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03/30/2023 Why Our Own Acreage Views Tilt Bearish on Corn, Friendly on Beans

By The Commstock Report

’22-CROP CORN RECCO UPDATE: Last May we had you price the first 15% of ’22 corn with December futures at $7.26. In mid-August we had you buy it back in Dec. ’23 futures at $5.83. With ’22 crop cash sales completed in early January, it’s time to close the books on ’22-crop completely. Exit that long position in Dec. ’23 corn this morning. NEW RECCO FOR ’23 CORN DAY 1: As our first move on ’23 crop, we advise selling $6.30 Dec. call options covering 15% of anticipated production if you can get 22 cents or better. NOTE: By way of explanation, this is called “writing a covered call” for producers because even if the trade works against you, your risk is “covered” by the rising value of your growing crop. The tactic can be win-win either way. If eventually exercised by the buyer, you will be assigned a short position in Dec’ 23 futures at $6.30 covering 15% of your crop – which is 60 cents better than yesterday’s close. If, on the other hand, it ends up expiring worthless to the buyer, then you simply keep the 22 cents credited to your account when you sold the option as a “price…

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03/28/2023 Wide Ranges in Trade Expectations for Prospective Plantings and Grain Stocks

By The Commstock Report

NEW WHEAT ADVICE DAY 2: Yesterday we advised hedging the first 10% of 2023-crop wheat in your respective new crop month at KC, MGE or CBOT when KC July hit $8.49. It did so yesterday and the advice stands today. NOTE: At that same time, we also advised pricing the final 15% of ’22 crop wheat, regardless of class so your ’22-crop sales should now be completed. On the Grains: 2-week weather outlook hints delayed spring. There are mixed implications for prices. On the one hand, it favors higher than normal precipitation over nearly the entire country, which favors a strong start for crops in the early growing season with potential to keep a lid on any rallies. However, the exception is the western half of the central and southern Plains states where HRW wheat still badly needs more rain and the 2-week outlook is drier than normal. Also supportive to prices is that much of the eastern Corn Belt and Delta looks to stay especially wet and likely to delay fieldwork. The maps also threaten fieldwork in the Dakotas by remaining cooler than normal over the next two weeks and further slowing the needed snowmelt to keep spring fieldwork on track for…

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03/27/2023 Private Estimates for Friday Planting Intentions Show Potential Surprises

By The Commstock Report

On the Grains:
Overnight markets are mixed to start a big report week. On Friday we get the Mar. 1 Grain Stocks and even more keenly awaited, the 2023 Prospective Plantings Report. The weekend was not without more geopolitical intrigue with potential for market disruption as well. Topping the list was the announcement Russia would station tactical nuclear weapons in “client state” Belarus (on Ukraine’s west flank).
 
Wheat popped Friday on reports that Russia was going to “temporarily halt exports.” It turns out that instead, they only told exporters not to accept any “offers below cost of production”. Our Ukrainian grain broker contact confirms that but says prices at the time were only about 16 cents per bu. below that new minimum price ordered by the Kremlin. (Nonetheless, it still helps establish a “floor” for global FOB wheat if it sticks.)
 
Our Ukrainian source also sheds light on China’s latest moves to assert itself as a rival superpower: It has informed the Kremlin it will only continue to buy Russian oil and grain in their own currency, not dollars. He says that insures Russia will in turn shift imports sources for machinery and other goods to Chinese products for both economic and political reasons.
 
