The Commstock Report

Brazil's soybean harvest pace is beginning to slow as it nears its conclusion.  We expect over 85% will be harvested by the end of the week.  Most of the Center West region has wrapped up the harvest along with Parana.  The MAPITOBA region is roughly 75% complete.  RGDS is the main laggard with only 25% complete but yields there are reportedly doing very well overall.  The April WASDE report will be out Thursday morning and yet again much attention will be focused on the size of Brazil's crops.  In the case of soybeans, the trade expects the USDA to make cuts at or below 152 MMT.  We believe this cut is warranted but whether the USDA will make good on that is a different matter.   In the case of Brazil's corn crop, the trade is looking for a cut below 122 MMT compared to 124 MMT last month.  Again, we feel this reduction is justified as farmers had very little financial incentive to plant safrinha corn.  While growing conditions have been conducive to reaching trendline yields that will not be enough to reach the USDA estimates for corn.  Much attention will be focused on how many acres they actually…

On the Grains Grain prices are mostly firmer in overnight trade. There is little to chew on from the fundamental side until traders see tomorrow's April WASDE update and the extent and direction of changes in ending stocks forecasts. Until then we're seeing more and more commentary confirming Ag traders taking note from outside markets like gold and the likelihood Consumer Price Index (CPI) numbers due later today will show prices increased by 3.4% in March, up from 3.2% in February. The Producer Price Index (PPI) will be out tomorrow and that's expected to show an annualized increase of 2.2% for March, up from 1.6% in February. Further re-stoking inflation worries, the Energy Information Administration (EIA) just raised its average price estimate for Brent crude this year to $89 a barrel from $87 previously. Reasons? "Expectation of strong global oil inventory draws and ongoing geopolitical risks." EIA specifically cites Middle East tensions and attacks on shipping in the Red Sea in combination with OPEC+ extending output cuts into the seasonal increase in demand for summer driving. Speaking of gasoline demand, all is not well on that front long-term. NCGA is sounding the alarm on the impact EPA's new tailpipe emissions…

Interest rates are the cost of capital. Is the cost of capital going to rise or fall? Everyone looks to the Fed for the answer to that question but the Fed essentially responds to underlying fundamentals rather than makes them up. They can temporarily directionally impact capital markets but they will eventually come back to whatever trendline that is fundamentally supported. The Fed is looking for an opportunity to reduce rates but that is against the backdrop of changing demographics. How did interest rates and the cost of capital get so cheap this decade before it has now gone up? The answer is that as of 2023, 51.3% of the wealth in the US was held by baby boomers…$78.1 trillion. 70% of the economy was being driven globally by the wealth of the baby boomer generation. That is why when in the throes of the Covid pandemic that interest rates could fall to as near to zero as they did. This generation hit the sweet spot of their earnings potential as we entered this century generating an unprecedented pool of capital but this will fade with their further aging. “Some $53 trillion will be passed down from boomers to their…

On the Grains Grains are soft in overnight trade thus far with no signs of any issues in yesterday's weekly planting progress update. Weekly export inspections were actually pretty good yesterday. Corn loadings came in above the high end of expectations, wheat loadings right at the high end and soybean loadings midway in the range. Between stronger than expected jobs growth data and Fed remarks about toning down expectations for rate cuts by year end to two instead of three. These factors have some pessimistic pundit's even suggesting there is potential for further hikes if the decline for inflation rates should end and start creeping up instead and that's rattling the stock markets. The weekend news about SAF qualifications for corn are not being released until mid-May was actually a bit better than expected for some in one sense. They note that originally, it was feared to meet specs to qualify for use in SAF production, farmers would have to comply with all three requirements of "efficient" tillage, "efficient" fertilization practices as well as employing cover crops. Now it appears any one of those practices may be acceptable and if so, the requirements may be less onerous than feared when…

The above map shows the spring average last frost dates for regions of the country. First and last frost dates have been extending the growing season for much of the country. One could say that spring is coming sooner but this year was unprecedented for us to have had a dose of spring in early March. Farm publications all have stories on cover crops as they have become the new thing. They are not very applicable to the NCB starting at the Iowa/MN border as there is little time for them to develop before row crops go in. Our crop insurance date for corn is April 10th and for soybeans April 15th. Farmers like to get both crops planted in April if conditions allow. Note that in NW IA where we are, planting soybeans in April is challenging the final frost date. Farmers bumped up the soybean planting date from what it used to be generationally by as much as a month resulting in improved yields. Cover crops just get in the way of early planting. They are still being tried because of carbon credits. A farmer shared his experience at a recent carbon conference. I understand carbon scoring and…

