The Commstock Report

La Nina forces continue to bring drier than normal weather to Southern Brazil and Argentina. We have little doubt there is crop stress occurring in these areas, however, we must weigh that against the fact that an estimated 88% of Brazil's crop regions are flourishing. I would agree with the narrative that Brazil's good areas are out producing the losses in Argentina. As we have mentioned in previous reports, RGDS represents 20 MMT or less than 12% of Brazil's crop. If RGDS loses 10%, that amounts to 2 MMT. USDA has pegged Brazil's crop at 169 MMT and many private forecasts are already looking for a 3 MMT to 6 MMT boost. Therefore, it is not unreasonable to expect that the gains could offset the losses.   Potential losses in Argentina likely pose an even greater threat to the Bears. First off, triple digit heat is encompassing most of Argentina whereas in Brazil temperatures have remained surprisingly cool up until now. Second, Argentina has a very long planting window and the last 8% or so has not even been planted and with this dry period it will either get planted late or not at all. In our experience, a two-week…

On the Grains Good morning: it’s one of those overnight sessions where not much has happened. Corn and Soybean futures are trading steady to 2 cents better as we await the USDA data dump on Friday and traders nervously waiting to see what January 20th looks like. With the November Trade in Goods and Services report behind us, ethanol looks to be on solid footing, as exports were at a monthly record of 187.6 million gallons, up 63% from last year. As we turned the calendar, we focused on what the prospective planting report could say at the end of March. Nov/Dec is sitting at 2.26, and many producers are frustrated with soybean yields. It’s too early to call what the second crop in Brazil will be on corn and too early to have a clue on anything here, yet if we see continued strength in December 25 corn, we will look to put some hedging strategy on. Since I am a farmer, I will go out and say that fertilizer is too high. That’s what we say, ha, but Urea prices are trending under last year and well under the 5-year average- concerning for acres next year. This content is…

PLEASE REFER TO THE BROKER COMMENTARY PAGE FOR UPDATES!! In late November, a screwworm infestation was discovered in cattle in Southern Mexico which triggered an immediate succession in feeder cattle trade between the US and Mexico. When coming home on a flight from Washington DC late last year my wife and I were seated next to a USDA Veterinary. My wife always converses and she learned that this USDA Vet was on her way to Central America to get boots on the ground there with a plan to eradicate screwworms. The screwworm recently was discovered to have migrated to southern Mexico from Central America which caused US border control to close the US market to Mexican feeder cattle. The flies move slowly. They require a warm-blooded host and typically attaching to open wounds and can only move a couple miles after feeding to find another host. The USDA Vet said that the way to eradicate screwworms is to produce sterile males and introduce them to the swarm so that they cannot reproduce. They radiate millions of the male flies which sterilizes them and then release them into the female population to mate. She said that there were once 3 labs that produced…

On the Grains Good morning: only three more sleep until the January crop report, which will give us final yield numbers on the 2024 production. While the December report was a nice surprise as they reduced the carryout, it feels unlikely that we will get back-to-back gifts from the USDA. The USDA has a history of holding steady or only slight adjustments from the November report on. The one exception was the 2020 report. While yes, the USDA could give us some nice surprises, I don’t like sitting back and doing nothing hoping we see adjustments like the 2020 reports. The continuous corn chart has rallied 95 cents since August 27th. May at-the-money $4.60 puts are running 17 cents right now and, depending on risk tolerance, could be offset by selling something above or below the market.  For example, you could buy a $4.60 put for 17 cents and sell a $5.00 call for 7 cents, making your cost only a dime, with the risk of more corn being sold at $5.00 obviously, this isn’t for everybody, but give us a call, and we can walk through some scenarios for your farm. This content is for members only.Register Already a…

Let's start the New Year by standing back and taking a big picture view of these markets. The corn market outperformed the soybean market in 2024 ending the year with a significant recovery from its August low with the March contract that we are working with now having recovered 57 cents to a recent high near 460 where weekly chart resistance begins. The initial rally was 3 waves up from that August low which is corrective suggesting the recovery is part of a major correction in what is still a bear market. There is as yet no confirmation that the correction has climaxed.   While corn production scored a record high yield in 2024, it was not the record that the trade once thought it was, being trimmed by USDA late season. The same could be said for soybeans which were impacted by the late season drought more than corn. My corn yield was 19% under my APH, impacted by flooding, and generated a revenue insurance claim. In the case of corn demand, it was underestimated during the demand season in all categories: exports, feed and ethanol usage. There was a significant regional disparity where corn west of I-35 saw…

