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03/28/24 March USDA Quarterly Stocks and Planting Intentions Reports

By The Commstock Report
Farmers Made Good Acreage Decisions So Far   Last year farmers said they intended to choose just about the right mix of crops in the March planting intentions report. Then they second guessed and added 2 mln corn acres to the 92 mln initially intended. Planting conditions were not that good but they did it anyway. Blame mostly fell on a high 5.91 corn crop insurance price guarantee but the additional acres added approximately 350 mln bushels to production and subsequently the carry over that we did not need. It is now a burden that is still riding on the back of the corn balance sheet. That collective mistake of planting more acres than the market needed in 2023 has cost the corn market and thus farmers a lot. Until the balance sheet is corrected it will keep on costing us.   March is going out like a lion but the snow will quickly melt and provide moisture for planting. Given the unprecedented degree of field preparation work accomplished because of the abbreviated winter, it is unlikely that we will see extended planting delays and farmers should be able to plant whatever crops they want. We should have an early…
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03/27/24 April is critical to Brazil’s Safrinha Corn Season

By The Commstock Report
Brazil is about 75% complete overall with the soybean harvest mid-week with Brazilian farmers hoping the harvest low is behind them. The majority of the soybean crop remaining to be harvested is centered in both Southern Brazil and the Northeast.  Mato Grosso is wrapping up harvest this week while Rio Grande do Sul is just getting started yet with only 5% complete. We have 40% remaining to harvest on our farm in Minas Gerais.  Heavy rains have slowed the harvest which is both a blessing and a curse.  Rain at harvest can hurt seed quality on the beans but it is also helpful for second crop corn.   Surprisingly, yields are phenomenal so far on the family farm.  The running soybean average is around 72 bpa, with one field that did 83 bpa.  But we have our weaker fields remaining, and so we expect overall yield to fall to 65 bpa or less.  This is still at or slightly above our APH.  I would not have expected yields to rebound like this considering the start to the year.  We had our farm Christmas party around December 16th and things were looking pretty bleak at that point.  One big difference is…
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03/26/24 More E-15 Needs to be Put into the Game

By The Commstock Report
When I checked into the motel in Omaha for the NCAA tournament there last week, there to root for ISU this time, the topic being discussed at the desk was not the time for checkout or basketball…it was shocking gas prices. The clerk was complaining that gas prices had jumped 40 cents a gallon in just a few days there. She was critical of US oil exports seeing that as inflating our domestic price. That view surprised me a little bit. Another individual checking in was blaming it on greedy oil companies. US oil companies are producing record amounts of oil. Geopolitical turmoil has supported prices. Frankly some of it was the winter/spring blend seasonal adjustment. They switch from winter blends which are cheaper to more expensive summer blends. It was an all of the above confluence of issues that sent gas prices on a run. I was able to tank up on E-15 in Omaha for $3.19 gallon compared to E-10 for $3.29. Again, E-15 reduces pump prices rather than increases them as the Biden Administration fears. E-85 ethanol at our home station was $2.19 a gallon. My previous fill of E-30 had been just $2.69 a gallon. Average…
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03/25/24 Correction of the Correction into March USDA Reports

By The Commstock Report
Both corn and soybean markets have posted corrective rallies from February John Deere lows. We are a long way, technically or fundamentally, from turning major trends bullish. Short-covering appeared to run out late last week completing the first leg up of something. The best we should hope for is that the John Deere low holds if tested and the upside correction is complex and incomplete. If so, after this pullback another leg of rally would resume. Ellioticians call it an A-B-C corrective chart pattern.   Farmers were making some catch-up sales on flash bids from our local ethanol plant. They briefly pushed 22 cents over CBOT here and got offers filled quickly. Most farmers are hoping for more however. Sales are mostly driven by cash flow needs. Soybean basis improved a nickel but remained well below last year's basis levels.   USDA will provide some fundamental fodder for markets to chew over later this week in their quarterly stocks and planting intentions reports. The stocks report should tell us a couple things. It gives a read on demand consumption and also tells us where grain is positioned. In corn and soybeans; domestic usage, feed and biofuel, should be up versus…
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03/22/24 News of the Day

By The Commstock Report
News of the Day   A bearish tone developed for the grains on Friday morning as traders watched moisture move across the radar. Whether rain or snow, coverage was wide and spanned across most of the Dakotas, Minnesota, Iowa, and Wisconsin. The system was staying mostly intact as it crossed the Mississippi River. Another round of showers was expected to start up late in the weekend. The forecast was also shifting favorably for South America.   Futures volume looked to remain on the lighter side as some traders were probably preoccupied with the March Madness tournament. In actuality, corn and soybean volumes have been on a general decline since prices put in their lows on February 26th, the Monday following the expiration of March options. Open interest dropped off briefly as March futures went into the delivery period, but the numbers have since rebounded, which fits with the idea that the shorts bought back by speculators have been new contracts sold by the farmer.   After building up a record net-short position on corn in February, hedge funds quickly reduced that bearish bet by about 25 percent. Over the same timeframe, commercial hedgers flipped net-short in corn for the first…
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03/21/24 All Meat Sold in the US is not a Product of the US

