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Limit Up

By Tori Uhland

March 17, 2024

The markets are still lackluster with very little news. The USDA released the March World Agricultural Supply and Demand Estimates (WASDE) report on Friday, March 8th, but even that was pretty much a non-event in terms of market movement. Historically, the March WASDE report isn’t a big one, and most of the trade is waiting around for the Quarterly Stocks and Acreage Estimates coming out at the end of the month. That data generally spurs a little more movement.

The May 2024 corn contract has seen a rally of about forty cents over the last month, but is struggling to find something to break through the resistance around $4.45. The 2.1 billion bushel carryout is weighing on the futures, and the trade is mostly watching weather. However, there are a few things that could provide pricing opportunities down the line. The USDA expects Brazil’s production to come in close to 124 million metric tons (mmt) while demand is pegged at 130.5 mmt (78.5 mmt domestic demand and 52 mmt for exports). Their pollination window will start mid-April and will be crucial for their production. Brazil’s own ag agency (CONAB) lowered their crop forecast to 112.7 mmt, even lower than the USDA’s estimate of Brazil’s corn production.

I think I mentioned a few weeks ago that the funds were at a record short in the corn market in February. They have exited out of some of that short position (meaning they bought back the contracts that they sold in the futures market) but still have a ways to go. The buy back could be some of the reason for the rally on the board. They will need a good reason (some bullish news) to encourage them to continue to exit out of their short position and buy back those futures contracts.

Just like in Brazil, US weather is also something to watch. While the drought monitor from March 12th doesn’t show any drought in eastern Colorado (yay!) major corn producing states in the Midwest are pretty well covered. Essentially the entire state of Iowa is suffering from a severe drought. This is a little early in the year for things to dry up, and the drought monitor is actually looking worse in the midwest right now than it did at this time in 2012, when we faced a major drought across the country.

Wheat futures have really struggled over the last month or so, making contract lows. Export reports last week didn’t help anything. Export inspections came in at 84 thousand tons — a marketing year low — and China had huge cancellations. Sales are expected to be poor again this week as last week’s data only included 120 thousand tons of Chinese cancellations. There are at least 384 thousand more cancellations that will need to be acknowledged.

Overall, the markets are still quiet. There isn’t any new demand, so the trade continues to watch the weather in crop producing areas around the globe as well as geopolitical issues and export inspections. In financial news, US Treasury Secretary Janet Yellen said that it is “unlikely” that market interest rates will return to levels that we saw prior to the COVID pandemic which sparked inflation and higher yields.

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