On the Grains The billion-dollar question remains: what will happen to the Ag markets after January 20th? We all know that markets generally do not like uncertainty, especially after building a long position. Friday’s selling wasn’t much more than profit-taking, and with the current forecast in Argentina and Southern Brazil, it would lead us to believe that we still have a few weeks to add some additional risk premium to the market. As the crop is 93% planted in Argentina, which is 4% ahead of average, it’s all about the forecast now. Exports continue to impress as sales run 30% above 2023, and USDA only projects an 8% year-over-year. We should be on target to meet, if not exceed, those projections even though Friday’s numbers were on the low side of estimates. The January 10th report will be our final yield numbers for 2024. I will be waiting for and posting the average trade guesses this week. Overnight energies are playing a part in supporting the row crops. Crude oil is up 30 cents at $74.30, while natural gas, on the back of a wild weekend storm, is up 28 cents vs January. This content is for members only.Register Already a…

Grain futures are vulnerable to follow-through selling after the poor finish Friday. Still eligible to change attitudes will be any possible developments on renewable fuels policy guidance that the public is waiting for. Traders could also move to cover shorts if anticipation grows for a friendly crop report. In the Headlines Friday's slide made March corn futures finish the week lower by 3 1/4 cents. March beans managed to hold a gain of 2 cents. Nearby Chicago wheat was down 17 1/4 while KC wheat dropped 15 1/2. February live cattle jumped $3.40 and January feeders were up $3.45. February hogs lost $3.37 last week. Last Thursday's session was example of the type of risk-off or flight-to-quality buying that can develop in the face of national security concerns like those that were stoked by the domestic terror attacks in New Orleans and Las Vegas. It was one of the typically rarer occurrences of both the dollar index and gold futures rallying simultaneously. The dollar and metals had just previously been moving in opposite directions as the greenback strengthened due to rising bond yields, which also diminished the comparative value of gold and silver. Dry weather in Argentina was a bullish…

I have recently taken over the entirety of our family farm crop operations, making me officially the sixth generation to do so on a farm that started in 1898.  It would be my desire for my son, if he so chooses, to someday be the seventh generation.   While my son is very young, I think farm succession gets put off way too late.  I have personally witnessed progressive farm families only begin to seriously ponder their estate planning AFTER the patriarch lay in the hospital bed having suffered a major health episode.  It was as if they suddenly realized that their parents were not going to live forever.  It was then left to the siblings on how to decide how to split things up.  Unfortunately this happens more often than you may think.   In another more personal example, my late father-in-law called his children into the office one random day a couple of years ago (along with me who sat quietly in the corner).  He made a surprising announcement that he had transferred the bulk of the farming assets into a new holding company and made his three children the owners.  He did sort of wait until the last…

On the Grains The USDA released Crush data yesterday, which reported corn use at 464.9 million bushels (bu), modestly above last November’s 457.2 MB. While USDA adjusted ethanol grind higher in the December report, additional demand could be coming. Weekly EIA numbers, released yesterday, came in at 1.11 million barrels per day (mbd), which was up from 1.107, and over the last 5 weeks, we have been running 1.8% above last year. Ethanol stocks increased to 993 million gallons, up 24 million gallons.  The weekly number needed to meet USDA’s estimate is 1.045 Mbps vs. last year’s 1.042. While it seems like a very reasonable target to hit and possibly exceed, USDA will be slow to adjust those numbers, just like the exports after December’s large adjustment. Argentina continues to dominate the corn market news; we’re rounding the corner on pollination in several of the largest producing states with limited rain in the forecast. This content is for members only.Register Already a member? Log in here

Part 2 of 2 One of the first things that the new Congress needs to do is write a new farm bill. The extension is only in order to buy time until this new Congress can work it over to shrink the USDA and cut spending. The next farm bill may not resemble what we have had in the past. Food versus farm policy issues have been necessarily combined to create consensus in compromise to enact farm bills. This will be revisited but may no longer work. That is because we have hit the mental limit on the federal credit card and austerity measures must be taken to change the trajectory of growth of the federal debt. We have talked about the rising spending and debt trajectory being unsustainable for some time and we have finally reached a tipping point where recognition was reached that things have to change. If you thought that could happen without impacting farm spending and programs get ready to rethink that. The USDA needs to be reworked by DOGE. The USDA needs significant reform. It is best if we get involved in the process defining what is essential and what is not or it will be…