On the Grains Grains were steady to mixed in overnight trade. We'll get weekly export inspections at 10am but the weekly Crop Progress Report showing the pace of planting and trend in wheat crop ratings won't be out until after markets close. Friday's Commitments of Traders report showed that through last Tuesday Funds were only increasing their net short positions in corn, soybeans, SBM and spring wheat while finally beginning to lighten up on net shorts in Chicago and KC wheat and adding sharply to a new net long position in soybean oil. We also learned over the weekend that the long-awaited subsidy model for Sustainable Aviation Fuel (SAF) probably won't come until mid-May. It's expected to require that corn used for SAF be grown using one of three "sustainable" methods including efficient tilling, cover crops or efficient fertilizer application. Key to how restrictive that will be depends on how they define "efficient" tilling or fertilizer application. Today's focus will largely be on the range of trade estimates for the April WASDE due on Thursday. As for U.S. ending stocks, the trade is looking for corn to decline 70 million bu. from March on average, but once again ranging widely…

Grains are called steady to slightly firmer at the open as traders look to gauge the tone of oil and outside financial markets. In the Headlines May corn futures lost 7 3/4 cents last week, with nearby beans down 6 1/2. May Chicago wheat was up 7 cents while May Kansas City wheat lost 3. April cattle dropped $6.75 and May feeders fell by $10.52. April hogs were up $2.70 for the week. May WTI crude oil futures jumped $3.72 while gold rallied to a new record high. The dollar index inched slightly lower. Ohio became the sixth state with a case of the highly pathogenic avian influenza (HPAI) virus detected in a dairy cattle herd. HPAI cases had previously been reported in Texas, Kansas, New Mexico, Michigan, and Idaho. Last Monday, it was announced that HPAI had infected a person in Texas. Also a concerning development from last week was that the bird flu had been detected in cats from one of the affected farms in Texas. Tennessee, Nebraska, and Hawaii have enacted restrictions on cattle movement in response to the risk. Cattle futures have sold off sharply as speculators liquidate their positions due to uncertainty surrounding the bird…

Gold prices rallied to new all-time highs again today as investors priced in the increasing likelihood of inflation staying a problem. The latest jobs report may have pushed back against bets for interest rates to start falling soon, but the data did nothing to quell inflation fears. The shift in monetary policy still expected for later this summer has major banks such as Goldman Sachs and Bank of America maintaining a strong outlook for gold, oil, and other commodities because of the view that lower interest rates and a weaker dollar will be linked to persisting concern about inflation.   In a recent report by Goldman Sachs, the analysts cited the historical tendency for gold and crude oil being two of the top performing commodities during periods of falling interest rates. Grain and livestock prices were also observed to benefit in such an environment, but to a lesser degree than most other commodities. Currently down sharply since the start of the year, grain futures have considerable room to catch up to the broader market, as the Goldman Sachs Commodity Index is higher by about 11 percent year-to-date.   The caveat to the bullish commodities argument is that the Goldman study…

On the Grains Markets are mixed in overnight trade thus far. Corn is mostly steady, beans on the soft side with wheat firming. Yesterday started off with crummy weekly export sales either near or below the low end of the range of trade expectations. Yet crop futures absorbed them surprisingly well, corn finishing a little higher, beans off only slightly and wheat closing mixed, with winter wheat in the red but MGE wheat in the green.   On Monday we'll get the next Weekly Crop Progress report after markets close now that they've resumed for the growing season. What will get top attention are planting progress and wheat condition ratings. The eastern Corn Belt is cold and soggy with bad flooding reported in the Ohio River valley. That's good news for Mississippi River barge traffic but will definitely slow fieldwork in the ECB. Not so for most of the WCB, however. We should see good planting progress for the WCB Monday and the latest 8-14 day outlook appears ideal for rapid progress across nearly the entire Midwest and Plains.   The outlook is for wetter than normal during this period in most of Texas, but it will be welcome there…

When the headline surfaced, "Officials Confirm HPAI Dairy Infections" a thread began to unravel that we have not seen the end of yet. North America appears to be awash in Bird Flu virus as the wild bird migration traverses the continent. Biologists were concerned that at some point the virus would jump species to animals other than poultry. Finally, it happened when dairy cows in TX and KS were confirmed to have been infected with Highly Pathogenic Avian Influenza (HPAI) virus. That gave this story some new legs. The cows got sick but there was no associated mortality. Initially observers discounted the risk saying that milk from unhealthy cows is discarded while milk consumed by the public is pasteurized and there was no way the virus would be passed along through the food chain. USDA gave its seal of approval that "there was no impact on human health." They did also offer the caveat that this was "a rapidly evolving situation." HPAI was also found in a Minnesota goat. Then again not enough research has been done to know anything for sure yet with high confidence. Cows also tend to be more exposed outdoors. The load of virus in the…