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

Wheat has continued to be the upside leader for the first time in a very long time. The funds had built pretty big short positions in wheat and the wheat market has been beat up by everything in the world. We are starting to get enough bullish things making headlines to start getting the market’s attention. Ukraine is still trying to ramp up exports to the level they were under the corridor deal with Russia but have not managed to achieve the volume and a major winter storm in the Black Sea last week added to the logistic hurdles. Russia has been exporting as much wheat as they can but there are hints they may have to pump the brakes on some of that movement to preserve domestic supplies and the new crop has not gotten off to the best start. China has come back to the US market with another wheat sale to China announced Monday morning. Domestic basis has strengthened indicating an uptick in domestic demand as well. The expression when it rains it pours, for weeks wheat has not been able to find anything positive and now it seems like all this comes at one time. 

Corn has been beat up the last two weeks making new lows as December contracts went into delivery. If wheat can maintain some upside it will help give corn continued strength. Corn harvest is all but over now and domestic basis is trending higher. US exports have been quietly improving and we continue to see some impressive daily flash sales. Feed demand is improving and ethanol production, despite the two week setback is still ahead of the pace needed to reach USDA’s estimate. US corn carryout is projected at above 2 billion bushels and with no major issue on the horizon the funds have been content to pile on the short side. This works for them until there is enough to spook the funds. It feels like the bullish things are starting to add up. I struggle to see a case for a major rally but a recovery rally back above $5 on the march could come quickly if we get enough momentum. 

Soybeans will remain the most volatile market as we watch the South American weather. Rains are starting to be consistently added to the forecast for the Northern growing regions of Brazil. Will it be enough to make up for the damage that has been done? Will the forecast rain even fall? We do not know that yet but in a weather market, rain makes grain so the bean market has been beat up. I do not think the weather story is over yet, and we still have a lot of growing season left. 

We get USDA’s latest supply and demand report this Friday December 8th at 12, noon eastern. The December report is generally not a market mover because they do not make any adjustments to the US crop size. The next adjustments to US crop will be when we get the “final” numbers on the January report. The market will be watching for updates on the demand side of the balance sheet and adjustments to the South American crop size. USDA has been very conservative about making adjustments to foreign crops of late and frankly a bit behind the eight ball so I do not think anyone is expecting anything big.