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03/18/2024 Trading Funds Finally Lightening Up Big Short Positions

By The Commstock Report
On the Grains Grains are mixed in overnight trade. As of 6am corn was mostly steady, beans weak and wheat firmer. Weekend news was mostly in the geopolitical arena. Putin overwhelmingly won another 6-year term as President, which was no surprise when what little opposition he has meet untimely "accidents". Israel has strongly condemned Chuck Schumer's call for a special election to oust Netanyahu and Biden's tacit endorsement of the speech. The war in Ukraine rages on but Ukraine's remarkable restoration of its Black Sea shipping lane made headlines over the weekend and is detailed below. Over the weekend, Russia stepped up attacks on agricultural facilities in Odessa while Ukraine launched multiple attacks into Russia. Back to our own shores, Trump is doubling down on promises to impose major tariffs on China's exports, including up to 100% tariffs on cars built by Chinese companies in Mexico. He says he doesn't fear or care about Chinese "retaliation", that's an unsettling background for our Ag export prospects. This morning we get weekly export inspections. Bean exports lag the needed pace to hit projections but domestic demand remains very robust as evidenced by a record February crush reported by NOPA Friday that exceeded…
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03/13/2024 Outlook for 2024 Still Cloudy, But Market Bears Less Cocky

By The Commstock Report
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…
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03/07/2024 Firmness in Grains Overnight Hint Market Bears Less Confident

By The Commstock Report
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.…
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03/06/2024 Early Trade Estimates for Friday WASDE Beginning to Trickle In

By The Commstock Report
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…
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03/05/2024 Cash Basis Improvement Bodes Well for Market Where Most Bearishness Already Dialed In

By The Commstock Report
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…
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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.

By The Commstock Report
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…
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03/01/2024 County Yield Estimates Prompt Review of Last Season and Consideration of Potential in 2024

By The Commstock Report
February is finally over, so we now have the crop insurance prices set, with base averages of $4.66 for December corn futures and $11.55 for November soybeans. The price averages are down 21 percent from last year for corn and down 16 percent for soybeans. With protection levels determined and insurance signup deadlines coming up on March 15th, this is a period that marks a shift of the focus toward spring and the new growing season ahead. Still, the influences surrounding last year's crops are not set to disappear any time soon. There was renewed attention on crop size over the last several days after the USDA just released the 2023 yield results broken down by county. Here are some of the highlights: County corn yields were recorded in a range from 46.9 bushels per acre in Elbert County, Colorado to 248.4 for the average of several counties in Washington state. Dawson County, Nebraska was near the top with a corn yield of 234.5, ahead of Clinton County, Indiana at 234.4, Stark County, Illinois at 234.1, and Boone County, Iowa at 226.5 bushels per acre. McLean County, in central Illinois, was the top grower of corn again this year, contributing…
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03/01/2024 Cash Basis Improvement Confirms Farm Selling Binge Likely Over

By The Commstock Report
On the Grains Overnight trade was mixed as of 6 am, with corn mostly steady, beans higher and wheat on the weak side. As expected, farmer selling has quickly dissipated with the arrival of March and selling "forced" by cash flow needs now done. The national average basis for corn actually improved by 2 cents yesterday and soybean basis held steady. In wheat, basis slipped a penny for HRW but rose 2 cents in SRW and by 5 cents in HRS. Weekly export sales weren't bad for corn. At 1.08 million tonnes, they were in the upper half of the expected range and YTD sales are up 30.4% compared to USDA's forecast for only a 26.4% gain. Wheat sales were towards the lower end of expectations, but still up 6% YTD versus USDA's forecast for a 4.5% decline for the year. Beans are a sorry case, however. At just under 160,000 tonnes they were three times the horrendously low figure of the prior week, but still near the low end of the range of estimates. YTD sales are still down nearly 20% versus USDA's forecast for a 13.7% decline. It explains why although corn scored a fourth straight higher close…
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02/29/2024 As We “Leap” Into March, Surge in Farm Selling Likely Behind Us

By The Commstock Report
On the Grains Grains are steady-to-mixed in overnight trade as of 6 a.m., with soybeans weakest. Today being the last day of February that nagging chatter about increased selling to make Mar. 1 payments is “officially” over, even though market action suggests it happened earlier this week. In fact, national average basis for soybeans held steady and actually improved yesterday for corn and wheat.   The Biden Administration has promised to realize its final rules on what qualifies for ethanol meeting standards for Sustainable Aviation Fuel (SAF) no later than tomorrow. American Coalition for Ethanol (ACE) CEO Brian Jennings sent a letter to members of the SAF Interagency Working Group urging them to reconsider their recent moves making it more difficult for ethanol to qualify, that included a detailed scientific study showing how they overstate emissions for Land Use Change (LUC), understate corn yields, and fail to give proper credit for climate-smart practices already in place. This content is for members only.Log In Register
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02/28/2024 Fund Short-Covering Evident, But Still Modest on Dearth of Bullish Triggers

By The Commstock Report
On the Grains Grains are soft in overnight trade after an encouraging start to the week with two days of gains. After yesterday’s White House meeting, leaders on both sides of Congress seemed confident a budget deal can be reached and government shutdown avoided. Light short-covering by funds was an important component of buying both Monday and yesterday, but it hasn’t yet been enough to trigger a “wave” of such short-covering that feeds on itself as fund managers wanting to cash in on big profits find a dearth of sellers willing to absorb their buyback orders. A prime source of selling these funds were counting on was farmers cashflow needs ahead of March 1 when the cash flow need bulges for payments due on land notes, equipment notes and cash rents to landlords. Normally that would be tomorrow, but being leap year there’s one more day to go. The farm selling has been there, but much has been absorbed by commercial buyers who’ve been content to buy hand-to-mouth for months. We know that because national average basis slippage has been modest in recent weeks and this final week it’s held up remarkably steady for corn, beans and wheat. This content is for…
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