Throughout history, Chinese moves like that are known as “mercantilism”, defined as economic aggression that combines exploitation of foreign dependents with domestic protectionism. China’s next target? Brazil. Hundreds of Brazilian agribusiness leaders flooded Beijing last week ahead of a visit by Brazil’s newly elected President Lula da Silva.… Continue Reading

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03/24/2023 Bean Complex Pressured Further When Granholm Says No Plans to Refill SPR

By The Commstock Report

On the Grains: Grains are mixed this morning with corn barely steady, beans down again but wheat firmer. Corn got only a whiff of support from yesterday’s weekly export sales that set a marketing year high at 3.1 million tonnes. It got caught in the downdraft from beans with sales of only 152K and not even close to the low end of expectations that ranged from 400K to 900K. Beans have broken key support and continue under pressure from fund liquidation. Soybean oil was already in trouble and is pressured further by sharply lower crude prices overnight that translate to lower demand for biodiesel in the minds of traders. Contributing to that was this week’s surprising rise in crude oil stocks while traders were expecting a drawdown. Those stocks are now 8% above the 5-year average and another contributing factor in overnight losses was yesterday’s testimony by Energy Secretary Jennifer Granholm before a House Committee yesterday. Last fall when crude was well over $90 per barrel, the Biden administration promised with considerable fanfare that they would begin refilling the Strategic Petroleum Reserve (SPR) “at a profit” if WTI dropped into the $68-72 range. It was thought that might provide somewhat…

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03/23/2023 Markets Stabilizing After Powell and Yellen Remarks Gave Indigestion Yesterday

By The Commstock Report

On the Grains: Overnight trade was steady to mixed in corn and beans but firmer in wheat after yesterday’s plunge. Stocks are a little firmer after ending sharply lower on a wild up-and-down afternoon while oil was lower overnight after three days of gains. If it sounds like a hodge-podge of indecision at this point that pretty much sums up trader attitudes while they digest dueling messaging from Fed Chief Jerome Powell and Treasury Secretary Janet Yellen yesterday. The Fed raised interest rates a quarter point, as most expected. The focus was “reading between the lines” of what he said after the announcement. What hawks heard was his emphasis on the need to continue fighting inflation with the Fed’s goal to tame it back towards 2% from its current rate of 6%. What doves heard was the noticeable absence about the likelihood for “continued hikes in rates as needed through 2023” that have accompanied post-hike remarks in the past. Instead, all Powell indicated was “likely need for one more quarter-point hike by the end of the year.” So what makes Powell think one more hike might be all that’s needed to keep inflation slowly working downward? Because there are other…

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03/22/2023 Bearish CBOT Chart Look was Not Improved by Recent Rallies/Fed Interest Rate Decision Due at 1 p.m./Weakness in Pork Demand Becomes Baffling

By The Commstock Report

Wheat Recco Day 3: On 03/19/23 we recommended that all producers, regardless of class, push cash sales another 10% if May KC hit 8.41. This sale was triggered on 03/21/23. You should now be 75% sold. Continue with the additional recommendation to sell another 10%, regardless of class, if May KC can trade to 8.58. On the Grains: While most focus is on the upcoming planting intentions report coming at the end of the month there is also the quarterly stocks report that will be released at the same time. While there is a good range of trade estimates for acreage, there should be enough intended acreage so that it would be hard for acreage itself to be bullish without some unfavorable weather. The trade expects better weather this year than a year ago with the fading La Nina and developing El Nino. I have been a little surprised at the lack of market concern displayed by soybeans and cotton markets over the prospect of maintaining acres. The cotton market, in particular, appears to be saying, “Don’t plant cotton.” Old crop cotton was never profitable after its harvest and new crop is also an unprofitable crop at current futures price levels….

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03/21/2023 Many Markets Now Hit Pause Ahead of Wednesday Fed Decision

By The Commstock Report

While the S&P chart looks generally defensive, support was found so far where it needed to be seen so bulls have a chance to repair things. It looks like 5 waves down from the February high, which would be the trend. After additional corrective trade, which could form the right shoulder of a head and shoulders formation, then things will get dicey again. All markets are waiting on the Fed Wednesday to signal where it is going next with monetary policy. The Fed will give their verdict on the health of the banking system. On the Grains: Do oats know? Probably if oats can take out Monday’s high, then other CBOT markets may get permission from this leader to do so. Otherwise, it is just noise. The weather conditions that have been supporting the soy complex in South America come to an end with the season. The trade looks for further reduction in the Argentine crop to as low as 25 mmts. A lot of South American crop conditions have to be in the market but each time they have set up to fail, selling exhausts. Both bulls and bears lack conviction. A rebound in soyoil turned the market higher…

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03/09/2023 Grains Firm on New, Even LOWER Estimates for Argentina Than USDA’s!

