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  • 03/13/2024 Outlook for 2024 Still Cloudy, But Market Bears Less Cocky
    On the Grains Grains are mixed in very low volume overnight trade as of 6 AM. Soybeans are weakest, with no follow through buying following yesterday's pop higher on Brazil's CONAB coming out with much lower crop estimates than USDA for both beans and corn. They're likely to go lower still and we explain why in this week's Brazilian operations update below. It's noteworthy that national average soybean basis gained another penny despite the jump in futures showing remaining beans in tight hands as fieldwork begins. In other news, Ukraine's Grain Traders Union says the combination of low prices, high costs amidst ongoing war will likely cut that country's total grain and oilseed production by 6.5 MMT in 2024. That's only about 8% and considerably more optimistic than last month's warning by Ukraine's Ag Ministry that production would likely fall 15% or more. Even that much decline will have an amplified impact on Ukraine's exports, however. The Union predicts corn exports will decline more than 6 million tonnes (over 20%) and wheat exports by 2 MMT (10%). Wheat has attempted to rally multiple times but keeps getting pushed back down by relentless selling by Russia at whatever discount it takes to maintain market share. Weekly updates on U.S. wheat condition won't commence until April, but we got new estimates from state offices in TX, KS and OK this week that showed further improvement. In TX, 44% rates good/excellent compared to 17% last year, in OK 65% rates G/E compared to 30% last year, ...
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  • 03/12/24 At Some Point in Each Mania Somebody Gets Really Rich Just Before it all Ends in Tears
    Market manias are common occurring random events throughout history. One of the most historical was the Tulip bulb mania in Holland in the early 1600's because it was so well-documented. It has been studied ever since as a physiological event. They created tulip futures as a trading entity and the public eventually rushed in to produce exponential speculation. When the last fool buys in, there is no one left to sell to.   I thought this chart depicted the stages of mania well. The current example of a speculative bubble building in my opinion is cryptocurrencies. My read is that it has recently reached the point where the public comes in. That could leave room for blow-off speculation yet. My bet is that the recent surge in speculative energy is the result of the approval of cryptocurrency ETFs. I see that as the trigger to the public conclusion that if the government regulators allowed ETFs, then it must be real… and investing is even "safe."  The chart below shows the anticipation of the approval of ETFs in Bitcoin followed by the subsequent surge of investing thereafter. Every dollar put into bitcoin is speculation. There is no other reason to ever own it.  There may still be the stages of Greed, Delusion and the New Paradigm to go through for the Bitcoin bubble yet.   Bitcoin recently surpassed its previous record high price of $68,800, which was set in November 2021. "Year-over-year, the cryptocurrency has increased by a whopping 175%. The SEC's recent approval of ...
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  • 03/12/24 Focus Turing to Planting Intentions for 2024 Season
    On the Grains Grains are mostly weaker in overnight trade, particularly in wheat. Yesterday's weekly export inspections for corn were near the upper end of the range of expectations, but numbers for wheat and soybeans were closer to the lower end. Another cancellation of an SRW sale to China hurt early on yesterday, but wheat still managed another comeback day.   STATS Canada put out their planting intentions yesterday, showing only a very slight increase in corn and total wheat, but a 5.1% increase for durum wheat and nearly a 22% increase in oats. However, planned acreage for winter wheat, spring wheat, canola, soybeans and barley are lower.   This morning we'll get latest estimates on soybean and corn crop sizes from Brazil's CONAB that will likely be supportive since they are already well below USDA's March WASDE estimates.   Beyond that, traders are rapidly becoming more focused on what our own planting intentions will be among major crops in the March Prospective Plantings later this month. Several private firms are already taking their own surveys and should have results ahead of the USDA report.   On the Hogs: We started the week with futures firm and the July contract even making a new high for the move at $104.45. But then the buying abruptly stopped and sold off to close in the red across the board. Typical for Mondays, packer interest was slack. The range of prices paid across the country dropped a buck at the low end and the regional bids were all soft as well. That ...
