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After a long weekend, the trade seemed to make up for lost time today. After an attack in the Red Sea over the weekend, global export risks were seen increasing. This headline spurred short-covering rebounds, especially for wheat. Technically, it will be key for the bulls to see follow-through buying strength on Wednesday or Thursday, which would then begin to suggest market bottoms are in place. Daily export sales, and decent export inspections kept support in the fundamental market today, while the extreme short positions continue to keep volatility in the market.
This morning we saw a pair of flash sales:
- 155,000 metric tons of corn for delivery to Japan during the 2024/2025 marketing year.
- 228,000 metric tons of soybean meal for delivery to the Philippines during the 2023/2024 marketing year.
As mentioned above, Iran-backed Houthi’s claimed credit for an attack on a cargo ship in the Red Sea over the weekend. The ship is the first grain cargo ship hit in the region, with expectations that its corn cargo will be lost if it sinks, which now looks likely. The attack on a grain carrying ship – and one not directly tied to either Israel or the United States – represents an escalation of the risks for freight moving through the region. It does not reduce the supply of commodities produced in the world – at least not at this point – but it does increase freight costs while lengthening delivery times as shippers choose longer routes.
It was reported today that the Biden admin is expected to approve year-round sales of E15 gasoline (blended with 15% ethanol), but with a start date in 2025. Currently, the U.S. government restricts sales of E15 gas in the summer due to smog concerns.
In Chinese news, the increase in travel in China seen over the holiday, combined with reports that pork demand was better than expected are seen as supportive to start the week.
The CFTC report on Friday pegged the funds shorter in the corn market than we had estimated. Net fund short positions are nearing records in the corn and bean markets. While this isn’t a guaranteed bullish story – at some point we start to slow the selling pressure down a bit as the funds lose interest in adding to their short position. The biggest fear of someone holding large short positions is a headline that might cause others holding similar positions to unwind those positions. The struggle is that the producer around the U.S. is still incredibly long – IF the futures market shows a correction higher it will be met with active selling.
Export inspections were released this morning and showed that all commodities landed on the high end of expectations. Marketing year to date soybean export inspections for shipment to all destinations total 1.175 billion bushels, down 346 million bushels or 23% from the previous year's pace. This year's total falls short of the seasonal pace needed to hit USDA's target by 22 million bushels (vs. being short 25 million last week). Marketing year to date corn export inspections for shipment to all destinations total 713 million bushels, up 173 million or 32% from the previous year's pace, and 15 million bushels above the seasonal pace needed to hit USDA's target for the year ending August 31 (up from 12 million last week). Marketing year to date wheat export inspections fall short of the seasonal pace needed to hit USDA's target by 54 million bushels, unchanged on the week.
Weather forecasts for South America were mostly like the weekend runs; Argentina will continue to see dryness for another 10 days, before showers return the first of March. Amid a lack of extreme heat, it is expected that dryness will not be an issue for crop development as long as rains return as forecast. Brazil continues to see wide spread shower activity in the North, with the South being generally dry for the next 10 days.
Funds were thought to have been all buyers today!
Friendly reminder to register for our upcoming Winter Grower Meeting if you have not done so already! Information can be found on our website! This is a free event, and will have great food and speakers! You will not want to miss out!
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