What We Learned From WASDE. The Corn & Ethanol Report

corn field

Photo by Jesse Gardner on Unsplash

We kicked off the week with Fed Jefferson and Fed Mester Speeches at 8:00 A.M., Consumer Inflation Expectations and Export Inspections at 10:00 A.M., 3-Month & 6-Month Nill Auction at 10:30 A.M., and Crop Progress at 3:00 P.M.

The markets reacted to the norm you would have expected as you dig into the USDA’s WASDE, wheat, and corn stocks tightened on the global balance sheets, and the soybean complex needs a bullish headline or will most likely follow the corn and wheat lead. The USDA added a important point, assuming we have a normal winter, (don’t count on it) wheat stocks/use to be the second lowest record in crop year 2024/25. Tomorrow is Last Trading Day on all May grains. Haren Braun with Reuters reports that funds raced out of CBOT corn and soybean shorts as weather worries build. Speculators as well furiously pitched short positions in Chicago corn and soybeans last week just after a big short-squeeze in wheat, as pest raid Argentina’s corn crop (corn stunt disease) and rains devastate soybeans in Southern Brazil. These two ingredients kept me from a huge bearish stand fearing a massive short-covering rally. In the overnight we saw profit taking on new long positions as the Commitment of Traders report showed active squaring of net short positions last week. However, the supply risks (weather) of the market have not changed with too much rain for Rio Grande do Sul in Southern Brazil, too little rain for the Black Sea, and developing flooding across South Central US. Ag Resources (ARC) doubts that CBOT breaks will be able to be sustained until there is greater clarity on ’24 world wheat, corn, and soybean production. CONAB will release their Brazilian crop estimates on Tuesday. Based on the Rio Grande do Sul flooding, a fall in the Brazil soybean crop is forecast. ARC estimates that US farmers have seeded 47-50% of their corn crop and 44-47% of their soybean crop. Spring wheat seeding advanced to 73-76% completed with their winter wheat crop ratings holding steady or down 1%. Greater rain is needed across the US Western Plains and fears of flooding in Gulf States. Today's advice is to expect CBOT values will thrash around until Russian, Brazilian, and Argentine crops are better known, and the US 2024 crop is mostly seeded. ARC’s bias is that CBOT breaks will be well supported, but selling rallies makes good sense longer term amid lackluster Chinese demand for US grain. Traders are also awaiting a Biden announcement on Section 310 duty increase on Chinese UCO which would have a big impact for soybean oil use in the production of US renewable diesel.

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