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  • 03/11/24 Turn Your Phone Ringer Volume Up
    Last December, when we made our incremental cash corn sale taking us to 75% sold, the local bid at our ethanol plant briefly topped $5 bushel. That was the last time the cash price of corn traded $5 bushel here. Their bid dropped to near $4 bushel with some local markets briefly falling sub-$4 bushel on the John Deere lows made late last month. Last week the ethanol plant texted out a flash cash bid of $4.50 bushel for FH March delivery and about 2 ½ hours later a second text said they had covered their needs pulling the bid. They quickly acquired inventory as broken farmer psychology had set up their sale. The commercial strategy is to first break the market, crush farmer psychology and then bin doors fly open when they bid up. They will buy more corn when they break the market again too as farmers are worried that they missed the rebound. Even with the late week CBOT strength their cash bid recovered to 4.50 for a second chance.  Better not have your phone set on vibrate and miss these calls if you have corn for sale. Would not be surprised to see a good retest of the late February low for them to see if they can buckle some more knees of those holding corn. Farmers will continue to be stubborn about holding corn with cash needs driving sales.   There is a lot of hope being put into a spring rally. Seasonally grain prices tend to ...
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  • 03/11/24 Huge Net Short Positions Held By Funds Still the Elephant in the Room
    On the Grains Grains are slightly weaker in overnight trade as of 6am after Friday's surprising firmness on a mostly yawner WASDE. The only big surprise relative to trade expectations was USDA cutting Brazil's soybean crop by only 1 million tonnes to 155 MMT with the trade expecting a cut four times that big. Even Brazil's own CONAB is already down to 149.4 and several private forecasters (ourselves included) at 145 million.   Yet soybeans had the strongest close on Friday as traders concluded USDA is being unreasonably "conservative" until harvest is closer to completion and paid more attention to some "sleeper" elements in the WASDE regarding China. Recall in January they blindsided the soybean market by boosting last year's Brazilian ending stocks nearly 2 MMT? On Friday they revisited last year's data again, only this time it was for China and price friendly. They boosted China's 2022-23 soybean imports 3.65 MMT and also boosted their estimate for this year's imports by 3 MMT.   Weakness overnight may stem in part from the Commitments of Traders report that came out after the close. It showed that through last Tuesday, the funds had continued to sell grains aggressively with the exception of KC and MGE wheat where they began to lighten up on their large net short position. They were especially aggressive selling soybeans by more than 11,000 contracts to a new record short position just shy of 172,000 contracts. They also sold SBO particularly hard and now have a record net short of 154,165 contracts ...
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  • 03/10/2024 Sunday Market Preview
    Grains are poised to follow through on strength from Friday's finish. Price direction on Monday morning may depend on anything that pops up at 8 am central when the USDA reports on daily export sales and/or cancellations. In the Headlines Friday's crop report did not produce any major changes, so market participants are left looking ahead to the Prospective Plantings and Grain Stocks reports coming up at the end of the month. For the planting estimates, analysts will look for numbers close to what were issued from the Agricultural Outlook Forum in February, which predicted corn acres down on the year to 91 million and soybean acres up to 87.5 million. Last year, the March plantings report was higher than the February estimates by 1 million acres of corn, but the projections matched exactly for soybeans. Compared to the final outcomes, the prospective estimates in March would end up being 2.6 million acres too low on corn and 3.9 million acres too high for soybeans. There were cancellations announced on Thursday and Friday for U.S. wheat exports that were previously committed to China. Chinese buyers were washing out of contracts that were opened in early December. The largest daily purchase of soft red wheat was made on December 6th when May Chicago wheat futures traded up to a recent high at $6.60 1/2, which is about $1.22 higher than Friday's settlement. The spread has been narrowing to reduce Brazil's discount under U.S. soybean prices. Brazilian soybean prices put in a one-year low in late ...
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  • 03/08/24 Grain Prices Find Relief from Crop Report Being Out of the Way
    The World Agricultural Supply and Demand Estimates (WASDE) report was released today to show very few changes from last month. Most notable was that the government analysts decided to stay stubbornly high on their production estimates for Brazil. Prices did not react much initially, but they firmed up eventually on the likely relief of the report being put behind us without having produced any drastically bearish revelations.   A quick first glance was given to the U.S. carryout estimates, which were only expected to change slightly if at all.  U.S. wheat ending stocks were up by 15 million bushels to correspond with the export target being cut by that amount. The average wheat price projection was cut by 5 cents to $7.15. The corn price estimate was also cut by a nickel, to $4.75, but that was the only change made on the U.S. balance sheet for corn. For soybeans, there were no changes at all from last month, leaving carryout at 315 million bushels and the price at $12.65.   Brazil's soybean production estimate was again only cut by 1 million metric tons (mmt), which was missed by an average trade guess looking for a reduction of nearly 3.5 mmt. The consensus view was also that Brazil's corn output should fall by at least 2 mmt, but it did not budge from last month. Brazil soybean exports were raised by 3 mmt, which was the same amount added to China's soybean import forecast. Additionally bearish surrounding South America were the USDA's additions to ...
