Weekly Market Update – February 12, 2021

Reminder, the market is closed Monday for Presidents Day. It will open Monday night at 8pm.

The market sold off hard on Wednesday the day after the USDA report. Nothing new came out; it seemed to be just fund selling. Markets found support and rebounded from the lows giving some technical support. South American harvest is still extremely slow. There are many ships lined up waiting for cargoes. Late first crop bean harvest means less double crop corn acres. China is entering their Lunar New Year celebration through next Wednesday, so purchases will be slow in the near term. They have slowed down bean purchases in anticipation of South American harvest but continue to be buying large amounts of corn. We did see a corn cancellation this week that we think was switched to Argentina. Brazil is too wet to harvest, but most of Argentina remains very dry so I expect values there to get stronger even with harvest. There is still some uncertainty in the size of South American crops that should keep a risk premium in the market.

There is a building backlash at USDA for the reports over the last two years. There are always angry voices when USDA makes big revisions or shocks the market, but the voices are now coming pretty loudly from both universities and industry organizations. Hopefully it will lead to some positive changes.

I do not have any changes to the marching orders from Tuesday. If you need to generate cash, sell small lots of old crop on rallies. Do not panic on down days. If you do need the cash, there is nothing wrong with sales at these levels. You are making money no matter where the markets go from here. We can be patient on new crop as we still need to attract record acres and the subsoil moisture still has not been recharged in the midwest. Any production issue is going to be even more explosive than the last few years. The market cannot afford to lose anything.

Wheat has held on in part due to lack of snow cover in the Midwest in the face of very cold weather coming. Wheat has not attracted the amount of fund activity so far due to the better fundamentals but if we get a few weather issues that could change. Wheat in the Southeast looks rough due to all the water. If you have it hedged in wheat, we can roll to corn as the corn wheat spread narrows and ship it as feed wheat. That is one of the advantages of hedging vs selling to the flour mill. It gives a lot of flexibility, and wheat demands flexibility.

I have been saying cotton has a lot of work to do to avoid losing too many acres next year and it is trying to catch up. Even with new crop over 83 it still has some work to do. USDA did not make any major changes but carryout has been dropping on cotton and should continue to do so. Be patient on new crop.

Soybean Harvest in Mato Grosso

Corn Planting in Mato Grosso