The Commstock Report

NEW WHEAT RECCOS DAY 1: On prior advice SRW producers are 80% sold on '23 wheat and 15% hedged on '24 wheat. HRW and HRS producers are 65% sold on '23 wheat and nothing sold on new crop. SRW and HRS producers are advised to use this rally to sell all remaining old crop, while HRW producers are advised to sell another 20% (to get to 85% sold) but hang on to the last 15% to squeeze a little more out of this rally with HRW crop ratings declining. On the Grains Grains are firm in overnight trade as of 6am, with wheat the clear leader as it was yesterday before traders had even seen the big hit to HRW wheat ratings released after the close (more on that later). As for weekly export inspections, corn was the only big winner. At 1.624 million tonnes it easily beat the top end of expectations at 1.5 million. Beans and wheat were within the range, but towards the lower end. After the close, we got the weekly Crop Progress Report. It showed corn planting at 12%. That met expectations, was on par with last year and 2 points ahead of average. On a state by…

Typically, most watch the US drought monitor but NOAA releases a North American version every two weeks. One can see that while drought has been completely mitigated in the Western US there are still lingering patches of drought in the Heartland. The drought has not been mitigated in Canada while the severe concentrated drought still covers Mexico with no sign of relenting. Where we live in Northwest IA the drought here is gone. Our soil moisture reserves have been fully recharged by late fall, winter and now spring rains so that we are starting the season out with a full tank of subsoil moisture. We got nearly 2 inches of rain last week and for the first time we had excess water standing in fields. More rain is forecast this week so planting will not be as super-early as thought. Additional rain now could actually delay planting and be a negative thing. There are other regions such as in the ECB or Delta where too much rain is a problem. Then there is still Kansas that can be counted upon for drought.   The primary characteristic of the climate setup for 2024 is the transition from El Nino to La…

On the Grains Grains were mixed in overnight trade with corn and beans on the soft side but wheat prices firming as of 6am. Weekend news was dominated by both events and non-events in both DC and the geopolitical arena: The major event was House passage of $95 billion in 3 separate aid packages for Ukraine, Israel and Taiwan. It's likely to clear the Senate easily but it happened only through Dem support that offset GOP opposition because the bills lacked any funding for U.S. border control and have Speaker Mike Johnson still facing criticism within the party. The major non-events making news are seemingly lessened risks of widening regional war with few signs either Israel or Iran want to trade blows again for reasons discussed below. That has oil prices quiet along with ideas OPEC+ has enough unused capacity to mitigate disruption of Iranian supplies. The Commitments of Traders report out after markets closed was somber news for those of us hoping this market will need to build in some weather risk and perhaps trigger more short covering by funds. It showed that through last Tuesday, those funds had actually been adding to already-large net short positions in all…

Follow-through interest will be tested after the grains posted a firm close on Friday. The overall tone of the grain trade is likely to largely depend on which directions oil and the dollar index are heading. In the Headlines A strong close on Friday limited the weekly loss for May corn futures to 2 cents. May beans were down 23 1/2 cents last week. May Chicago wheat was down 5 3/4 cents while May Kansas City wheat dropped 8 1/4. April cattle were up $2.57 and April feeders gained $3.72. June hogs were up $2.75 for the week. The House of Representatives voted on Saturday to pass a spending package worth $95.5 billion that includes $61 billion for Ukraine, $26.4 billion for Israel, and $8.1 billion "to counter China's actions in the Indo-Pacific" (protection for Taiwan). As the federal government is taking on new debt at relatively higher interest rates, the total cost of servicing the deficit amounts to 36 percent of annual tax receipts – the highest level in 27 years. Interest costs could increase by almost another 50 percent by the end of the year if the central bank does not reduce rates. The Environmental Protection Agency issued…

Grain basis levels have taken on a heightened level of variability this year, showcasing a notable disparity between the country's western and eastern regions. While corn basis remains notably stronger in the West, soybean basis displays relative strength in the East. These discrepancies cannot be solely attributed to supply differentials, given the robust crops witnessed on both sides of the Mississippi River last season. Instead, the driving forces behind the basis differences lie within the dynamics of demand. In the West, firm corn basis is supported by robust ethanol usage, elevated export demand from the Pacific Northwest, and stiff competition within the rail market that draws corn into the Southwest. In the East, soybean basis is bolstered in large part by a wide network of processors that serve a consistent draw from the southeastern poultry sector.   Differences between Illinois and Iowa show the nature of basis being split by region. Country elevators across much of Iowa are posting corn bids against basis that is relatively strong for this point of the season, with a statewide average of 2 cents over the May futures price. At 24 cents under the board, Corn basis in Illinois is closer to its modern…

