The Commstock Report

Gold prices rallied to new all-time highs again today as investors priced in the increasing likelihood of inflation staying a problem. The latest jobs report may have pushed back against bets for interest rates to start falling soon, but the data did nothing to quell inflation fears. The shift in monetary policy still expected for later this summer has major banks such as Goldman Sachs and Bank of America maintaining a strong outlook for gold, oil, and other commodities because of the view that lower interest rates and a weaker dollar will be linked to persisting concern about inflation.   In a recent report by Goldman Sachs, the analysts cited the historical tendency for gold and crude oil being two of the top performing commodities during periods of falling interest rates. Grain and livestock prices were also observed to benefit in such an environment, but to a lesser degree than most other commodities. Currently down sharply since the start of the year, grain futures have considerable room to catch up to the broader market, as the Goldman Sachs Commodity Index is higher by about 11 percent year-to-date.   The caveat to the bullish commodities argument is that the Goldman study…

On the Grains Markets are mixed in overnight trade thus far. Corn is mostly steady, beans on the soft side with wheat firming. Yesterday started off with crummy weekly export sales either near or below the low end of the range of trade expectations. Yet crop futures absorbed them surprisingly well, corn finishing a little higher, beans off only slightly and wheat closing mixed, with winter wheat in the red but MGE wheat in the green.   On Monday we'll get the next Weekly Crop Progress report after markets close now that they've resumed for the growing season. What will get top attention are planting progress and wheat condition ratings. The eastern Corn Belt is cold and soggy with bad flooding reported in the Ohio River valley. That's good news for Mississippi River barge traffic but will definitely slow fieldwork in the ECB. Not so for most of the WCB, however. We should see good planting progress for the WCB Monday and the latest 8-14 day outlook appears ideal for rapid progress across nearly the entire Midwest and Plains.   The outlook is for wetter than normal during this period in most of Texas, but it will be welcome there…

When the headline surfaced, "Officials Confirm HPAI Dairy Infections" a thread began to unravel that we have not seen the end of yet. North America appears to be awash in Bird Flu virus as the wild bird migration traverses the continent. Biologists were concerned that at some point the virus would jump species to animals other than poultry. Finally, it happened when dairy cows in TX and KS were confirmed to have been infected with Highly Pathogenic Avian Influenza (HPAI) virus. That gave this story some new legs. The cows got sick but there was no associated mortality. Initially observers discounted the risk saying that milk from unhealthy cows is discarded while milk consumed by the public is pasteurized and there was no way the virus would be passed along through the food chain. USDA gave its seal of approval that "there was no impact on human health." They did also offer the caveat that this was "a rapidly evolving situation." HPAI was also found in a Minnesota goat. Then again not enough research has been done to know anything for sure yet with high confidence. Cows also tend to be more exposed outdoors. The load of virus in the…

On the Grains Grain markets are steady to firm in overnight trade thus far. EIA weekly ethanol data was constructive. Weekly production was unexpectedly up 7% from the prior week and on track to suggest USDA's current corn-for-ethanol estimate may be up to 75 million bu. too low. Ethanol stocks remain very high but gasoline stocks came in unexpectedly lower, implying gasoline demand has hit a 21-week high. Both China and India are reportedly into reserve stocks rebuilding. China is rumored to have canceled some Ukrainian corn purchases and buying up domestic supplies to replenish reserves and shore up domestic prices through planting time. India is similarly been drawing down wheat reserves the past two years to tamp down high internal prices and now reportedly seeking to replenish them. Also helpful to wheat are continued strengthening in Russian wheat prices while also dealing with importer complaints about Russian grain quality to the point where some shipments already in route have been stopped by Russian officials for quality issues. In other news of note, Fed Chairman Jerome Powell reiterated that rate cuts are in the offing for this year. He noted the latest inflation data was higher than expected and that…

PLEASE REFER TO THE HEDGE AND TRADE STRATEGY PAGE FOR UPDATES!! Brazil’s national soybean harvest is approximately 82% complete this week, with much of the soybeans in the Center West region replaced by second crop corn.  Debate continues as to the size of the soybean crop with one extensive crop tour estimating Brazil’s soybean crop at 152.2 MMT.  Meanwhile several other private estimates seem to be homing in on a crop size between 146 to 148 MMT.  The remaining bulk of Brazil’s soybean crop to be harvested lies in both the Northeast and RGDS.  RGDS remains an important production state representing 15% of the country’s soybean output. As we enter the first week of April, weather remains adequate with average rainfall continuing to blanket roughly 80% of the second crop corn regions in the Center West.  Subsoil moisture appears to be absent in most of these regions, but the corn continues to get by with hand-to-mouth rains.  Rainfall in Mato Grosso will be a question of the have and the have-nots, with rainfall favoring the northern half of the state receiving up to 6 inches, and the southern half of the state getting by with just one inch in the…