By The Commstock Report

If  you’re at the Commodity Classic down in Orlando, be sure to swing by booth 2719 and visit with Commstock broker Justin McKinney! On the Grains: Markets are firm in overnight trade after disappointing closes yesterday. Even though USDA cut Argentina’s crops to the lowest of trade estimates, the Rosario Grain Exchange just lowered them even more. They now put the bean crop at only 27 MMT vs. USDA’s new figure of 33MMT and the corn crop at only 35 MMT vs. USDA’s new estimate at 40 MMT. Yesterday’s muted reactions in corn and soybeans to USDA’s surprisingly large cuts to Argentina’s corn and soybean crops was a classic example of a market that had already “bought the rumors” and ready to “sell the fact.” Even though USDA cut both crops by near the very lowest pre-report estimates, they left Brazil’s estimate unchanged. The impact on global soybean ending stocks was only slightly below expectations. The market finished with only a slight gain for beans and well off the day’s high. As for U.S. balance sheets, soybean ending stocks came in 10 million bu. below the average trade estimate but the average farm price was left unchanged at 14.30. In…

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03/08/2023 Where Attention Will Shift Once Today’s WASDE “Dialed In”

By The Commstock Report

On the Grains: Overnight markets still lean soft as we go to press, awaiting the March WASDE at 11 a.m. CST. Yesterday was a combination of pre-WASDE positioning by funds and what some call a “macro day.” That’s when outside markets (stocks, crude oil, the dollar) influence trade in Ag commodities as well. The trigger was hawkish comments by Fed Chairman Jerome Powell that suggested the Fed might have to become more aggressive on raising interest rates to curb inflationary pressures still at work. The dollar soared more than a full point, always a sour note for Ag exports. The outside markets have calmed overnight so traders are again focused on what surprises (or lack thereof) we might see in the WASDE when the numbers come out. We’ve hashed and rehashed trade expectations for changes in U.S. and global ending stocks in recent days so there’s not much point in listing them all again. Suffice to say the trade focus will be on how much USDA cuts estimates for both corn and soybeans for Argentina as well as tweaking Brazil’s prospects for both crops. The risk is that USDA is unlikely to cut its Argentine estimates nearly as much as private forecasters…

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03/07/2023 Overnight Grains on “Simmer” Awaiting Wednesday WASDE

By The Commstock Report

On the Grains: Overnight markets are steady at best as we go to press, as if on “simmer” awaiting tomorrow’s WASDE updates from USDA. It’s often noted that a market that can’t go up on price-friendly news is a warning sign and that describes corn’s poor performance yesterday. Traders got a weekly export inspections figure just shy of 900,000 tonnes, blowing the top off expectations that ranged from 450-750K. Private estimates for Argentina’s corn crop are already lower than the big cuts expected from USDA tomorrow. Then we got two flash sales announcements totaling nearly 300K between them and still corn closed lower. Chart-wise, the picture is a little better. May corn scored an upside reversal on Mar. 1 and was as oversold as it could get, only now climbing out of oversold conditions. Ironically, soybeans closed strong yesterday despite very disappointing export sales. At only 542,0000 tonnes they didn’t even come close to the lower end of expectations that ranged from 625K to 1.3 million tonnes. The difference is that unlike corn, soybean sales YTD have been strong enough to sustain USDA’s current export estimate in tomorrow’s WASDE. Further, the bull market in soybean meal is alive and well with the May contract…

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