Saturday, January 28, 2023

Today’s Grain Market Update

by Andy Schwab

DTN reports:

Thursday trade began the day with solid gains and ended with each market closing convincingly higher. Soybeans and soymeal have made a big recovery from early weak fund selling, and wheat and corn markets are also on the rise on weather concerns, with KC wheat soaring.

Wheat:

Kansas City March wheat led all three wheat markets higher Thursday. Just since the recent low set on Monday, KC March has been able to rally roughly 60 cents. There has really been no new business to speak of, but with the Drought Monitor showing little improvement in Plains wheat crops, and with another arctic cold blast about to bring single digit temperatures as far south as Kansas and Oklahoma, the already poorly rated HRW crop is under a threat of winterkill in those unprotected areas. Single digit temperatures are forecast to occur in Kansas on Sunday night. Funds have been short a very large position in wheat, mostly Chicago, and there is little doubt that fund short-covering played a role in Thursday’s strong close. As of noon, funds were estimated to have bought 7,000 contracts of Chicago wheat. All three wheat markets remain in a sideways to bearish trend, but Thursday’s rally saw both KC and Minneapolis spot markets test the 50-day moving average, finishing slightly below. DTN’s National HRW index closed at $8.13, 30 cents below the March contract.

Corn:

Corn futures rose again Thursday to challenge recent highs, fueled by concern over Argentine weather still and a strong cash market. The March-May calendar spread rose to a nearly 3-cent inverse, a sign of strong commercial demand and limited stocks. Export sales were decent at 35.8 million bushels (mb), but fell from the week before, and total corn sales commitments, at just 946 mb, are still down a hefty 45% from a year ago. Some analysts feel that USDA will be forced to again lower their yearly export forecast following the recent revision in January. Spot corn is still in an uptrend, and the market overcame some bad news today. Word that Mexico is contemplating reducing corn imports by 30% to 40% by the year 2024 is concerning, as Mexico has been one of the largest corn customers of the U.S. In the past few years, the U.S. has sold roughly 600 to 650 mb to Mexico. On another bearish front, when China returns from holiday on Monday, they could return buying but are likely to wait and take cheaper Brazilian corn, according the U.S. Ag Attache in China. Corn ethanol production last week was fairly steady, but ethanol stocks soared by 7.2% to 25.1 million barrels. Funds remain long corn, and, after a one-day selling spree early this week, seem destined to stay that way. Argentina has more rain on the way, but this week’s coverage was deemed disappointing, so we’ll see what the weekend brings. In their weekly condition report, the Buenos Aires Exchange showed corn improving from 5% to 12% good to excellent, with the poor to very poor portion of the crop improving from 47% to 39% P/VP. DTN’s National Corn Index closed at $6.82 and 8 cents over the March contract.