On the Grains Grains are mixed in overnight trade thus far. As of 6am, corn was steady, beans soft, and wheat a little firmer. The DJIA has had a rough start to the month after stronger-than-expected economic data is casting doubt on Fed hints at 3 rate cuts by the end of the year. It has fed a bit of risk-off mood that's bled into commodities as well. Even corn has given back all the gains since the lower-than-expected planting intentions. It seems to be a growing foregone conclusion that actual corn acreage will climb between now and the June Acreage report. It has risen in 15 of the past 20 years, varying only by how much. Increases exceeded a million acres in eight of those years with last year among the largest at 2.1 million. However, we've noted often that last year it was the high crop insurance coverage available, which is certainly not the case this year. Further, I've looked at the "anatomy" of the state-by-state changes last week and it argues against assuming the worst. Looking at total acreage planted to all principle crops, it went down in 35 states, up in 12 with 2 about unchanged.…

The Fed is closely watching prices and inflation. Gas and food prices are unlikely to fall near term due to seasonal factors. Strong housing sector prices contribute to inflation. A contractor says that while lumber prices have come down, paint, materials and labor costs have gone up to offset it so building a house has not gotten cheaper. I have to admit I'd have lost money betting against home values rising further given mortgage rate hikes. I thought that home values would fall to compensate for higher rates but…   They explain the strength in the housing market as demand exceeds supply with many more prospective buyers than homes on the market. There is less turnover of older homes as owners do not want to give up favorable mortgages to upgrade homes at higher interest rates. My granddaughter and her spouse just moved into a townhouse as new first-time homeowners. The two professionals bought what they could afford which was a modest starter home in Omaha. There were multiple offers at the listing price. I was favorably impressed with the amount of square-footage they got for their investment. Rent is high in part because the high cost of home owning…

RECCO UPDATES FOR CORN AND SOYBEANS DAY 3: On 3/19/24 we advised clients wishing risk protection against bearish numbers on last Thursday's reports to buy May 470 short-dated new crop put options for 12 cents or less on up to 50% of expected corn production.  We advised the same for soybean producers, but with May 1180 short-dated puts at 26 cents or less on up to 50% of expected production. As it turns out, Thursday's corn numbers were actually price-friendly and soybean numbers mostly neutral so we now advise selling those options for whatever premium is left to reduce the net cost of the protection. They served their purpose. On the Grains Grains are steady-to-mixed in overnight trade as of 6am. Crude oil is firming on rising geopolitical threats after an Israeli air strike in Syria hit the Iranian consulate in Damascus, killing the top commander of Iran's Revolutionary Guard. Yesterday's weekly corn export shipments of 1.432 billion bu. were strong and beat the top end of the range of expectations. So did wheat loadings. Alas, soybean loadings of only 414,000 tonnes didn't even make the low end of the range of expectations and still running about 5% behind the needed…

Last year our crops sucked all available moisture from our soil profile in order to finish here in NW IA. We had enough subsoil moisture reserves, where there are deep soils, to finish the crop with better-than-expected yields. Our moisture was tapped out in the process, so we were bone dry at harvest. Then it started raining here again in October. My partner who tracks his accumulations says that we got 8 inches in October which went a long way to restore our soil moisture deficit. Our soil profile can hold 11 inches that is available to a corn crop on our farms. Next to happen is that it did not freeze hard until after Christmas. Some did field work up until Christmas and some tilers worked here in January before we got hard frozen ground. We got another 2 inches of rain in December. The late freeze allowed this to soak into the soil profile as well. The winter freeze did not last long, as I told you that the car that they park on the ice on our lake, fell in the earliest ever before in the 'guess the date' contest. This year the lake was frozen for…

RECCO UPDATES FOR CORN AND SOYBEANS DAY 2: On 3/19/24 we advised clients wishing risk protection against bearish numbers on last Thursday's reports to buy May 470 short-dated new crop put options for 12 cents or less on up to 50% of expected corn production.  We advised the same for soybean producers, but with May 1180 short dated puts at 26 cents or less on up to 50% of expected production. As it turns out, Thursday's corn numbers were actually price-friendly and soybean numbers mostly neutral so we now advise selling those options for whatever premium is left to reduce the net cost of the protection. They served their purpose. On the Grains Grains are mixed in overnight trade thus far. As of 6am corn was a little lower, beans firmer and wheat lower. Last Thursday's export sales were overshadowed by the big reports that came out later, but were highly mixed in market reaction. Corn sales came in on the high side of expectations and wheat sales even beat the high end while soybean sales didn't even make the low end of expectations. We'll now continue to digest the surprises from both planting intentions and Mar. 1 Stocks. Lost in…