Corn, soybean, and wheat prices all closed the week in positive territory following last week’s friendly USDA report.
Weekly Grain Market Recap
It was an exciting week in the grain markets, with considerable follow-through from last Friday’s friendly USDA report. Demand remains strong as Monday’s inspections showed a top-line beat for corn shipped and three consecutive soybean flash sales to China. Argentinian weather concerns remain a tailwind for grain prices for the time being. However, rains have re-entered the medium-term 6-10 day forecasts. Current Argentinian soil moisture conditions are rivaled by only 2022, and much-needed rain could pressure grain prices in the short term (more on this topic in the corn supply-side overview).
Chinese trade relations are, and will continue to be, a primary driver in grain prices. During Thursday’s confirmation hearing, Treasury Secretary nominee Scott Bessent commented that China has not made good on its purchases of American agricultural products over the past four years. Moreover, if confirmed, Bessent said that one of his first actions would be to demand China to fulfill its obligations that went unenforced under the Biden administration. The initial Phase I trade agreement penciled China in for $40 billion annually in American ag products. While China never entirely held up that agreement, they did come close by accruing $38.1 billion in imports in 2022. Since then, China has been increasingly absent from the American markets in favor of Brazilian corn and soy. Relations with China remain the most potent uncertainty in the market right now. Long-held expectations are that both sides will dig their heels in and trade relations worsen. However, recent discourse between China and the incoming Trump administration has been amicable. In fact, Xi Jinping stated recently that he will send a representative to the inauguration. If the Trump administration can reach an agreement with China that even resembles the terms of the Phase I agreement, it would be a significant victory for the American producer.
Corn
Futures Price Overview
March corn was able to parlay last Friday’s momentum into a productive week, ultimately settling at $4.84 ¾ – up $15 cents on the week. While prices fell on Thursday and ultimately retested our pivot pocket between 469 ¼-471 ½, March corn bounced back Friday and traded up all the way up to 484 ¼ – the highest price recorded on the contract since June 17th. Breaking through our 3-star resistance pocket between 479 ¾-480 ½ was a win for bulls, and the next significant test will come at our 4-star pocket between 487-488 on its way to ultimately test the 500 handle.
Futures Money Flow Overview
Much has been made about the net-long position that managed money has amassed in corn futures & options. It makes sense – funds are holding their most prominent net-long position since November of 2022. As of now, it sits at 292,228 contracts across futures & options. That leaves the market subject to long-liquidation risk, which could materialize if/when Argentina garners some much-needed rains. However, commercials simultaneously hold an enormous net short position of X contracts between futures and options. Over the last 10 years, commercials have only been in this ballpark a couple of times – 2020/21 and 2021/22. While there’s still some room for commercials to add, they may be nearing maximum capacity. Once commercials are maxed out, it opens the door for managed money to take the reigns and continue driving prices higher.
Corn Supply-Side Overview
Argentina’s Rosario Grains Exchange trimmed their Argentinian corn production estimates to 48 MMT from prior forecasts between 50 and 51 MMT on Wednesday, citing extreme temperatures, low relative humidity, and high levels of solar radiation. Soil moisture levels there are extremely low, mirroring only 2022’s conditions as displayed by the chart below:
The dreadful conditions there have been a significant contributing factor to the recent rally in corn futures. The 6-10 day forecast now calls for rains across much of Northern Argentina, which may result in some long liquidation on behalf of managed money. The extent of the liquidation would likely coincide with the accumulated moisture. In other words, light rain would result in a smaller correction than significant rain. The other notable supply-side adjustment made this week came from the International Grains Council (IGC) on Thursday by cutting its forecast for global corn production in 2024/25. They trimmed their estimates by 6 MMT to to 1.219 BMT, largely reflecting downward revisions for the United States. The move reflected the adjustments made by the USDA last week.
Corn Demand-Side Overview
Corn export inspections on Monday enjoyed a top-line beat this week totaling 1,441,006 MT, which compares to last week’s 887,214 MT. Thursday’s export sales were also considerably higher than last week totaling 1,024,200 MT. There’s no buts about it demand for U.S. corn has been strong. Accumulated sales for the crop year are the strongest of any point in the last 5-years. Most importantly, the export window for corn is still open for quite some time. Seasonally, corn export sales typically top out in March and start falling off as Brazil harvests their second crop corn. Interestingly, China has remained largely absent from the corn markets – Brazil or U.S.. China’s economy has been reeling for the better part of the last six months, which may have played a factor in their curtailed demand. Fortunately, Chinese economic data printed Friday was strong. Assuming their economy improves, it adds credence to how much they stand to add if a deal were reached with PRC.
Corn Cash Market Activity
As we’ve communicated with clients of Blue Line Ag Hedge, it’s prudent to take advantage of the recent rally we’ve enjoyed if you have unsold corn bushels. Basis bids widened across elevators, processors, and ethanol plants early in the week due to the strength in the futures market and ramp up in farmer sales, but were able to stabilize as the week progressed. Ethanol plants across the I-states have held the firmest bids over the past few weeks, but that may soon change as corn used for ethanol typically recedes between mid-January through February. Moreover, ethanol stocks are beginning to climb. If you’re looking for cash market assistance, call the trade desk at (312) 278-0500 and request information about Blue Line Ag Hedge.
