Grain Spreads: Weather Leans Bearish

Sean LuskGeneral Commentary


Corn came undone today with midweek rallies unable to hold. Later next week weather runs not as bullish as feared and with both basis here and in Brazil dropping today, sellers emerged. In my opinion the Euro model started to turn toward wetter yesterday and is now cooler and wetter today. This has taken some of the wind out of the smaller crop ideas that brought the Managed Money to cover some of their short positions. Also seen as bearish headlines were that Conab raised its Brazilian corn crop estimate 2.5 million metric tons (MMT) to 114.1 MMT, with the bulk of the increase in expected safrinha production. Brazil is now expected to export 33.5 MMT of corn in 2023-24, up 2.5 MMT from the prior forecast. The USDA report this week has largely a nonevent in my opinion. New Crop ending stocks come in at 2.1 billion bushels per USDA. Demand is ok, but supply side at this juncture matters most. Without a weather issue, there is no reason for the USDA to adjust ending stocks lower. Anything over a two-billion-bushel carry is not friendly for price and in my view and that may result in a futures price later this year closer to 4.00 rather than to challenge 5.00. This is unless beans and wheat stage a significant upside later this Summer. Watch the open Sunday night for the market’s reaction to weather runs that may change next week. 

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