By The Commstock Report
Why Label it So?   It took a while but mandatory "Country-of-Origin labeling" has now become voluntary "Product-of-America labeling." This rule, finally finalized by USDA, addresses a loophole created by the repeal of mandatory country-of-origin labeling in 2015 after which multinational meatpacking corporations began placing a "Product of U.S.A." label on imported meat packaged in the U.S. I was an active promoter of mandatory Country-of-Origin labeling which split the livestock/meat industries down the middle. It seemed to me that other countries were allowed to identify their product origin with labeling but somehow it was a restriction for us to do likewise. If mandatory, there was a cost to it but consumers said that they were willing to pay to know where the meat they purchased came from. This was back in the time when BSE in other countries threatened US consumer confidence here. Our meat import competitors saw this labeling as a trade violation and were willing to take a complaint to the WTO. Again, it was difficult to differentiate how our labeling products failed to comply with trade rules while theirs did. The playing field did not feel level. Mandatory Country of Origin labeling was taken under complaint in…
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03/20/24 Biodiesel versus Renewable Diesel

By The Commstock Report
One Clear Winner   Brazilian soybean production expansion appears to be hitting the wall. Every year they have planted more area and expected higher yields. CommStock estimates this year's Brazilian production will be 145 mmts compared to 154.6 mmts last year. Remember they started out looking for larger production this crop season so the turnaround has been dramatic. Profitability has been lost so the trend to grow more acres each year has potentially hit a wall.   The US has essentially conceded soybean export growth to Brazil. However, Brazilian soybean exports are likely to get curtailed below projections by less supply which could be made up by the US or Argentina. In the US the soybean industry has turned to domestic consumption for its demand growth. There has been a lot of hype and a lot of forecasts for expanding the domestic crush using soy oil as the feedstock for biofuel. Domestic soybean demand growth has been driven by a desire to reduce petroleum dependency transitioning to low-carbon renewable fuels.   The National Oilseed Processors Association (NOPA) released February crush data last Friday.  NOPA members processed 186.2 million bushels of soybeans in February, up 0.2% from January and 12.6% from…
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03/19/24 Election Year Lows in Natural Gas

By The Commstock Report
How and Why   The US is the world's largest exporter of natural gas, with supply growth unleashed by the technology of fracking as the co-product of shale oil production. While there have been NG supply reductions in Europe primarily caused by geopolitical conflict with Russia which had been their main supplier, the US has the capacity, given time to build the LNG export infrastructure, to mitigate such shortages. US LNG exports to Europe tripled and they would take more if available to them. If we do not displace Russian NG supplies in the world market someone else will or it gives Russia additional black-market opportunities. It will push China and Russia closer together. The laws of supply and demand and a global free market were in process of responding to these market forces as it should until…interrupted by US government intervention through regulation, with a pause in issuing permits to build said LNG export infrastructure. To build an LNG export facility the company needs permits from the US government to export the stuff. They have to have commitments from NG buyers approved by the Feds. If the buyers are from a country that has a free-trade agreement with the…
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03/18/24 Is a Lion Still Coming?

By The Commstock Report
The month of March weather came in like the nicest cutest little lamb we have ever enjoyed. The adage is that when that happens the month's weather usually goes out like a lion. I doubt that winter is over but the winter in its nastiest form should be. Our ground frost is gone, many fields have been worked that farmers would prefer a little frost returns temporarily. Whatever form of moisture we get, even if snow, should soak in unimpeded and be welcomed. If the lion brings moisture, then rather than something that would prolong winter, it would be a good thing. I was down to Des Moines and back late last week again and there are many fields prepared that are ready to plant. They will likely only wait until the crop insurance authorized date of April 10th to roll around. It is rather difficult to see right now where planting delays in the primary Corn Belt would come from. The central plains are under a rain shadow cast by the Rockies, the ECB is better watered than the WCB, soil moisture reserves are much less than desired, rain systems are rolling through the delta and mid-south and up…
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03/15/24 Grain Price Outlook Spit Among Technical, Seasonal, and Cyclical Factors

By The Commstock Report
Our customers and subscribers ask us every day to predict where prices are headed and lately the answers have seemed to take extra time to explain. It has been more necessary than ever to start any discussion about the price outlook with a clarification about the timeframe, whether it is short-run, intermediate, or long-term. For the grains, my answer about price direction is currently something like "down and then up, and then probably down a little bit again."   In the short-term, technical influences are a primary driver for bearish price action in the grain market. Corn and soybean futures found pushback on the chart this week after rebounding up toward tests of their descending channel tops, while wheat slid lower along the bottom end of its downtrend. For the mid-range outlook, seasonal trends paint a friendlier picture of grain price potential leading up to summer. More weather-related risk premium is usually injected into the market at this time of the year when there is such an intense focus on both how crops in South America are going to finish and on how the new U.S. planting season will start. Seasonal price strength could extend further than normal into the…
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