The Commstock Report

Grain basis levels have taken on a heightened level of variability this year, showcasing a notable disparity between the country's western and eastern regions. While corn basis remains notably stronger in the West, soybean basis displays relative strength in the East. These discrepancies cannot be solely attributed to supply differentials, given the robust crops witnessed on both sides of the Mississippi River last season. Instead, the driving forces behind the basis differences lie within the dynamics of demand. In the West, firm corn basis is supported by robust ethanol usage, elevated export demand from the Pacific Northwest, and stiff competition within the rail market that draws corn into the Southwest. In the East, soybean basis is bolstered in large part by a wide network of processors that serve a consistent draw from the southeastern poultry sector.   Differences between Illinois and Iowa show the nature of basis being split by region. Country elevators across much of Iowa are posting corn bids against basis that is relatively strong for this point of the season, with a statewide average of 2 cents over the May futures price. At 24 cents under the board, Corn basis in Illinois is closer to its modern…

On the Grains Grains are all still firm in overnight trade as of 6am, but well off overnight highs on word that Israel had attacked some sites in Iran in promised retribution for the weekend barrage. Oil and wheat prices initially spiked much higher but have since given most of the gains back. Why? Because despite promising they would counter even the slightest attack on their territory with a devastating second-wave, Tehran instead declared that the Israeli attack had "failed" (just as theirs had). It's an unfolding drama that could change again by the time you read this. Supportive news for corn comes from continued cuts in Argentina's corn outlook from both the Buenos Aires Grain Exchange and the U.S. Ag attache down there. It also appears EPA will agree today to "temporarily waive" summer restrictions on E15 sales through September 15 after repeated pleas from several senators to do so in light of ongoing energy security risks stemming from war in the Middle East and Ukraine. The most important news this morning is a host of updates on the long-term weather outlook released yesterday by the Climate Prediction Center. The new forecast for May through July calls for above-normal…

Your You/Tube analog gets to know you and tracks podcasts that it thinks that you should see. My chosen one was by David Woo who has been a Wall Street executive and major bank official who now has his own forecasting/investment firm. He lives in Israel and noted that 90% of Israeli's supported finishing Hamas no matter what it took or the geopolitical risk with Iran that it created. They are immersed in the eye for an eye thing and cannot be told when it is time to quit. There is real acrimony and then there are the optics of animosity there. Failure to hit back when attacked leaves the appearance of weakness. Iran's recent drone/missile attack on Israel was in response to one from Israel and was carefully crafted to fit both real acrimony and the optics of animosity necessary in the intended absence of harm and damage that resulted. It was an attack that Iran knew that Israel would thwart. The Saudis, Emirates, and even Jordan assisted in Israel's defense. Israel vowed to respond. Iran said it was 'one and done' but it was not. It immediately began re-supplying missiles to its proxies in preparation for the next…

On the Grains Grains are mixed yet again in overnight trade, with corn and beans steady to weak but wheat slightly firmer. EIA data out yesterday showed a big drop in weekly ethanol production to a 12-week low and well beyond expectations with stocks declining only marginally. On the brighter side, they also showed gasoline stocks falling more than expected implying stronger demand. This morning we get weekly export sales at 7:30, which could set the tone for early trade. Here are the ranges of expectations: Corn, 300,000 to 900,000 tonnes, Soybeans 300K to 650K, Wheat negative 100K (due to net cancellations) to 200K. Sometime today, the Climate Prediction Center will issue its latest 3-month outlook for May-July and that will give the trade the next reading on yield risks in this growing season. Beyond that, speculation is already beginning on what the May WASDE will show for USDA's first look at the 2024-25 season balance sheets. Then there's the geopolitical uncertainty in the Middle East that has the world on pins and needles. Israel insists it will have to retaliate for the weekend attack while Iran blusters that if there's any encroachment whatsoever onto Iranian assets or territory, they…

Brazil's soybean harvest pace is beginning to slow as it nears its conclusion.  We expect Brazil's harvest to reach 90% this week but it may take another month yet to wrap things up completely.  CONAB made a minor adjustment lower to their April soybean production despite finding an additional 140,000 acres by cutting yield a quarter bushel per acre to 48 bpa overall.  This places overall estimates at 146.5 MMT for CONAB while the USDA didn't budge from their March report.  Traders are putting more emphasis on the USDA, pointing out their superior satellite and NDVI technology.   I pointed that out to one trader in Brazil that the USDA has been more accurate in recent years to which he replied, "this time they are wrong."   Even if CONAB and the USDA split the difference, that is still 150+ million bushels removed from Brazil's export supply.   Brazil's exports are the canary in the coal mine.  They are the first to go when there is a lack of supply.  One red flag is that Brazil's soybean exports were down for the month of March compared to last year by 6%.  This would be unusual for the middle of their peak export…

