The Commstock Report

New Monday Wheat Recommendation: We’re using Fibonacci retracement theory to set targets in KC May wheat for advancing old crop sales. Regardless of class, advance old crop cash sales another 10%, to 75% sold, when KC May hits its 50% retracement objective of $8.41. Set a target at a 62% retracement to $8.58 in KC May to advance sales another 10%, to 85% sold. Opening calls are for the grains to start steady as traders sort out cues from crude oil and outside financial markets. In the Headlines Geopolitical tensions are heightened further following Vladimir Putin’s visits to Crimea and Ukraine’s occupied city of Mariupol and ahead of Putin hosting Chinese President Xi Jinping in Russia this week. China is attempting to support plans that would negotiate a ceasefire in Ukraine while locking in new territory for Russia. Complicating the matter for China was the Friday announcement of an arrest warrant issued for Putin by the International Criminal Court for war crimes. European markets will be even more important than usual for setting the Sunday night market tone, since more turmoil with Credit Suisse and other European banks will have to be addressed on Monday. Several regional U.S. banks are…

California is threatened by flooding from another “atmospheric river” that formed to funnel a massive stream of water vapor over the central portion of the state. This week’s atmospheric river system was one of the stronger ones that the National Weather Service says can carry as much as 15 times the average flow of water at the mouth of the Mississippi River. Excessive rainfall is a problem for crops in the region while wind gusts of up to 100 miles per hour are responsible for power outages. The storm was the latest in a string of severe weather events that have occurred this winter to provide relief against drought in the West, but that now pose the risk of flooding for many farmers heading into the spring planting season.   California weather should remain a matter of interest as Nutrien meteorologist Eric Snodgrass says that “we need to be watching the West Coast sea surface temperatures closely.” The risk of drought in the Midwest is elevated if these Pacific coastal waters continue to turn colder, although Snodgrass cautions that the effect could be minimal or even entirely offset if an El Nino takes over as the dominant influence of weather…

Grains are poised in overnight trade to open on a firm note as hopes build that bank crisis contagion will be held in check by rescue plans among global central banks. But it’s a nervous confidence that needs to get through the weekend without new crises developing at other banks. Stocks had a decent bounce yesterday and crude oil is up again in overnight trade.   Yesterday provided the 3rd straight day of big flash corn sales to China. And in what has become a near weekly event, the Buenos Aires Grain Exchange has lowered its estimate for Argentina’s soybean crop sharply yet again. Yesterday it pegged the crop at only 25 MMT, down another 4 million from its last estimate. That’s now 8 million below last week’s USDA WASDE estimate of 33 million and down 42% from last year’s 43.3 million.   In other headline news this morning, Chinese leader Xi Jinping visits Russia’s Putin in Moscow next week. China has already urged Putin to continue the Safe Corridor deal that automatically renews this weekend unless he stops it. That’s likely a done deal since Xi’s trip is at Putin’s invitation and being billed by both sides as “showcasing…

The media has gone to great lengths to ensure that everyone knows about the impending decline in cattle numbers and subsequent expected drop in beef production. Is the material herd liquidation a good thing or a bad thing? I am going to be a contrarian here and say that it is the latter. The futures market is attempting to price in this historical decline in cattle numbers. Feeder cattle futures have soared to levels that will be problematic for the feeding industry. Keeping a pen full of feeders on feed would have an interest cost of over $130-140 head per turn for just the animal itself if you have the cash equity for everything else. The cattle industry is highly capital intensive and high leverage is going to be the demise of some feedlots who will not survive the credit crunch coming at them. The price of feeder cattle will become a rationing process to determine which of those who want to continue feeding cattle can afford the investment and risk. Feeder cattle producers are being offered an enormous profit potential opportunity. Will futures prices materialize? We would suggest Livestock Risk Protection (LRP) insurance policies (talk to Eric Relph 712-227-1110…

Overnight trade is mixed with corn and beans on the plus side but wheat soft as we go to press. The safe corridor deal for Ukraine we likely renew without incident despite Russian complaints and threats. Why? Because now China has weighed in favor of extension and with continued China support critical to Putin he’s unlikely to buck them.   The latest 2-week precipitation outlook came out yesterday. It leans favorable for the whole country except for parts of HRW country in the Southern Plains and potentially excessive in much of the E. Corn Belt and threatening fieldwork delays.   Today we get another batch of weekly export sales. Another big flash sale of corn to China yesterday of 667,000 tonnes has raised hopes for more and expectations for this morning’s weekly sales of corn range from 700,000 to 1.5 million tonnes. Expectations for soybeans and wheat range from very low to robust; as low as 50K for beans to as high as 700K and as low as 75K for wheat to as high as 500K. Another issue making headlines is a new outbreak of African Swine Fever (ASF) in China. It’s not seen as threatening as the 2019 disaster…

