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02/26/2024 Bears Retain the Upper Hand but Bearishness Should Soon Be Dialed In

By The Commstock Report
On the Grains Grains are lower to start this final dismal week of February. Though private estimates for Brazil's crops continue to fall, the news falls on deaf ears after Friday's pitiful bean export sales and reports that poultry giant Perdue has three more cargoes of Brazilian beans headed for the U.S. east coast. Corn and wheat sales were both dismal as well, even though YTD sales remain ahead of pace to meet USDA targets. Topping it off was Friday's Commitments of Traders report showing funds selling the daylights out of corn at a record net short likely now in excess of 350,000 contracts. They were also continued big sellers in beans and both KC and Chicago wheat. Only their big net short in MGE wheat came down by a few hundred contracts. Thursday will put February out of our misery as the end of pressure related to farm selling to raise cash for Mar. 1 land and equipment payments we've described as the "John Deere low". Weather-wise, the latest 2-week outlook calls for warmer and wetter conditions for most of the country. Even that will likely be read as negative by promising an early start to spring fieldwork in…
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02/23/2024 Agonizing Wait for Bearish Grip to Ease with Few Signs Yet

By The Commstock Report
On the Grains Grains are steady to firm in overnight trade as this goes to press. We'll have the holiday-delayed weekly export sales at 7:30, which could set the tone for early trade. Expectations as follows: Corn, 700k to 1.5 million tonnes, Soybeans, 300K to 800K, Wheat, 250K to 550K. Two big reports due at 2 pm after markets close are the Cattle on Feed Report and monthly Cold Storage report for beef and pork in freezers. We'll see their impact Monday. The stock markets soared to new highs again yesterday on the stunning report from AI giant Nvidia, where quarterly profits were up 265%, blowing away estimates and pumping that stock up 16% in a single day. Other than that, the macro-environment remains conflicted. Weaker housing starts and retail sales argue for rate cuts, but stronger employment, GDP and CPI have the Fed signaling at best that the top may be in for rates, but cuts not likely until June at earliest. The crude oil market is looking toppy again, hitting solid resistance at $79. This week's data from the EIA was helpful. Ethanol output was up 7% over last year and strong enough in recent weeks to suggest…
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02/22/2024 Counting Down the Last Six Days for Basis Contract Price Pressure

By The Commstock Report
On the Grains Grains were mostly firm in overnight trade as of 6 a.m.  Weekly export sales normally released early Thursday mornings won't be released until 7:20 tomorrow because of the Presidents Day holiday Monday. The steady drip-drip of farmer corn and soybean pricing against March basis contracts taken out months ago has another six trading sessions to go due to this being leap year. Yet yesterday national average basis actually firmed slightly for corn and wheat while slipping but a penny in beans. Private estimates for Brazil's bean crop continue to decline. The latest was from Agroconsult, which completed a tour and cut their crop estimate to 152.2 MMT. That's up from the Brazilian Ag Ministry, which recently matched our own estimate at 145 MMT but still well under USDA's Feb. WASDE peg at 156.  Argentina's Rosario Grain Exchange has just lowered their estimate for that country's bean crop to 49.5 MMT, down half a million from USDA. (They also cut their corn estimate to 57 MMT, but that's still 2 million higher than USDA's 55 MMT.) The U.S. isn't buying Russian assurances that Putin opponent Alexei Navalny inexplicably died of what they termed "sudden death syndrome" in a…
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02/21/2024 Cash Selling to Meet Cash flow Needs Still a Drag on Recovery Hopes

By The Commstock Report
On the Grains Grains are all soft in overnight trade after yesterday's robust start to a holiday-shortened week. In corn and beans, the most likely culprit is steady farmer selling driven by Mar. 1 cash flow needs and pricing of a lot of basis contracts written against the March contracts. Though national average basis held steady yesterday, it's been softening on a weekly basis as cash movement picks up. News the Biden Administration would finally approve year-round sales of E-15 helped ease the sting of rule changes that will make it harder for ethanol to meet specs for Sustainable Aviation Fuel (SAF). Weekly grain inspections were all well within the range of expectations yesterday, with corn loadings at the upper end of expectations once again. Not only are YTD corn sales running well ahead of USDA expectations for the year, so are loadings. They're up 32% compared to a year ago vs. USDA's forecast for shipments to increase 26%. Sadly, that's not the case for soybeans and wheat, however. YTD soybean loadings are down nearly 23% from last year vs. USDA's forecast for them to drop less than 14% and YTD wheat loadings are still behind last year by nearly…
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02/20/2024 First Signs Market Bears Losing Heart for Continued Selling

By The Commstock Report
On the Grains Corn and beans are firm in overnight trade, with wheat mixed. There isn't anything particularly bullish in the news. To the contrary, the Biden Administration's sudden decision to change carbon footprint scoring making it harder for ethanol to meet specs for Sustainable Aviation Fuel (SAF) rather than easier came out of "left" field (literally and figuratively). Yet corn is firm in overnight trade because it's been declining for weeks and clearly hadn't yet responded at all to the "promise" of greater ethanol use as SAF. Weekend weather was mostly favorable for South America, where traders still face that huge gulf between USDA's Brazilian crop estimates and their own. Global winter wheat conditions continue generally favorable, especially in the U.S., and yet even KC wheat is showing a plus sign in overnight trade at 6 a.m. after closing lower every day last week. The best explanation for general firmness in overnight trade is that even market bears are losing the stomach for pressing the short side even further. Friday afternoon's Commitments of Traders Report showed funds continued selling the tar out of corn, soybeans, SBM and KC wheat through Tuesday of last week. Those funds had actually begun…
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02/16/2024 More on the USDA Outlook Forum