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  • 03/08/24 Wide Range of Trade Guesstimates for Brazilian Crop Size Make it the Biggest Wildcard for Today’s WASDE
    On the Grains Grains are quietly mixed in overnight trade. Yesterday's weekly export sales were in the top half of the expected range for corn, but YTD sales are still running 28% over last year vs. USDA's forecast for a 24.6% increase so today's WASDE should leave corn export sales unchanged. Wheat sales were near the low end of expectations but YTD sales are still 5.9% over last year vs. USDA's call for a 4.5% decline. Yet wheat managed to score the strongest gains yesterday as a further sign that relentlessly bearish news is pretty much dialed in with ending stocks projected to be the second tightest in a decade.   Soybeans and soybean oil were the shining stars of last week's sales. At 613,500 tonnes, soybean sales were above the high end of expectations at 600K. Alas, YTD sales are still down 19% from a year ago with USDA's current forecast at less than a 14% decline. That makes beans vulnerable to reduction in today's WASDE. Soybean oil sales were spectacular. At 29,200 tonnes they blew away expectations that ranged from a net reduction of 5,000 tonnes to only 10,000 in new net sales. The big surprise buyer was Colombia, suddenly buying over 14,000 tonnes.   Morning trade will be dominated by continued positioning ahead of the March WASDE at 11am. As promised here are the averages and ranges of trade estimates for the most critical metric, ending stocks compared to last month. For the U.S. not much change is expected with the average ...
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  • 03/07/24 Delay… Delay… Disappoint…Politicians are Pretty Much All Alike
    The current administration's biofuel political advantage over the Trump administration is being squandered by delays in regulatory benefits for biofuel. Trump's RFS waivers for refineries cost the ethanol industry 1.5 bln gallons of ethanol demand or in terms of corn demand, over 500 mln bushels of lost corn demand. Today’s 2,172 bln bushel carryover projection would be well under 2 bln bushels were it not for the master-stroke of Scott Pruitt’s EPA RIN waivers to Big Oil. It can be argued that that action taken back then cost us over $1 bushel in today's corn market. Trump did stamp initial approval of the year around E-15 but then did not consummate it in the regulatory process. Neither did Biden. It will require waivers again for E-15 sales this summer. They supposedly approved permanent E-15 for 2025 so a waiver then is not needed but don’t hold your breath. The WH is reportedly scared to death over what gas prices will do this summer with the election approaching this fall and someone sold them a bill of goods that E-15 increases gas prices. I am incredulous over that contention as I see the opposite, ethanol is cheaper than gasoline so more ethanol in an E-15 blend over an E-10 blend lowers the gas price at the pump. I have always seen E-15 priced below E-10. At least if you are going to regulate biofuel for political purposes you should get it right.   There are 3 primary special interests that impact bio-fuel policy…corn ...
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  • 03/07/2024 Firmness in Grains Overnight Hint Market Bears Less Confident
    On the Grains Grains are notably higher in overnight trade as of 6 am. There isn't any particularly bullish news to explain why so it only supports the notion that the pervasive mood of bearishness is largely dialed in and day-to-day change depends heavily on whether funds are adding to their huge net short positions or lightening up on them. Alas, even that has been inconsistent. Funds sold wheat hard to new 3-year lows yesterday. Another factor was worry that China may cancel some SRW purchases from the U.S. and Russian wheat offers have reportedly dropped below $200 per tonne. In the weekly energy stats from EIA, ethanol production backed off some last week, but it is still running strong enough to meet or beat USDA's current corn usage estimates for the year. Gasoline usage rose to a 10-week high, so that was supportive to ethanol consumption, yet stocks remain at a record high for this point in the year. Today's trade will also feature "positioning" ahead of tomorrow's WASDE report, there are few changes expected in the U.S. balance sheets but the "global" ending stocks are a wildcard heavily dependent on what USDA does with its South American forecasts. We'll have detailed trade expectations in tomorrow's AM report. At 7:30 we get weekly export sales that often set the tone for morning trade. Expectations range as follows: Corn 800K to 1.4 million tonnes, Soybeans 175K to 600K tonnes, and Wheat 250K to 500Ktonnes. One more news development worth noting is that American Carbon Alliance ...
