Prices traded in a choppy manner, and finished near the bottom of today’s session. Fresh news was limited. July corn finished 2 cents lower. New crop corn futures fell 2 3/4 cents. July soybeans fell 2 1/2 cents with new crop down 3/4 cents. Wheat prices continue to advance higher due to short covering and weather uncertainties. July CBOT wheat finished a penny higher, but KC moved 14 cents higher with a 6 cent rally in MPLS.
For the first time in a long while, prices finished higher for the week. Corn gained 7 cents versus a week ago, with soybeans adding 11-13 cents. Wheat had a tremendous week. July Cbot rallied 55 cents, MPLS 51 cents and KC hit it out of the park with a 71 cent move! The funds trimmed their net short positions, but are still carrying a rather large net short in corn and soybeans.
It has been a rollercoaster of a ride for the outside markets this week. The market did not recover yesterday’s steep loss, but the Dow found a way to climb 153 points higher to finish the week. Gold rallied $8 and oil was slightly higher. The dollar index rose .440 points and is nearing November’s highs. We promise there will be more volatility next week as the Fed’s meet to discuss monetary policy.
Corn prices have made some progress to the upside this week, but is still having a hard time pushing through resistance. July corn needs to bust through $4.55-4.56 1/2 for a shot at the Jan 17 high of $4.68. There is a lot of corn sitting in the bins, and the end users know it. Fortunately, US corn is very competitive on the world markets and exports are surprisingly strong. In addition, the Argentina corn crop is shrinking – which means less US competition. The verdict is out on the safrinha crop in Brazil. The early planted crop looks good, but regular rains are needed to finish yields for the later plantings. All in all, demand is decent for corn but the carryout is still too large at over 2 billion bushels.
Ethanol demand has been strong this year. Ethanol demand ranks as the second largest demand category for corn, following feed usage. The current USDA projection for bushels used for ethanol is 5.4 billion, up from 5.176 billion the previous year. The 2024/25 estimate is 5.425 billion. Doesn’t it seem odd to be projecting an increase in ethanol when the world is set on pushing EV mandates? Cue, the government.
On Tuesday, the White House will announce a much anticipated climate model for its SAF (sustainable aviation fuel) subsidy program. The rule will chart a path on how ethanol producers can qualify for SAF tax credits. This is a way for the ethanol industry to build demand for its products as gasoline consumption is expected to decline. According to sources, the model is more restricted that what the ethanol industries expected. It appears that if the ethanol plants want a tax credit, they will need to partner with corn growers that use sustainable farming practices. But, this is just heresay until we see the rules on Tuesday.
From our discussion with industry leaders, producers will need to document their farm practices to qualify for a “premium” for grain they take to the ethanol plants. That is going to be the cleanest and quickest ways to max out premiums until the industry can figure out a system for elevators that feed into ethanol plants. From what we have been told, the best way to get your carbon intensity score down is by using cover crops, best practice tillage methods and manure. The greener your farm, the higher the chance for more premium. Some believe the ethanol plants will split the tax credits 50/50, but that is just a guess. This tax credit is worth billions. At this point, it is all a guessing game. We will keep you posted on the latest news. Fyi…if you already participate in a carbon program then you will not be able to “double-dip” with this program. Subject to change.
Given the bearishness of the commodity markets, producers will be looking everywhere for a way to boost profits. Several analysts are comparing this year to 2014. In 2014, prices peaked in the spring months and then fell apart. Every year has different circumstances, but if 2024 prices follow 2014 – be prepared to sell a lot of grain in the next few weeks.
Weather is probably the easiest way to prop up prices. Planting has been fast and furious in some areas, and others have not turned a wheel. You can probably guess where most of the progress has been made according to the 30 day % of normal map. The areas in blue and purple are wet.
The 6-10 and 8-14 day maps point to a better planting window for the ECB.
We are not sure how excited the market will get because the forecast is mixed. Iowa customers have made tremendous progress, along with a few pockets in Illinois and Indiana. It is still too early to get excited about planting delays, but be ready to price if it happens.
Have a good weekend.
