Special Market Update

Corn

Old crop March corn finished the day down 5c closing at $6.4150. While the new crop December 2022 corn contract finished at $5.8475, down 3.75c.

It was a very volatile trading session led by beans as it feels like corn is along for the ride for the time being as simply put there is more news to drive the soybean trade currently. Yesterday’s WASDE report was very much a non-event for corn. Especially domestically, the USDA left domestic supply and demand unchanged. The only changes to speak of on corn came in South American estimates and the USDA did trim Brazil’s corn production back slightly based off the hot and dry weather during the first crops growing season. However, the USDA also raised SAM export estimates for this crop year so that did offset a bit of the potential world carryout cut.

The market now will most likely shift its attention back to South American weather and U.S. corn exports. Heading into March the U.S. will be entering a key period for our export program. Sales and shipments to date are lagging last years pace. The USDA has been willing to hold off additional cuts to the program until we can see if China steps in this spring, which is an uncertainty to say the least. Exports and seeing how Brazil’s second crop corn planting progresses will be drivers for this market moving forward.

In technicals, front month corn pushed up today towards the 61.8% retracement mark to last summers high but was unable to sustain that move today, reversing course with beans and heading lower. Downside targets for the bears will be a close below the previous contract high of $6.4050. Beyond that a throwback into the trend channel on the chart below.  Beyond that a move back to the 50% retracement off last summers highs of $6.31. Any very bearish news would target a move back towards $6.00 at the lower end of the trend channel.

Soybeans

Soybeans led and then dragged the grain markets today in what was an extremely volatile session. Front month March soybeans closed at $15.7425, down 20.5c and posting a 68c range for the day. New crop November 2022 beans closed at $14.32 down 5.5c.

A wild day to say the least with what appears to have been profit taking mid-session and/or short covering from those who sold pre-report yesterday. The WASDE report yesterday saw the U.S. cut the domestic carryout by 25M bushels on higher crush. They also cut South American production, cutting Brazil from 139MMT to 134MMT (this would be second highest ever). The USDA also cut exports out of South America. Also, worth noting that Brazilian agency CONAB cut their soybean estimate to 125 MMT today so quite a bit lower than what the U.S. is using.

The USDA report yesterday was overall supportive of beans, but the big questions moving forward are “How much is the USDA underestimating the crop loss in South America?” and “How much of a potential supply issue is priced in currently?”. To illustrate the importance of the second question it is worth pointing out that this time last year with a U.S. carryout of 120M bushels and a world soybean carryout of 83MMT, the March 2021 soybean futures were in the upper $13 range. In yesterdays report, the USDA estimated this years U.S. carryout at 325M bushels and world carryout about 10MMT larger at 93MMT. Despite this, soybean futures traded today to $16.33, almost $2.50 higher year over year! So, the timing of this rally is really an intriguing part of the whole discussion. Remember last year the board did eventually take off to the upper $16s when China purchases skyrocketed, this year however it really appears that the market has positioned itself attempting to be proactive of a South American problem and large demand, rather than last year where it was very much reactionary. The bottom-line is should combines start rolling in Brazil in March and find they’ve overestimated yield loss, then the reaction of the board could potentially be just as volatile the other way. It also begs the question, if crop losses are being accurately forecasted or are even more, where does this soybean market go from here having rallied so much so early in the year. Mix in inflation concerns, and U.S. planting projections coming up and today may just be a snapshot of the volatility to come.

In technicals, front month beans have of course exploded through all retracement resistance in the last month and a half. Last years May 12^th high of $16.7725 will be the target for the bulls moving forward. Any selloff from here the bears will be targeting a throwback to the upper $14s, where the 20-day moving average and 61.8% retracement marks sit.