On the Grains Grains are all still firm in overnight trade as of 6am, but well off overnight highs on word that Israel had attacked some sites in Iran in promised retribution for the weekend barrage. Oil and wheat prices initially spiked much higher but have since given most of the gains back. Why? Because despite promising they would counter even the slightest attack on their territory with a devastating second-wave, Tehran instead declared that the Israeli attack had "failed" (just as theirs had). It's an unfolding drama that could change again by the time you read this. Supportive news for corn comes from continued cuts in Argentina's corn outlook from both the Buenos Aires Grain Exchange and the U.S. Ag attache down there. It also appears EPA will agree today to "temporarily waive" summer restrictions on E15 sales through September 15 after repeated pleas from several senators to do so in light of ongoing energy security risks stemming from war in the Middle East and Ukraine. The most important news this morning is a host of updates on the long-term weather outlook released yesterday by the Climate Prediction Center. The new forecast for May through July calls for above-normal…

Your You/Tube analog gets to know you and tracks podcasts that it thinks that you should see. My chosen one was by David Woo who has been a Wall Street executive and major bank official who now has his own forecasting/investment firm. He lives in Israel and noted that 90% of Israeli's supported finishing Hamas no matter what it took or the geopolitical risk with Iran that it created. They are immersed in the eye for an eye thing and cannot be told when it is time to quit. There is real acrimony and then there are the optics of animosity there. Failure to hit back when attacked leaves the appearance of weakness. Iran's recent drone/missile attack on Israel was in response to one from Israel and was carefully crafted to fit both real acrimony and the optics of animosity necessary in the intended absence of harm and damage that resulted. It was an attack that Iran knew that Israel would thwart. The Saudis, Emirates, and even Jordan assisted in Israel's defense. Israel vowed to respond. Iran said it was 'one and done' but it was not. It immediately began re-supplying missiles to its proxies in preparation for the next…

On the Grains Grains are mixed yet again in overnight trade, with corn and beans steady to weak but wheat slightly firmer. EIA data out yesterday showed a big drop in weekly ethanol production to a 12-week low and well beyond expectations with stocks declining only marginally. On the brighter side, they also showed gasoline stocks falling more than expected implying stronger demand. This morning we get weekly export sales at 7:30, which could set the tone for early trade. Here are the ranges of expectations: Corn, 300,000 to 900,000 tonnes, Soybeans 300K to 650K, Wheat negative 100K (due to net cancellations) to 200K. Sometime today, the Climate Prediction Center will issue its latest 3-month outlook for May-July and that will give the trade the next reading on yield risks in this growing season. Beyond that, speculation is already beginning on what the May WASDE will show for USDA's first look at the 2024-25 season balance sheets. Then there's the geopolitical uncertainty in the Middle East that has the world on pins and needles. Israel insists it will have to retaliate for the weekend attack while Iran blusters that if there's any encroachment whatsoever onto Iranian assets or territory, they…

Brazil's soybean harvest pace is beginning to slow as it nears its conclusion.  We expect Brazil's harvest to reach 90% this week but it may take another month yet to wrap things up completely.  CONAB made a minor adjustment lower to their April soybean production despite finding an additional 140,000 acres by cutting yield a quarter bushel per acre to 48 bpa overall.  This places overall estimates at 146.5 MMT for CONAB while the USDA didn't budge from their March report.  Traders are putting more emphasis on the USDA, pointing out their superior satellite and NDVI technology.   I pointed that out to one trader in Brazil that the USDA has been more accurate in recent years to which he replied, "this time they are wrong."   Even if CONAB and the USDA split the difference, that is still 150+ million bushels removed from Brazil's export supply.   Brazil's exports are the canary in the coal mine.  They are the first to go when there is a lack of supply.  One red flag is that Brazil's soybean exports were down for the month of March compared to last year by 6%.  This would be unusual for the middle of their peak export…

On the Grains Grains are mixed again in overnight trade. There's still no sign of any weather issues with planting, so there is no need to build in any "weather premium" in the minds of traders. That could change tomorrow when the Climate Prediction Center updates its 3-month outlook for May-July. Globally speaking, the only glimmer of supportive news are slightly lower production forecasts for both Ukraine and Russia and ongoing conviction that USDA's estimates for South American soybean and corn crops will inevitably be coming down to more in line with their own estimates down there. Shorter-term, geopolitics and even US politics for that matter are powder kegs of uncertainty that have the U.S. dollar at the highest levels since last fall. The Iranian attack on Israel was a sea change in Tehran's strategy, no longer content to rely on its proxies in the region. For its part, Israel will only say it's going to "respond" and when it does, Tehran says it will strike again. The powder keg in U.S. politics are renewed calls for House Speaker Johnson to resign as he struggles to get support for separate bills to fund new aid for Ukraine, Israel, and Taiwan.…