The Commstock Report

On the Grains: Overnight markets are steady at best as we go to press, as if on “simmer” awaiting tomorrow’s WASDE updates from USDA. It’s often noted that a market that can’t go up on price-friendly news is a warning sign and that describes corn’s poor performance yesterday. Traders got a weekly export inspections figure just shy of 900,000 tonnes, blowing the top off expectations that ranged from 450-750K. Private estimates for Argentina’s corn crop are already lower than the big cuts expected from USDA tomorrow. Then we got two flash sales announcements totaling nearly 300K between them and still corn closed lower. Chart-wise, the picture is a little better. May corn scored an upside reversal on Mar. 1 and was as oversold as it could get, only now climbing out of oversold conditions. Ironically, soybeans closed strong yesterday despite very disappointing export sales. At only 542,0000 tonnes they didn’t even come close to the lower end of expectations that ranged from 625K to 1.3 million tonnes. The difference is that unlike corn, soybean sales YTD have been strong enough to sustain USDA’s current export estimate in tomorrow’s WASDE. Further, the bull market in soybean meal is alive and well with the May contract…

There are 3 CO2 sequestration pipeline projects under development with two, Summit Carbon Solutions and Navigator CO2 Ventures crossing our region, locally. I have clients who are dealing with both companies asking easements from them. I have personal experience with Summit Carbon Solutions, having signed an easement with them, with second hand information from clients and others dealing with Navigator. I can tell you that the two projects are both attempting to build pipelines to connect ethanol plants to deep CO2 sequestration sites, but the structure and progress of the two are about as different at this point as night and day.   The largest difference between them starting out is that Summit is buying an easement and Navigator is buying a 3-year option to acquire an easement. Summit is paying more than Navigator, more than twice as much, according to someone dealing with both I am told. Summit pays the landowner 100% of the amount immediately after signing. They are also negotiating terms for pipeline construction, indemnity, and other issues while structuring the payments in a tax favorable way to the landowners. Easements typically are structured combining the three components of crop damage, temporary easements and permanent easements which…

On the Grains: Markets are soft in overnight trade as we go to press. That suggests that for corn and beans, traders have already dialed in expectations that USDA will drop its estimates of Argentine corn and soybean crops dramatically in the March WASDE on Wednesday. This was key to the late week recovery in both corn and beans from fund long liquidation that began the week before as the calendar turned to March. We got another COT report Friday but it was only current through Feb. 7 and showed fund liquidation had already begun. Funds’ net long position in corn was down nearly 18,000 contracts (but with still over 200K to go). In beans, they’d reduced their long position by more than 10,000 contracts but still 165K to go. The 3-day bounce that we saw late last week suggested that liquidation tied to March going into delivery had finally eased. We also know the trade is well aware of private estimates of Argentine crops smaller than the ones expected from USDA on Wednesday. Are they fully dialed in as well? Overnight weakness would suggest they may well be. Or how about the fact those private estimates just keep on dropping? Over the…

Grains look set for a higher start tonight unless something changes to break up an otherwise quiet weekend of news. Another hot, dry weekend in Argentina lends support to the soy outlook while markets attempt sort out the facts about China’s recent interest in buying U.S. corn. Weather is turning friendlier for the moment as better moisture prospects in parts of the U.S. are outweighed by the likelihood of disruption during the early planting season. In the Headlines May corn futures settled 9 1/2 cents lower after rebounding 17 1/2 cents from last week’s low. May soybean futures were down just 1/2-cent for the week. May Chicago wheat fell 13 cents while May KC wheat was down 19 and Minneapolis was down 9 3/4. Russian forces were reportedly close to taking full control of Bakhmut, Ukraine, a city that is important for access into the southeastern Donetsk region. In other news, the Black Sea export deal is still being loosely negotiated. Russian officials have again claimed issue with the agreement in a bid to receive concessions on Western sanctions; however, the deal will be automatically extended if there are no formal exceptions submitted before the renewal deadline on March 18th….

Even more than usual right now, the market is sensitive to a constant flow of news headlines that have set up grain prices for regular instances of prices following the pattern of “buy the rumor, sell the fact.” A major example has been the wheat market getting temporarily riled up by developments from the war in the Ukraine and the approaching expiration of the Black Sea export deal, only for wheat prices to deflate quickly after data on U.S. exports continue to show no improvement.   Unless something changes to allow U.S. exports to compete with cheaper Russian wheat, traders will think it is justified to have wheat futures trading below their levels from just before the invasion of Ukraine one year ago. With the prospects of the war only intensifying, it could be a matter of when, not if, that risk premium returns to flip the script for wheat into a “sell the rumor, buy the fact” type of reaction. The immediate risk point remains the possibility of further disruption for the grain export agreement that has mainly facilitated the export of Russia’s record-large wheat crop from last season. The next catalyst could involve the struggle for Ukraine to…

