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…

According to the USDA, ownership of U.S. farmland by Chinese nationals has increased by an additional 75,000 acres since 2010, totaling 338,000 acres as of 2020. These acres only account for less than one percent of all U.S. agricultural land held by foreign citizens, but Chinese national ownership is quite concerning as it is suspected the Chinese government may be buying up land for military and espionage purposes. Concerns have also been heightened in recent weeks as China floated a spy balloon over our nation and is now getting awfully cozy with Russia.   Last year, Chinese company Fufeng Group purchased 370 acres of farmland in Grand Forks, ND. The company claimed their intentions were to build a $700 million corn mill, and it was just a coincidence the land they purchased was next door to an Air Force Base. Right off the bat, Grand Forks Mayor Brandon Bochenski was in support of this purchase, however once he received a letter from the U.S. Air Force claiming the company’s project was a counterintelligence threat, he quickly changed his stance on the matter. The town of Grand Forks went on to deny Fufeng’s building permits.   A similar situation occurred in…

NEW WHEAT ADVICE DAY 3: Monday 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 that very day and the advice stands. You should also now be sold out of ’22 crop if not already there. On the Grains: Overnight markets are mixed with corn and beans trading either side of unchanged while wheat prices more clearly on the firm side again. The ambiguity in corn and beans makes sense in light of wide ranges in trader expectations for Friday’s Prospective Plantings and also the quarterly Grain Stocks Report both due for release at 11 a.m. that day. (There is also some “ambiguity” developing about South American soybean and corn prospects in light of most recent weather developments detailed in this week’s Brazilian Operations Update below.) The continued firmness in wheat, on the other hand, also makes sense. Funds remain heavily short and in the covering mode. Continued dryness in the western half of the central and southern Plains threatens HRW yields and delayed planting likely in spring wheat country with below normal temps slowing snowmelt and fieldwork. On Monday NASS resumes…

We have covered the Congressional Budget Office (CBO) baseline forecasts” for crop-by-crop balance sheets, ending stocks and average farm prices going out 10 years earlier this year. They came out in February. They are of limited value, of course, because they make the heroic assumption that each of the next 10 years  will have “average” growing seasons, and “trend-line yields” not just in the U.S., but worldwide.   So what’s the point? These are the numbers Congress uses as “baseline assumptions” to calculate the impact on acreage and prices of any significant budgetary allocations, changes in program rules, ending some programs, or initiating new ones that might impact grower decisions.  Essentially the baseline numbers are used to say, “all things being equal, here’s how this policy addition, change or deletion might impact farmer decision-making.” (Of course, “all things” never ARE “equal” but constantly in flux for a host of other reasons, but Congress has to have a basic set of “starting assumptions” to evaluate any proposition offered in farm policy design and implementation.   Today, however, we’re addressing how the baseline assumptions are set among the basic components of the new farm bill to be designed this year, regardless of…

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…

A well-known climatologist once told me how his audience liked to hear long term weather outlooks going out six months or more.  However, he confided to me that since weather obviously was dependent upon a myriad of factors that could change on a whim, “anything beyond three weeks was completely made up” according to him.  In other words, today’s weather forecast technology does not allow for anything accurate beyond three weeks.  I often think the same thing could apply to the commodity markets.  Outlooks can easily shift depending upon a variety of factors.  The trade has a habit of focusing on short term issues that often appear trivial in the larger scheme of things, pulling the market in a temporary direction that causes farmers to lose focus.   It seemed that late last year all we heard about was how poor exports were for corn.  Despite only making up 15% of corn demand, the market seemed solely focused on this singular issue.  The market likes to “overdo” things, either exploding too high on moderately bullish news or falling too fast on moderately bearish news.  Poor exports were a perfect example, as the market dropped 60 cents last November as the…

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

“PENDING” WHEAT TARGET HIT: On 3/20/23 we recommended all producers, regardless of class, push cash sales another 10% if May KC futures hit $8.41 and still another 10% of KC May futures hit $8.58. The $8.41 target was hit on 3/21 and the second target was hit Friday 3/24. so all producers should now be 85% sold on ’22 wheat. NEW WHEAT ADVICE DAY 1: Hedge the first 10% of 2023-crop wheat in your respective new crop month at KC, MGE or CBOT when KC July hits $8.49. NOTE: At that same time, we also advise pricing the final 15% of ’22 crop wheat, regardless of class. Opening calls are mixed, but the grains have the potential to see light follow-through after a strong close on Friday. There is again likely to be an outsized influence from conditions in the outside financial markets. In the Headlines Chinese corn purchases continued last week with daily flash sales announced in 3 out of 5 days and totaling another 463,000 metric tons. Fresh export demand from China comes while total U.S. corn sales are still down 34 percent from last year but with the USDA looking for them to drop 25 percent for…

Hedge funds have turned net-short in corn futures and options for the first time since 2020. The sentiment shift was sparked late last month when the March contracts went into delivery and then selling interest was sustained throughout the recent economic turmoil. The Commodity Futures Trading Commission is expected to catch up with the most current trader positions report this afternoon following a cyber attack that disrupted the data release for nearly two months. The updated numbers should show the managed money trader category keeping a net-short in corn for the second straight week to go along with a heavily net-short wheat holding. Funds will have trimmed down a net-long position that remained in soybeans during a reporting week when May futures lost about quarter. Hedge funds are likley to have flipped net-short again on hogs after their bets briefly poked into net-long territory in the week prior. More length has also recently been erased from net-longs held in live cattle and feeder cattle futures.   One thing that stands out about the fund corn position in particular is its split between longs and shorts. With the net-short recently recorded above 50,000 contracts, the position consisted of over 224,000 short…

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…