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  • 03/06/24 Someone Interesting – Howard G Buffett
    Sometimes when doing a report, the research leads me to new places of enlightenment. Such was the case with my recent report on Ukraine. "If someone granted you $3 billion to accomplish something great in the world, what would you do? In 2006, legendary investor Warren Buffett posed this challenge to his son Howard G. Buffett. Howard set out to help the most vulnerable people on earth—nearly a billion individuals who lack basic food security. And Howard gave himself a deadline: 40 years to put the resources to work on this challenge." One of his 15 books, "40 Chances "recounts Howard's personal and professional experiences in surprisingly candid and colorful fashion…successfully blending personal stories with a tough look at the struggle to fight domestic food scarcity and world hunger…"   The Howard Buffett Foundation has been adding inserts to Farm Journal magazines entitled "Courage of a Nation" promoting "Farmerhood", a non-profit helping small farmers in Ukraine.   The publication's parent company Farm Journal Media also produces the AgDay and U.S. Farm Report television programs and publications including The Packer and Drovers Magazine.  They placed expansive multi-page inserts in the magazine that caught my attention triggering my curiosity. Howard has spent a lot of time in Ukraine focused on Ag, Food and Freedom issues. The Foundation has reportedly spent over $500 mln on aid projects in Ukraine since the start of the conflict and is said to plan to spend another $300 mln this year on humanitarian assistance. Here in the US, Howard has been attempting to offset Russian propaganda with the truth on ...
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  • 03/06/2024 Early Trade Estimates for Friday WASDE Beginning to Trickle In
    On the Grains Grains are mixed in overnight trade. As of 6 am, corn and beans are mostly steady but wheat generally weak yet again. Soybean oil should get some support from growing evidence that palm oil production is declining in both Indonesia and Malaysia. China has been buying corn aggressively from Ukraine lately and plans to ship most through the Red Sea as its grain vessels have so far not been subject to Houthi attack. But in a noteworthy feature of China's recent party congress where it lays out objectives for the coming year, one thing that jumped out is sharply increased funding for "stockpiling of grains, edible oils and other materials" to restore "grain security and price stability." The stock market took a big hit yesterday ahead of today's testimony before Congress by Fed Chairman Powell. February jobs data is expected to be down sharply from January and yet he's expected to tell Congress it's still too soon to look for rate cuts. Also bearing down on the economic outlook is that over $17 trillion in government bonds are coming due for renewal over the next several months. Many bear current interest rates under 1% and will need to be renewed at rates nearly 5 times higher. Recent bond auctions show sagging demand for bonds with the spread between rates offered and what the public and institutions would accept near record gaps. Wheat just can't buy a break. Prices for wheat from Ukraine and Russia continue to drop and now yesterday, ...
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  • 03/05/24 Do Not Fold or Spindle
    Recently, one of my colleagues wrote in this report that one of the GOP criticisms of the farm bill was that they allege that illegal immigrants were getting food stamps under SNAP. I know that is a common assertion and I was curious how much truth, of any, that there was to it. I happened to know an expert in social services who has a great deal of experience working with the immigrant population in Des Moines who would know if they are accessing SNAP. Attacking SNAP, calling it corrupt and abused, has been a common theme for Farm Bill critics for as long as they have debated them. As a general statement, most user-abuse has been purged from the system. Some use a broader definition, seeing SNAP as undesirable welfare that for which only elimination would suffice. SNAP opponents have tolerated it as the necessary compromise to get the votes to enact the larger farm bill with Ag titles. One gets the impression today that hard hard-right slice of House Republicans, that are punching above their weight, have reached a tipping point where these opponents would do away with a farm bill altogether if that is what it took to drastically shrink or eliminate SNAP. My own view is that abuse needs to be strongly addressed and prevented or it gives critics credibility. However, it is better to err by feeding a few undeserving than to err by expanding hunger. Let's not go off the rails either way. That ...
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  • 03/05/2024 Cash Basis Improvement Bodes Well for Market Where Most Bearishness Already Dialed In
    On the Grains Grains are slightly weaker in overnight trade following yesterday's welcome gains. National average basis improved 2 cents in corn and a penny in beans while holding steady to firm in wheat. Short covering by funds was a noteworthy feature yesterday. They remain holding their near record short in corn and beans, but even evidence they're not adding to their net short position is supportive. Export inspections yesterday were well within the range of expectations all around, but near the low end of the range for wheat. Despite that, wheat was easily the leader yesterday, stemming from reports that widespread hail has damaged India's crop and a report from Australia's ABARE had put their crop at 26 MMT. That's still slightly above USDA's last estimate of 25.5 million, but significantly lower than private estimates closer to 30MMT. We've yet to see pre-release trade estimates ahead of Friday's WASDE, but when we do, they'll tell us much about the odds for price-sensitive changes. Of most interest will be trade estimates of how much USDA will cut its own estimates of Brazilian soybean and corn crops. The most welcome news yesterday was that Valero would ship CO2 from eight of its plants through Summit Carbon's pipeline network. POET, the country's largest producer had already agreed to this early this year and between the two companies alone, more than half the nation's ethanol output gets a big boost in its "carbon intensity" score that will help qualify for Sustainable Airline Fuel. On the Hogs: Hogs saw little ...