Recently, I have come to feel like it is harder to get clients to act upon our market recommendations than it has been to call the market. Up until August 2020 we had been very bearish the corn market. I recognized an upside chart gap as a breakaway gap that would lead to an extended gain. It was tough getting subscribers to make the change as they get psychologically locked into a mindset, which we had fed, and I repeatedly advised “time to change horses” as the trend turned higher. Since August 2020 we were very bullish until last December. I am going to walk through the chart and try to give you more clarity as to how I make these determinations. While I do grasp fundamentals believing them important, most of my major decisions are derived from technical chart analysis. As this is my 50-year crop anniversary I have learned a little something along the way. I have been looking at Elliot Wave chart patterns for a few decades now. I can’t tell you what the wave count for every market is all of the time but every so often something in the pattern does stand out and has…

On the Grains: Grains are firm in overnight trade as fund long liquidation finally subsides a bit in corn and beans while short-covering in wheat continues. Crude oil is soft and still below the $72/barrel threshold where President Biden said last October the U.S. would begin to replenish the Strategic Petroleum Reserve. Not a peep about that lately, but it does act as a potential “floor” at this level. The Dow is down hard again as this goes to press. Uncertainty in the wake of the unfolding banking crisis; what the Fed will do on interest rates and what Congress will do on banking regulations still abounds.   Funds had actually doubled-down on their short bets against Chicago wheat and found themselves still short nearly 100,000 contracts with crop condition ratings actually worsening for HRW country and heavy snowpack up north threatening fieldwork prep for spring wheat. As a result we saw double-digit gains in wheat actually leading the way higher for a change instead of a dragging corn back like a ball-and-chain.   Yesterday’s highlight for corn was the 675,000 old-crop sale to China. It finally confirmed rumors we’d been hearing for weeks that China was going to take…

Let’s take a break from the serious and talk about something mundane today. The pi that I am talking about is not apple, cherry or chocolate pie but the kind of pi that mathematicians like. 3.14 or March 03/14 is pi-day. Scientists see today as a holiday of sorts. The symbol, used by mathematicians to represent the ratio of a circle’s circumference to its diameter, is the lowercase Greek letter π, sometimes spelled out as pi. It is a number rounded off at 3.14 that goes on ad Infinium. It is coincidently Albert Einstein’s birthday. It has become an international holiday celebrated by physicists and mathematicians giving them a good as any excuse to enjoy a pie of their favorite pie. My favorites are rhubarb and sour crème raisin or any other kind of pie that is available.   The Scientific American explains the history of pi. “The importance of pi has been recognized for at least 4,000 years. A History of pi notes that by 2000 B.C., “the Babylonians and the Egyptians (at least) were aware of the existence and significance of the constant π,” recognizing that every circle has the same ratio of circumference to diameter. Both the Babylonians and Egyptians had rough…

On The Grains: Overnight grains tried to mount a modest rebound but as this goes to press they are weaker again. Lower prices in palm oil and crude are again pressuring soy oil on macro-economic worries. (Natural gas is a notable exception in the energy complex, moving higher yesterday and again overnight.)   Weekly export inspections were uneventful for corn and beans, both well within the range of expectations. Wheat was sour, falling just under the very lowest of expectations. Ironically, wheat was the only one of the three that managed to close in the green yesterday, even with Russia agreeing to extend the safe corridor deal out of Ukraine for another 60 days. (In overnight news, Ukraine disputes that new limit and says it will operate on current language extending the deal for 120 days unless Russia specifically halts it.)   Credit fund short-covering in Chicago wheat for yesterday’s gains in wheat.  The COT report showed funds extremely short Chicago wheat while only modestly long KC and MGE wheat. In other news, there are already some worries developing about delays in spring fieldwork for the northern Plains where snow depths up to 20 inches are widespread.   Stock markets…

The US Treasury, FDIC, and the Fed came together quickly with the blessing of the White House to jam a finger into the hole in the dyke that was the Silicon Valley Bank (SVB) leak. They did not even get through the weekend before another bank, Signature Bank with $89 bln in deposits also collapsed from some of the same issues as SVB. A quarter of Signature Banks deposits reportedly came from cryptocurrency. The Banking industry is finding out that cryptocurrency is not real money so should not be considered to be actual dollars on deposit. Every dollar on deposit that is in cryptocurrency is essentially just a loan on a dubious asset that bears its own risk parameter. If a real bank is lending real money against fake cryptocurrency deposits, then they are undercapitalized. The whole cryptocurrency thing is a fool’s illusion and it can now be seen how even banks have become party to the fools. How can that be? It can be. The Fed is making it clear that it doesn’t want cryptocurrency held in banks.   The action taken by the government Sunday to essentially insure the uninsured FDIC deposits in SVB and Signature, were unprecedented….