By The Commstock Report
PLEASE REFER TO THE HEDGE AND TRADE STRATEGY PAGE FOR UPDATES!! The USDA's Agricultural Outlook Forum has been widely reported on this week due to its production of initial estimates for the 2024 crop season. Among the highlights were projections for plantings to be down by 3.6 million acres for corn and up 3.9 million acres for soybeans, leaving corn acreage still larger than the soybean area by about 4 percent. Projected ending stocks of 2.53 billion bushels for corn and 435 million bushels for soybeans were built upon trend line yield estimates of 181 bushels per acre for corn and 52 bushels per acre for soybeans. The predictive power of these forecasts are limited, as proved last year with the early acreage estimates that were far from the actual outcome. Early yield estimates are also obviously limited in their accuracy. While the new supply projections mentioned above received most of the attention, there were other notable items from the Outlook Forum that can help shape our view of what might lie ahead for markets throughout the rest of the year and beyond. Here are some key excerpts selected from the USDA documents just released: • Prices for fertilizer such…
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02/16/2024 New Spring Weather Outlook Bodes Well for Most; But Not for Some

By The Commstock Report
On the Grains The markets are closed Monday for President's Day, so this report will return on Tuesday. Overnight markets are mixed as this goes to press, with corn and beans showing plus signs but wheat weak again. Yesterday's weekly export sales got little attention with traders digesting the new balance sheets just out from the Outlook Forum. They were actually very strong for corn. At 1.306 million tonnes, they were near the upper end of the range of expectations and kept YTD sales running 30.2% head of last year vs. USDA's forecast for exports to rise only 26.4%. Soybean and wheat sales were a bummer, however. Both came in near the low end of the range of expectations. For soybeans, YTD sales are down 19% vs. the USDA forecast for them to decline only 13.7%. (NOPA crush numbers for January were a little below trade expectations, down 4.9% from December but up 3.8% from January 2023 and the largest on record for the month.) Wheat sales YTD are hanging in there, however. They're actually up 6.6% from a year ago at this point vs. USDA's forecast for them to decline by 4.5%. One bright spot for the export outlook…
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02/15/2024 Hot off the Press! First Ending Stocks Estimates for 2024-25

By The Commstock Report
On the Grains Grains were weak again in overnight trade. Today and tomorrow USDA is conducting its 100th Annual Outlook Forum and we'll have highlights of key presentations as they unfold. However, as you're reading this, markets are already absorbing the first supply/demand balance sheets for the 2024-25 season just released ahead of opening sessions: Corn: Acreage plugged in at 91.0 million acres, down 3.6 million from last year. Average yield put at 181.0 bpa, compared to 177.3 last year, ending stocks at 2.532 billion bu. compared to 2.172 billion for this year, average farm price of 4.40 per bu. compared to 4.80 for this year's crop. Soybeans: Acreage plugged in at 87.5 million acres, up 3.9 million from last year. Average yield put at 52.0 bpa, compared to 50.6 last year, ending stocks at 435 million bu. compared to 315 million for this year, average farm price of 11.20 per bu. compared to 12.65 for this year's crop. Wheat: Acreage plugged in at 47 million acres, down 2.6 million from last year. Average yield put at 49.5 bpa, compared to 48.6 last year, ending stocks at 769 million bu. compared to 658 million for this year, average farm price of 6.00 per bu.…
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02/14/2024 Two Key Drivers behind Overnight Weakness in Grains

By The Commstock Report
On the Grains Grains are lower in overnight trade with wheat down double-digits. Two factors are at work, the first is the "aftershock" of yesterday's disappointing small decline in the CPI compared to trade expectations. It's hard to explain how coming in down just slightly to 3.1% compared to December at 3.4% can be seen so harshly negative compared to expectations for 2.8%. But just 3/10ths of 1% difference caused the stock market to tank more than 500 points and reignited the uptrend in the U.S. Dollar Index. The message it sent to the market is that the Fed was on solid ground poo-pooing last month's market chatter of up to six rate cuts possible through year end. Yesterday's data told the world "it is what it is" and that interest rates will likely stay higher for longer than most were hoping. The second driver for overnight weakness is likely trade bracing for bearish balance sheets for the 2024-25 marketing year in tomorrow morning's first batch from USDA's annual Outlook Forum. Though nearly 40% of the country is still suffering some degree of drought, that figure has been shrinking as well as the "intensity" of drought within the footprint. That…
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02/13/2024 Why “Quiet, Mixed” Trade in Low Volume Holiday Trade is Noteworthy

By The Commstock Report
On the Grains Grains are mixed but leaning lower in overnight trade as of 6 a.m. Favorable weather for Brazil and Argentina continue to pressure prices despite wide disagreement over how much irreversible damage was done to crops early in the growing season. Yesterday's weekly export inspections were pretty decent for a change with corn and soybeans falling near the upper end of expected ranges and wheat midpoint in that range. Market volume is very low due to South America celebrating "Carnival" and China off for "Lunar New Year." Actually, for markets to be steady-to-mixed despite low volume trade is encouraging because it suggests little new selling by funds, who are enormously short. That alone offers a hint they may soon grow impatient and begin to lighten up. If they do, that could trigger commercial buyers into taking advantage of these awfully low prices. Alas, even that is a slim hope for now as traders await this week's first 2024-25 balance sheets from Thursday and Friday's USDA Outlook Forum. Today we could see that inflation during January was under 3% for the first time since March of '21 and a solid drop from December at 3.4%. If so, it could…
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