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  • 03/04/24 Sure Wish the Wind Would Blow…NOT!
    March has come in as a lamb, a really warm/windy lamb for our region of the country. Red Flag/High wind warnings stretched the entire middle section of the US. They fanned wildfires in TX. Moisture was relegated to the West coast where they got literally feet of snow. High temps into the 70^s and gale force sustained winds are drying out our topsoil moisture profile. There is no snow cover here so topsoil is exposed to the warmth and wind. I drove home to NW IA from Des Moines Sunday fighting the wind. Wind turbines were in full go. I noted last fall that an inordinate large amount of tillage had been done. This was a good test for conservation tillage practices putting these practices on trial. Tillage to soybean ground that is done is light if at all. I left mine untouched. Strip till did not open topsoil up enough for the dirt to blow. Overall, I was very impressed with how little dirt was moving Sunday. The only exception was not more than a mile in length where someone had disked soybean ground and there was a mini-size-dirt blizzard blowing across the road. You could see dirt polishing the highway and visibility was poor. The picture below was not taken until we were almost through it.   It was temporary/short-lived and I thought that it was good that it was the only instance of dirt moving from Des Moines to Spirit Lake. 40 years ago, similar conditions would have moved ...
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  • Tomorrow I’ll have “Part 2” of the most important observations and prognosis for resolution in the AFBF report. But I already see another implication they don’t even cover: The increasing importance of growing domestic demand for ethanol and biodiesel to reduce our dependence on exports. The competitive threat from Brazil is increasingly obvious. Now add to that the twin threats to ocean transport that threaten comparative advantage there. Even the AFBF study observes Brazil even gains an edge there being much closer to the tip of Africa route to Asian markets.
    On the Grains Grains are mixed in overnight trade. As of 6 am, corn was steady to firm and beans firmer yet, while wheat was soft. To nobody's surprise, the EPA missed the Friday deadline to announce final rules on how ethanol can meet specs for Sustainable Airline Fuel (SAF). Now we await several more weeks before they'll say exactly how farmers can help meet those specs by supplying refiners with corn grown under "climate-smart" methods as well as other things winning "credits", such as use of wind or solar on the farm. Beans are firmer despite dueling estimates for the size of Brazil's crop. Some private firms are now even lower than our own estimate at 145 MMT, but StoneX just revised their estimate upward to 151.5 MMT from 150.35 previously. We have the March WASDE due Friday. There's no doubt USDA will come down from 156 MMT, the only question is by how much. Pre-release trade estimates will be closely watched for that reason. War risk premium is still warranted. It was revealed over the weekend that Iran has even considered building a naval base in Sudan to more efficiently supply their Houthi proxies with aid attacking Red Sea shipping. Cash basis levels will be closely watched in the days to come to ascertain whether the pre-March 1 selling surge by farmers is over or if "resignation selling" continues on favorable weather prospects to start the fieldwork season. On the Hogs: Hogs scored big gains Friday, capping off a week of modest gains. The ...
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  • 03/03/2024 Sunday Market Preview
    Grains are called firmer behind follow through buying interest for soybeans. Expectations will formed for the March crop report scheduled for Friday. The broader commodities market will be sensitive to the direction of crude oil prices as they respond to a pending decision from OPEC regarding production agreements. In the Headlines The White House did not meet the promised deadline of March 1st for releasing details of how tax incentives will work for the production of sustainable aviation fuel, now saying that the plan was to "finalize updates in the coming weeks." Reports were that ethanol would not qualify on its own for use as a feedstock, but that the tax breaks could be received if ethanol was produced with corn from farms that could prove the implementation of certain other sustainable farming practices, such as having solar power or growing cover crops. Sorghum export sales were very strong again last week as China continues to buy aggressively as a partial substitute for its corn needs. China is expected to take in about 240 million bushels of U.S. sorghum, which accounts for 75 percent of sorghum production last season. Sorghum imports will not totally replace corn, as China is projected to import over 900 million bushels of corn this year from the U.S. and other sources. Wheat was the weak link at the end of last week, tumbling lower behind weakness indicated for international values, including top trade competitors Russia and France. Russian wheat offers were reportedly down to as low as $205 per ...
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