On the Grains Grains are mixed again in overnight trade. There's still no sign of any weather issues with planting, so there is no need to build in any "weather premium" in the minds of traders. That could change tomorrow when the Climate Prediction Center updates its 3-month outlook for May-July. Globally speaking, the only glimmer of supportive news are slightly lower production forecasts for both Ukraine and Russia and ongoing conviction that USDA's estimates for South American soybean and corn crops will inevitably be coming down to more in line with their own estimates down there. Shorter-term, geopolitics and even US politics for that matter are powder kegs of uncertainty that have the U.S. dollar at the highest levels since last fall. The Iranian attack on Israel was a sea change in Tehran's strategy, no longer content to rely on its proxies in the region. For its part, Israel will only say it's going to "respond" and when it does, Tehran says it will strike again. The powder keg in U.S. politics are renewed calls for House Speaker Johnson to resign as he struggles to get support for separate bills to fund new aid for Ukraine, Israel, and Taiwan.…

I have long held the opinion after decades of watching USDA statistical performance that they are biased toward commercials over the interests of farmers in their processes. They seem to keep shortages a secret and understate demand until commercials have stolen grain from farmers before they admit that stock tightness existed. There was an instance that USDA did not get production right until forced to adjust stocks in the following year's quarterly September stocks report, the last possible opportunity for them to do so. Farmers are forced by cash flow and high storage carrying costs to move their grain before USDA gets around to releasing information that benefits prices. When commercials own the grain then prices can go up. Markets go up on USDA data after farmers have sold. Farmers still own too much of last year's corn crop which is one of the factors holding prices down. There are lots of instances but I believe that 1993 was one of the worst when that crop disaster was kept secret until their January report. That example was just one of many. I have learned to adopt this into my analysis accommodating for USDA process bias. CBOT price discovery accommodates the…

On the Grains Grains are steady to mixed in overnight trade. Weekly export inspections were within the range of expectations for both corn and soybeans yesterday and wheat actually came in above the high end of the range, but all to no avail with lower prices for all three. Hopes that stubborn inflation data might help convince funds to start lifting short positions more methodically bore no fruit yesterday. To the contrary, funds were again big contributors to the selling in corn, wheat, soybeans, and soy products yesterday. The weekly Crop Progress Report put corn planting at 6%, a bit less than 7% expected at last year's pace, but still a bit better than 5% average. They started reporting soybean planting this week and put it at 3% complete, the same as last year and the average and a point better than the 2% expected. Spring wheat planting is at 7%, just as expected, a point better than average and several points ahead of last year at only 2%. Winter wheat was rated at 55% good to excellent overall, down a point from last week but still the best in four years. Last year at this time, only 27% was…

Mankind continues to evolve except where it doesn't. The Mid-East human development continues to be stuck, held in place by the tenants of its past. There are 3 tenants which characterize the entwined cultures of the nations of the region that define it. The first is the old school "eye for an eye" "tooth for a tooth" concept of human relationships there. No slight can be forgiven or wound not returned in a circle of perpetual violence. Failure to attack one's attackers is seen as weakness and dishonorable. Vengeance is a way of life. The next tenant of the region is the geographical intertwinement of peoples who are sworn enemies. The West Bank looks like a cancer that has metastasized to where it has entwined enemies which cannot escape each other. They cannot live together but a two-state solution cannot be carved from the topography that the combatants find acceptable. The third tenant of their cultures is its legacy. They have patience for vengeance. A slight or attack against one generation may not be returned until generations later but they do not forget nor do they forgive. The animosity between these cultures goes back centuries…in fact millennia. This is 2024…

On the Grains Grains are modestly lower in overnight trade as macro-economic and geopolitical tensions are twin fountains of uncertainty to start the week. Grains managed to close higher Friday despite another massive slide in the stock market tied to resurgent inflation worries and sagging hopes of interest rate relief. The June contract for the DJIA broke through important support at 38,400 in place since last December. It's also now oversold and further downside will hopefully be limited to completion of a 62% retracement of the entire move up from December lows to the double top at about 40,300. Then over the weekend, the world witnessed Iran's blatant escalation of Mideast conflict by launching hundreds of drones, ballistic missiles and about 30 cruise missiles towards Israel. Nearly all were intercepted and destroyed by combined forces of Israel, the U.S., the UK, France and even Jordanian air support before they entered Israeli airspace. The UN Security Council met in emergency session Sunday to urge both sides to stand down. There was fear oil prices could soar if this raised odds of assault on Iran's oil export capacities, but so far, that hasn't happened. The attack was widely telegraphed and oil prices…