This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at [email protected] or 843-540-4540.

The outside markets continue to get hammered due to the uncertainty surrounding the tariffs Trump announced last week. The market was expecting something reciprocal but immediately questioned the validity of the metrics used to calculate what tariffs and other barriers US goods faced abroad. The scope and scale of the tariffs surprised the market and has been trying to get the new uncertainty priced into the market since last Tuesday. Stocks have dropped precipitously wiping out trillions of dollars of market capitalization.

The ag commodities have held on better than most asset classes. That is partially due to the fact the spec funds have been reducing their position over the last month or more so there is not as much spec money to panic in the ag space. This is also due to the fundamental tightness we are facing for our commodities. The corn balance sheet has no room for error in the US or the world and we continue to see robust and growing demand. In the flurry of announcements last week, there were no new tariffs announced to Mexico so they have continued to aggressively buy US corn. The South American crop gives beans a little more cushion but with growing domestic demand and a price ratio that favors planting corn, soybeans may tighten up domestically even if exports drop. Soybeans dropped last week after China announced their response targeting among other things their ag imports but there are very few export sales to China that have not been shipped so the number of sales that can be cancelled is very limited. This is the time of the year that US exports fall off anyway. Export inspections were impressive again on Monday morning for beans and corn, wheat was disappointing. Wheat stocks are adequate in the US but tight in the world. The weather has improved in Ukraine and Russia but the chances to end the conflict in the near term look very slim and getting slimmer, not better. 

All markets have been really upended and are trying to price in the new reality but no one knows what that is yet. Grains have been somewhat insulated but still have the weight of the uncertainty hanging over them. They will not react as quickly to changing fundamentals until things settle down a bit in the outside markets. But they will trade the fundamentals and it is impressive how well support has held in the grain markets so far. We are going into a planting and growing season and the weather so far has been anything but tame. The eastern corn belt got too much rain over the weekend while the western belt is still dry. There are increased weather risks this year and those will have to be priced in if there are threats to the crop. 

Cotton closed up more than 200 points on Monday despite more back and forth with China. This is impressive and could mean all the negative has finally been priced into cotton for the time being. I think its been about 6 months since i have said anything positive about cotton. 

USDA released the first weekly crop condition report of the season. Corn planting progress was estimated at 2% complete. The market was expecting 2% and that compares to 3% last year this week and 2% on average. Cotton was 4% planted compared to 5% last year and 6% on average. We also got the first wheat crop condition ratings since November. The winter wheat crop was rated at 48% good/excellent compared to 47% expected, 55% last reported in November and 56% a year ago.