• jcrist18

Market Thoughts 5/1/2022

May corn gained 25’2 last week to close at 818’2, recording a new daily high of 827’0 in the process. May soybeans actually ended up losing 7’6 to finish the week at 1708’2. And May spring wheat only managed a 1’0 cent weekly gain but took a wild path to such a modest outcome; trading all the way to 1209 and then turning around and giving back almost 50 cents to finish at 1161’2.

Things felt pretty wobbly a week ago as equities were being pounded and grains were unable to trade higher on friendly news. This week though brought a barrage of fresh bullishness and things were quickly back on track, led by corn. News included corn planting progress 2 points slower than expected, winter wheat ratings 3 points further into worst-ever status, Brazilian second crop corn drying out, Indonesia clarifying crude palm oil is included in their export ban, a shockingly low Canadian canola acres number and not to be left out, the USDA reporting a major old crop/new crop China corn purchase. New crop corn, wheat and canola all made new contract highs and new high weekly closes. Beans still haven’t made it past the Feb 24th daily highs but Friday’s close was a new weekly high.

Wheat was under considerable pressure Friday as forecast rains materialized across much of the plains. Closer to home, highest rainfall totals tracked somewhat east of major spring wheat growing areas and the forecast looks much drier/warmer now. It still seems nearly certain recent North Dakota weather creates more wheat bushels than it costs, with added risk premium quickly coming out of the market once drills are rolling. Wheat export sales continue to lag and basis/spreads are quite poor, casting further doubt on wheat’s ability to maintain these prices. Corn/beans/canola all look to be on much firmer footing with fresh fundamental news seeming to perpetually appear. Most importantly, trade will rightly be on edge until considerably more corn acres are planted. There is a high correlation between planting date and trend yield and corn is quickly approaching the “deadline” for 50% of the crop to be in the ground. Again, the issue isn’t necessarily that farmers won’t get corn acres planted – they certainly will with a staggering financial incentive to do so. It’s that later planting dates are correlated with below-trend yields and this year’s balance sheet doesn’t have room for such an outcome. Corn/beans/canola have a high probability of steady/higher prices until significant planting progress is made. Old crop corn is now within 25 cents of its 2012 all-time high and still seems probable to test that in the near future.

After last week’s gains, spot canola futures (converted to USD for apples v. apples reasons) are now 24% higher than the previous all-time high from 2008. The equivalent of 24% higher than previous all-time highs would be $10.45/bu corn. To quickly clarify, that doesn’t mean such is imminent for corn and that isn’t the point of this illustration. Canola’s fortunes going back to summer 2021 have been substantially more bullish than corn/beans and it’s not terribly surprising that Canola is experiencing this now. In June of last year, when canola was at 24 cents, we made the case for 40 cent canola and even that proved too conservative. It serves as reminder though that there is no “ceiling” (or floor for that matter) on a commodity’s price. If the bullish news continues to align, corn/beans can keep moving higher even as they approach previous all-time highs.

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