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Mr.Grain

Posted 4/18/2024 18:26 (#10711833)
Subject: Why do beans continue to fall? - market comments

Grains mixed as corn continues it's brutal chop while soybeans continue their 4-week sell off.

Corn and soybeans are seeing some pressure due to rains falling in the western corn belt where the soil moisture lacks. As virtually all of the drought sits west of the Mississippi river.

However, weather does not really matter right now. It will in a few weeks, but right now weather doesn’t have the ability to push us sizably higher nor lower.

The biggest thing in corn that could be adding pressure the next week or two is first notice day and all of these May basis contracts that are going to have to be priced. This often leads to more farmer selling.

An example of this would be in February, we made our lows the day after the March basis contracts expired.

Then soybeans.. Why do we continue to fall off the recent highs?

For starters planting is going good early. We came in at 3% planted which is not a huge number and it is still far too early, but that is decently fast compared to normal.

The biggest concern is soybeans is the recent rally in the US Dollar to Brazilian Real. When the dollar goes up, it makes everything else we export that more expensive to foreign buyers. However, farmers in Brazil get paid more of their currency when the US dollar rises due to the exchange rate.

For example, if the US dollar goes up +5%, the Brazil farmer would get paid 5% more in their currency.

This matters because it creates a lot more Brazil farmer selling.

As you can see by the chart of US Dollar vs Brazil's Real, yesterday this fell and soybeans bounced. Today it rallied and soybeans fell. (CHART BELOW)

Why is the dollar rallying?

The fear is that we might not see rate cuts this year, or as soon as most were originally expecting we were going to.

We also have the war in Iran and Israel. This spooked the stock market and helped rally the dollar.

War in the middle east does not rally the grains like the war in Russia and Ukraine as the middle east are not producers of grain like they are.

Now taking a look at US weather and planting.

Right now this does not really matter. In 2 or 3 weeks it will, but not today.

We have gotten off to a decent start to planting, and most are expecting Monday's crop progress report to show pretty good pace as well.

Early and fast planting in most cases pressures the grain markets lower through out early to mid spring. This is something we have been mentioning the past few months.

The western corn belt is getting some rain. These are the areas that needed a recharge the most. Despite the rains, a lot of areas that had problems still have problems. As we move forward this will start to gain more attention, but not today. (MAP & FORECASTS BELOW)

We are at least 3 weeks away from any real weather discussions.

Let's say it does just keep raining out of nowhere and planting gets delayed. When would the market care?

Take 2019 for example. This is an extreme example. But this was the worst delayed planting we have ever seen. The market did not bottom and realize this until May 13th. (CHART BELOW)

So even if we do get delayed planting, the market is not going to care until the middle of May more than likley.

However 2019 isn't happening. Overall the outlook still does look like a pretty favorable planting and I expect fast ish planting.

So short term expect choppy sideways to even lower price action the next few weeks as there is nothing to get the markets excited.

With first notice day and the expiring basis contracts, to go along with the possibility for fast planting the next few weeks, this market could continue to struggle until the end of the month when we get those out of the way.

Because until we get into a real weather market, the funds do not have any reason to cover.. eventually they will. Just not today or tomorrow…..

Read the rest of todays market update where we go over everything you need to know about the grains heading into this growing season

Read Here: https://txt.so/JWE8c2