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Market Thoughts 2.19.23

March corn lost 2’6 to close at 677’6, week number six now that futures have closed between 675 and 683 as consolidation continues. The March contract also now has a nearly perfect triple top as corn managed a high of 688’6 four weeks ago, 688’4 two weeks ago, and 688’2 this week.

March beans lost 15’2 to close at 1527’2. Beans featured more volatility than corn as futures traded up to 1555’4 on Sunday night, a new high for the move, then fell 40 cents by Wednesday morning before recovering a bit to close out the week.

March spring wheat somehow managed to record no change on the week, closing at 930’2, the exact same price as last Friday. In the process, wheat didn’t exactly have great follow-through on last week’s breakout like we were expecting. Futures did trade to a new high of 936’2 on Tuesday, though only a half-cent above last Friday’s high. But futures then fell all the way back to 918’6 on Wednesday before recovering to close the week unchanged.

Five weeks ago our commentary that landed between the January WASDE report and annual meeting suggested bullish January WASDE data was enough to keep grains trading in the same range through most of winter. Dec corn closed at 598 that Friday and is at 595’6 now. 1393 for Nov beans then and 1386 today. Sep wheat 882 then versus 898’6 now. Consolidation at these high prices has bought some time for marketing decisions, as we expected back then but that time is starting to run out.

We expected last week’s bullish fundamental stories and technical breakout for wheat to be enough to support higher trade this week. That of course didn’t turn out to be the case as none of the grains posted weekly gains while wheat couldn’t extend its breakout higher, corn failed again at 688 and beans immediately lost 40 cents after trading to new highs.

Fresh fundamentals weren’t helpful as this week featured poor corn export sales, ethanol grind, and soybean crush. Plus bird flu is, finally and rightfully so, causing traders to question feed demand, meaning corn is underperforming on all three fronts of its demand base. There were two main short-term bullish stories last week.

First, the Ukraine/Russia grain export deal is set to expire on March 18th and Russia has been insisting they won’t agree to extend it without easing of sanctions. And second, South American weather overall and specifically Brazilian harvest delays threatening optimal second-crop corn planting. It’s most probable that neither of these stories will be any good a month from now. Recall that in November, before the export deal was extended the first time, Russia made similar threats but ultimately signed the extension with no concessions.

And, regarding second-crop corn planting, the Brazilian farmer has a staggering economic incentive to get beans off and corn immediately planted. Remember planting delay rallies are never any good; that applies to both hemispheres now. We had expected grains to do more with last week’s bullish news in the short term and they still might. But as we’ve been saying for months, there remains low probability of a major rally and high probability of significantly lower prices by harvest.

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