Phyllis Nystrom

The following marketing analysis is for the week ending Feb. 24.

CORN — Stale news is how I would best describe trade action when traders returned from the long President’s Day holiday weekend. Yes, we saw a bounce to begin the week based on a weekend frost in Argentina and less rain there than expected; but it didn’t take long for prices to reverse lower ahead of the Feb. 23 U.S. Department of Agriculture’s Outlook Forum. 

The USDA numbers were viewed as slightly negative and price action that day reflected the reaction. The May contract has been unable to punch through the January high of $6.86 per bushel and prices took out all moving average support levels on post-report trading. The December contract broke out of its February range by extending the downside to $5.74.25 per bushel. This was the lowest the December 2023 contract has traded going back to last August when it hit $5.64 per bushel.

A poor showing in wheat prices this week added pressure to the corn market with moisture in the hard red wheat areas and an overall lack of demand for U.S. wheat. The personal consumption expenditures price index increased by 0.6 percent to 5.4 percent on an annual basis in January vs. 5.3 percent in December and shot the U.S. dollar index to its highest since early January.

The USDA forum released full supply/demand balance sheets hours ahead of the Forum opening. They pegged the 2023-24 U.S. corn acreage at 91 million acres vs. estimates for 90.9 million acres and 88.6 million planted acres last year. In the last 13 years, the March prospective acreage report number was below the February Outlook number five times; but the final corn acreage number has been below the February number nine times. 

The U.S. corn yield will begin at a record 181.5 bushels per acre vs. 179.7 bu./acre estimated and 173.3 bu./acre last year. It seems early to be forecasting such a large number. U.S. production is forecasted at 15.085 billion bushels vs. 14.949 billion bushels estimated at 13.73 billion bushels last year. This production level would be the second-largest U.S. corn crop. 

The 2023-24 carryout is pegged at 1.887 billion bushels vs. 1.809 billion estimated and 1.267 billion last year. The USDA’s history of ending stocks in February is to overestimate the stocks compared to the final number. The stocks-to-use ratio is estimated at 13 percent. The average farm price outlook for 2023-24 at $5.60 is $1.10 lower than for 2022-23.

There weren’t any export sales flashes this week and both the weekly ethanol and export sales reports were delayed a day by the holiday. Weekly export sales were within expectations and the lowest in six weeks at 32.4 million bushels. Total cumulative exports are 1.13 billion bushels and remain 40 percent behind last year when the USDA is forecasting a 22 percent decline in year-on-year exports. We need to average 26.3 million bushels of sales per week to ring the bell on USDA’s outlook. Weekly export inspections at 622,800 metric tons were at the low end of expectations and cumulative inspections are running 36.6 percent behind last year. The USDA has exports down 22 percent year-on-year.

Weekly ethanol production was up 15,000 barrels per day at a nine-week high of 1.029 million bpd. This is still below the pace needed to meet USDA forecasts. Ethanol stocks were up 249,000 barrels at 25.6 million barrels. Net margins improved 2 cents to 15 cents per gallon. Gasoline demand was at an eight-week high at 8.9 million bpd. Gasoline demand over the last four weeks has averaged 1.2 percent below last year.

The Buenos Aires Grain Exchange cut their Argentine corn production forecast by 3.5 million metric tons to 41 mmt. The USDA is at 47 mmt and will be expected to play catch-up on the March World Agriculture Supply and Demand Estimates report. The BAGE had Argentina’s pollination at 61 percent vs. 74 percent on average. The corn rating fell 2 percent to 9 percent good/excellent. AgRural said over half of the safrinha corn crop in Brazil’s second and third-highest safrinha production areas will not be planted within the ideal planting window.

Negotiations to extend the Black Sea grain corridor should begin soon. Russia is once again asking for concessions to make it easier for customers to buy their grain and Ukraine wants more ports and vessel inspectors added — as well as extending the agreement for a year. The current agreement ends March 18. President Putin this week said he would halt participation in the New Start nuclear arms treaty, a nuclear arms control treaty with the United States. The first anniversary of Russia’s invasion of Ukraine was Feb. 24.

