
The December/March corn spread has been pretty volatile but has traded as wide as 15 cents during the month of November and as narrow as 11. It closed on Monday right in the middle of that range at 13. If you still have unpriced corn basis contracts, my recommendation would be to roll at anything below 13 and wait for another bounce in corn to price.
The market already showed a holiday lack of enthusiasm in Monday’s trade. We did get a flash sale of another Chinese purchase of U.S. beans, but it was not big enough to generate much excitement. It is better than nothing, but we do need them to pick up the pace if there is any chance to get to 12 million metric tons by the end of the year. The grain market needs some kind of bullish news to revive the buying interest.
Brazilian weather is currently seen as favorable enough to not warrant any market reaction. There are some areas that are too wet (southern Brazil) and other areas that are too dry (northeastern Brazil), but the current forecast points to both of those negative conditions moderating. AgRural estimated Brazilian soybean planting at 81% complete as of Nov. 20, which is 5 points behind last year.
There have been some weather threats in China, where heavy rains in northern China, which accounts for around a third of the country’s corn production, have disrupted harvest and caused questions about stored corn. If this weather continues, it could spark some Chinese buying in U.S. corn. China has so far bought no U.S. corn this year, yet we are well ahead of the pace needed to reach USDA’s export target. If China does start buying, it would be seen by the market as most likely coming out of carryout and tightening up supplies. U.S. corn is competitive in the world, on par with Argentina and well below Brazilian prices.
We are looking for flat trade this week, but as noted above, with less volume in the market, if a headline does hit, prices could move more than they would on a normal week due to less liquidity. That makes it more important to get working orders in case something happens to cause the market to jump higher and then fall back just as quickly. U.S. grain markets will be closed on Thursday for Thanksgiving and have an early close on Friday. I will not do a Friday report, so will be back to you next Tuesday.