Soybeans
Futures Price Overview
March soybean futures showed resilience this week after walking back Monday’s sharp gains through much of the week and ultimately rallying on Friday. For the week, March soybean futures settled at $10.35 ½, up 10 ¾ cents. March beans shot through our 4-star resistance pocket between 1055-1062 ½ on Tuesday, trading as high as $10.64, but was unable to maintain those gains and ultimately closed lower. That set the tone for most of the week, and saw March beans go back and retest the lower threshold of our 3-star support pocket at 1021 ¾ on Thursday. Soybeans ultimately defended support, and bounced 16 ½ cents higher on Friday.
Futures Money Flow Overview
Managed money flipped long this week, now holding a net long position of 34,833 contracts between futures & options. Producers also remain largely uncommitted but the flip to a long position is encouraging. With both managed money and producers effectively in no-mans-land, there remains ample opportunity for sharp price moves both higher and lower. As such, soybean prices will likely have sharp reactions to headlines relating to trade relations with China and weather conditions in Meanwhile, the Rosario Grain Exchange trimmed their forecast of Argy soybean production to 53-53.5 MMT, but did not specify an initial estimate.
Soybean Demand-Side Overview
We had a run of three consecutive days of flash sales to China to begin this week, as they front-run the inauguration. The sales totaled 132,000 MT, 135,000 MT, and 198,000 MT. The pickup in activity is certainly welcome as Brazilian harvest begins. Monday’s export inspections were run-of-the-mill totaling 1,350,121 MT, which compare to 1,295,379 last week. Thursday’s sales report was much the same as net-sales totaled 569,100 MT. While net-sales were markedly higher than last week, they were still 27% below the 4-week average. Sales thus far have been middle-of-the road. Accumulated sales are mostly inline with the recent 5-year average. Unfortunately, that may be indicative of what’s to come. Unlike corn, the export window for soybeans is nearing a close as Brazilian harvest begins. As such, a trade deal with China would be uniquely beneficial for soybean prices if attained.
On the domestic side, NOPA crush came out on Wednesday and showed December crush at a new record of 206.604 million bushels. A new record was expected, but it still blew through the top-line estimate of 205.498 million bushels.
Soybean Cash Market Activity
Basis widened less than futures rallied on across the I-states this week. Farmer selling amidst the rally was a contributing factor, and bids stabilized by the end of the week. Processor bids softened more than elevators on average as crush margins have contracted. We’ve been adamant about not letting the rally going to waste on unpriced ‘24 bushels in our cash grain advisory service as March soybean futures are more than $1.05/bu higher than they were a month ago. If you’re looking for cash marketing assistance, call our trade desk at (312) 858-7305 and request a consultation for Blue Line Ag Hedge.
Wheat
Futures Price Overview
March Chicago Wheat futures were able to close the week in positive territory, but did not enjoy a rally akin to corn and soybeans. For the week, March wheat settled at 5.39 ¼ – up 8 ¾. To put it kindly, it’s a start! Wheat followed corn and soybeans higher on Monday, but limped through the balance of the week. By closing 1 ¾ cents higher, we may have scored our first higher low. At some point, something has to give. The wheat-corn ratio is now at multi-year lows. If corn continues to rally, one has to imagine that wheat will follow suit eventually. Looking at the technicals, the signs are there as well. We have bullish divergence on the RSI and open interest has begun falling. If volume ticks higher and open interest continues receding, it will indicate that shorts are exiting the market.
Futures Money Flow Overview
Managed money added to their net-short position again this week, which now totals 94,393 contracts across futures & options. The position isn’t overwhelming for funds, as managed money accrued a net-short position of 126,998 contracts as recently as May of 2023. Meanwhile, producers have amassed a considerable net-long position of 18,587 positions across futures and options. As with soybeans, there remains ample middle-ground. While wheat values will be less effected by trade relations headlines as corn and soybeans, they will likely follow.
Wheat Supply-Side Overview
The IGC left world wheat production estimates unchanged at 796 MMT with a modest downward revision in Russian corn production offset by a modest increase in Australian production. The global wheat market is expected to contract in 2024/25 due to mixed production trends. However, contractions in global wheat trade has been are more prominent trend.
Wheat Demand-Side Overview
It was reported Thursday that Egypt’s state grain buyer, Mostakbal Misr, has signed several supply agreements with European grain producers. Egypt is one of the largest importers of wheat in the world, and has been noticeably absent from the import market. Wheat inspections on Monday were as-expected, totaling 288,895 MT but were markedly lower than last week’s 412,342 MT. Meanwhile, wheat sales on Thursday were strong. Wheat sales totaled 513,400 MT – 55% above the prior 4 week average. U.S. SRW wheat out of the Gulf is globally competitive, but demand has been lacking across the board. There is nothing more evident of that than the accumulated sales from Ukraine. Odessa offers wheat at a near $11 per ton cheaper rate than anywhere in the world. January is typically a high-volume month in terms of exports for Ukraine, but Turkish, Pakistani, and Egyptian demand has yet to be seen.
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