Outlook: A major winter storm across the upper Midwest garnered a lot attention this week with not much fresh for the markets. The number of traders may have been limited in the first half of the week with the last vestiges of Mardi Gras winding up before Ash Wednesday. The three major crops of corn, soybeans, and wheat total acres were estimated by the USDA at 228 million acres, up 6.2 million acres from last year. Prevent planted acres are expected to be below the last two years. Cotton acres are anticipated to be slashed to 10.9 million acres, down from 13.8 million acres last year. The first “survey based” acreage estimates will come on the Prospective Planting report on March 31.

Corn this week plunged below the recent trading range and back to December’s lows. Without bottom-picking or fresh bullish news, the next downside support will be the January low which was $6.48.25 in the May contract. The December contract crashed to prices not seen since early August. The December low in August was $5.64 per bushel.

For the week, May corn plunged 28.25 cents to $6.49.25, July dropped 27.25 cents to $6.38.75, and December was 19.5 cents lower at $5.76.25 per bushel.

SOYBEANS — Soybeans gapped higher in post-holiday trading after reports of frost in Argentina and limited rainfall events. The gaps were filled later in the week in post-USDA Forum trading. Brazil’s soybean harvest is behind the average pace, but it is expected to move ahead with sporadic rain interruptions. The two week forecast for Argentina is a return to hot, dry conditions. 

May soybeans surged to highs not seen since last June and November not seen since mid-January. The May contract has been stymied at the $15.50 per bushel level several times and again fell back before touching it. The November contract traded above $14.00 per bushel, but couldn’t muster the strength to close above it.

The USDA Outlook Forum showed 2023-24 U.S. soybean acreage at 87.5 million acres vs. 88.6 million acres estimated and 87.5 million acres last year. The February soybean acreage number has been above the final acreage number in all of the last five years.

U.S. soybean yield is expected at 52.0 bu./acre vs. 51.5 bu./acre estimated and 49.5 bu./acre last year. Final soybean yields have been higher than the February estimate in seven of the last nine years. 

Crush was forecasted at a record high. U.S. production for 2023-24 is projected at a record 4.51 billion bushels vs. 4.515 billion bushels estimated and 4.276 billion bushels last year. The carryout is predicted to be 290 million bushels vs. 319 million bushels estimated and 225 million bushels last year. The USDA has a history of overestimating ending stocks when compared to the final figure. The stocks-to-use ratio is estimated at 6.5 percent. The average 2023-24 average farm price of $12.90 per bushel was down $1.40 per bushel from 2022-23.

Weekly export sales were on the low side of expectations and were the highest in three weeks at 20 million bushels. Total cumulative soybean exports stand at 1.78 billion bushels and are now down 1 percent from last year. The USDA is projecting year-on-year exports to be down 7.7 percent. We need to average 7.7 million bushels of weekly sales to reach the USDA forecast for 1.99 billion bushels. Weekly export inspections were in the middle of expectations at 1.578 mmt. Cumulative inspections are up 3.5 percent from last year when the USDA is predicting exports to be down 7.7 percent from last year.

The BAGE slashed its Argentine soybean production outlook by 4.5 mmt to 33.5 mmt. The USDA was last at 41 mmt. They dropped Argentina’s soybean rating by 6 percent to 9 percent good/excellent and increased the poor/very poor category by 4 percent to 60 percent. As of Feb. 21, Safras and Mercado estimated Brazil’s soybean harvest at 21 percent complete compared to 23 percent on average and 33 percent complete last year. AgRural put it at 25 percent complete. 

Outlook: How small is Argentina’s soybean crop? How did the unexpected weekend frost impact yields? The answer to these questions is unknown, but it may be safe to assume the crop is not as big as the USDA expects at 41 mmt.

A late week sell-off came as attention once again turned to the prospect of higher interest rates. The March 8 WASDE will provide further direction; but for now, we will need fresh bullish inputs to get back to the upper end of the recent trading range.

For the week, May soybeans posted a moderate 3 cent loss at $15.19.25, July was 6 cents lower at $15.08.5, and November fell 12.25 cents to $13.74 per bushel. May soymeal was $5.10 higher at $4.80 and May soyoil fell 53 ticks to $61.22.

Weekly price changes in May wheat for the week ended Feb. 24: Chicago wheat plummeted 54.5 cents to $7.21.75, Kansas City dropped 60.5 cents to $8.35.25, and Minneapolis was 41 cents lower at $8.82.5 per bushel.  

Phyllis Nystrom is a market analyst with CHS Hedging in St. Paul.    

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