Content ID

313736

Grain is golden, analyst says

Are funds buying a lot only to sell, following the USDA report, analyst asks.

It was last year, about this time, that everyone felt grain wasn’t worth much of anything.

In fact, prices were basically at 20-year lows, and there was no hope for them to rise. Or was there? Now, just one year later, corn and soybean prices have doubled and are still going higher. It’s hard to imagine a quicker turnaround than the past year in grains.  

We now have $7.60 corn and $16 soybeans, and wheat is knocking on double digits in terms of dollars paid per bushel. This, in spite of really no sign that 2021 production prospects are showing any increased risk to the 2021 crop.  

Planting is well underway, and weather remains quite cooperative for farmers to get planting completed early, with mostly normal precip forecast the next week with below-normal temps. Thereafter, temps warm into the six- and 10-day and eight- to 14-day forecasts. Much of the U.S. will enjoy above-normal temps during those periods along with above-average precip.  

Essentially, these would be greenhouse-like conditions in the Corn Belt, and should result in above-normal yield potential to start the year. It’s raining or snowing in parts of Wyoming, Colorado, Kansas, Texas, Nebraska, Arkansas, and Louisiana today, which are mostly some pretty dry areas. So, they will appreciate that moisture.  

Crop conditions/progress yesterday continued to show an early planted crop with nearly ideal conditions nationwide, with corn 67% planted (15% ahead of normal pace) and soybeans 42% planted (20% ahead of normal), with emergence of both crops now ahead of normal.  

Cotton is 25% planted (1% behind normal), with sorghum 22% planted (6% behind normal); the warm-season crops in the South are the only ones behind normal planting progress. Cool-season crops are well ahead of normal planting pace, with sugar beets 97% planted (26% ahead of normal), oats are 85% planted (12% ahead), HRS wheat 70% planted (19% ahead), and barley is 71% planted (11% ahead).  

Winter wheat conditions improved 1% to 49% rated G/E, only 4% below last year despite the tremendous drought we experienced last fall, and the bitterly cold winter/freezing we endured. In fact, winter wheat yield models rose a significant 0.43 bu/acre last week to 51.2 bu/acre, back near the highs three weeks ago before cold temps hit, and also well above trend yield of 50.56 bu/acre.  

Ironically, winter wheat with recent moisture might be headed toward a bumper crop to harvest in just a few months.   

Rainfall, last week, helped pasture and range conditions improve 22% to 24% rated good/excellent, with soil moisture levels nationally improving 3% topsoil to 66% rated adequate/surplus, and up 1% subsoil to 63% rated adequate/surplus.  

Overall, things are looking good so far for the U.S. crop to produce an above-average crop yield in 2021. With prices soaring the past 45 days over $2 in soybeans and $1.50 corn, it’s likely we’ll have more acreage of both than the March 30 report (which wasn’t enough).

Funds have been buying this market for a long time, and in the past 45 days have blown this market substantially higher, making their nearly 2-billion-bushel corn long position look good, and the nearly 1-billion-bushel long position in soybeans even better.  

They may be doing it again this morning, as they seem to want to prop this market up for what should be a bullish USDA May crop report tomorrow. Do they plan to sell a bullish report tomorrow? And is that why they bought the market and blew it higher the past month?  

That could be a good bet. If you want to place some bets, I’d guess it would be better to buy puts on a bullish report (especially if it goes limit up). This market is a tired bull market that has blown the top off prices. It just needs an event to finish it, and a bullish report would be the perfect exit plan for the speculative funds who basically own this grain market. Unfortunately, they have blown the market up so quickly that demand will be shattered – who can afford to pay these prices?  

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Ray can be reached at raygrabanski@progressiveag.com.  
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Ray is president of Progressive Ag Marketing, Inc., a top-ranked marketing firm in the country.  

This material has been prepared by a sales or trading employee or agent of Progressive Ag Marketing, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Progressive Ag Marketing's Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. 

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