Keeping market analysis simple
Let’s keep it simple this week and just list the most important nuggets of information in the market.
1. While it rains in Argentina and Brazil, it does not rain much in the south. And it rains too much in northern Brazil where there are mature beans waiting to be harvested (there are ships in port waiting for these soybeans).
2. Crop estimates for both corn and soybeans in these two countries seem to decline on a daily/weekly basis. For Argentine corn, however, the damage may be done and additional sizeable declines may not occur. For soybeans, continued dry weather can cause further declines.
3. The cash corn market is red hot! Basis levels at the Gulf are at almost unheard of levels as at least one shipper has been caught short. Interior basis levels (elevator, ethanol plant, etc.) are also improving in an attempt to keep grain flowing. It seems the farmer stopped selling the day the January USDA reports came out. What price will allow grain to move again?
4. In the face of the three items above, many buyers have sought to increase coverage. This nervousness obviously compounds the situation but is natural in the face of potentially declining supplies. Instead of being uncomfortable, end users seek to put supplies around them. Export sales of corn this morning were almost a million metric tons. This could be a category of use the USDA will have to increase in future supply/demand reports.
The risk of loss in trading commodities can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial situation.