On the Grains: Markets are steady-to-mixed in overnight trade as we go to press. Positioning is already beginning for next week’s WASDE updates from USDA. Yesterday’s markets were on the defensive shortly after weekly export sales were released. Corn sales were especially poor at only 598,000 tonnes and towards the low end of expectations that ranged from 500K to a million tonnes. Ditto for beans, also coming in towards the low end of expectations. Wheat sales were so-so, at least coming in the middle of trade expectations.News on the domestic demand front for corn and soybeans wasn’t helpful either. YTD ethanol use of corn is down 5.8% vs. USDA’s forecast for only a 1.4% decline. Despite excellent crush margins keeping bean basis strong, Oct. through Jan. crush was actually 2.12% below a year ago despite the current USDA forecast for it to be 1.2% higher by the end of the season. Nonetheless, beans managed to close with decent gains yesterday. They got a lift from higher product values, particularly soy oil. There is some concern about flooding in Malaysia pushing up palm oil and yesterday the DOE put out encouraging news on renewable diesel capacity. They said U.S. plant capacity…

Now that we have established spring crop insurance price points, producers are faced with the task of signing up for another year of crop coverages. Through our insurance division, AgriVantage LLC., we have tried to sort through some of the noise and give our clients the nuts and bolts of what we believe to be the top options for those in a few specific areas of our coverage region. Obviously, what works well for a black dirt Iowa farmer isn’t necessarily going to be the best choice for a Western Kansan with light soil, low rainfall potential, and a higher risk of an area disaster. So as you read forward, keep in mind that each scenario is dramatically different, but we have to make the most informed decisions we can with the information we have, and we aim to help with that process.   This year has set the stage for a great value in crop insurance when compared to the past ten or so years. This is largely due to the fact that we have set pricing at historically high levels at $5.91 corn and $13.77 soybeans, while volatility levels are extremely low. It’s kind of a perfect storm…

Fertilizer Prices Fall with Natural Gas and Grain Prices/ Cost of Carry rises as 6-month T-bills are Now Paying 5%/ Still No Relief from Argentine Drought as May Soybeans Test 15.00 Resistance/ Rumors of New Export Demand on CBOT Break/ The Black Seas Corridor, which is Dysfunctional as is, ends March 18th if Either Party Fails Files a Formal Objection On the Grains: Looking at a corn price chart, we have been in a bear market trend since last October and even the friendly USDA Annual Production Report did not change that. Commercials are bidding off the May contract and cash corn prices are not $7 here in NW Iowa anymore as basis only improved locally 1 cent on what was a 60-cent loss in futures to Wednesday’s low. Has farmer psychology changed? I do not think so. Everyone who was bullish before the break seems even more bullish now after it or because of it. Selling weakness is not advised but selling rallies still is. Technical resistance for May corn is at wave-4 of lessor degree near 646. I had nearly forgotten who Biden’s Secretary of Agriculture was it had been so long since we had heard a peep out…

Showing no signs of slowing down, the bird flu, this strain known as H5N1, has now spread to new corners of the globe. The virus continues to devastate global bird populations and has spilled over into a variety of mammals, including sea lions, mink, and bears. It’s proving to be a year-round threat as neither the sweltering summer heat nor the bitter cold of winter has been able to slow its spread through North and South America, Europe, Asia, and Africa. With no relief in sight, concern over the world’s food supply continues to grow.   In recent weeks both Argentina and Uruguay confirmed their first cases of bird flu, proving the virus is advancing in South America. The number of South American countries reporting their first-ever encounter with the bird flu has risen to ten. Peru is on this list, where more than 50,000 wild birds died last fall, and most recently 600 sea lions. Despite the virus making its way through South America, Brazil, the world’s top chicken exporter, has yet to report a confirmed case.   In October of last year, the H5N1 variant infected a herd of mink at a fur farm in northwest Spain. To…

On the Grains:
The 2022/23 El Nino growing season in South America was nearly textbook perfect for what we have been told to expect from La Nina conditions. Drought is expected in southern Brazil and Argentina but the rest of Brazil produces well enough to compensate. That is generally been the case this year. The US has likely maxxed out combined corn/soybean growing acres while South America continues to expand acres adding significant growth to their production. With the La Nina likely fading, Argentina will be poised for a significant rebound in 2023/24 corn/soybean production. USDA has modeled optimism for a rebound in crop yields following La Nina conditions in their production forecasts for this country too this season. US weather appears to be changing with drought relief coming to the western US. The NOAA drought monitor shows that the area remaining under severe drought classification is shrinking. There is still a lack of subsoil moisture reserves in the Corn Belt but most will have enough topsoil moisture to get the new crop started. Then it will come down to timely rains.