USDA Beats Dead Horse

Good Day,

My kids spilt water all over the floor this morning when my son went to fill up the dog’s dish as my daughter opened the door to the garage to come in as he was going out.  No big deal, water has been spilt before, but the dirt and grime from a floor that hadn’t been swept recently and an entry rug that had reached its dirt carrying limit left a mess that couldn’t be cleaned with just towels. Tracks were made and tracks were left in the cleanup.  It needed a broom after the towels and then another towel if company was coming over (company was not coming over).  Not the most efficient way to clean a floor. 

Producers are plenty aware at this point that some house cleaning was coming.  A timely brooming earlier would have helped the situation, but you still would have needed a towel after the last month and the USDA’s splash of water today.

USDA Beats Dead Horse

The January WASDE and Quarterly Stocks Report was released today, and it put what may be the final nail in the coffin for 2023-24 grain bulls. 

Production estimates of both corn and soybeans for the 2023 crop year were raised between .5% and 1% in total, which doesn’t sound like much, but it allows for the projected 2023/24 ending stocks of corn to remain comfortably above 2 billion bushels at 2.162 billion.  A plentiful supply that will take time for demand to chew through.  Demand has been good…ish with better export sales to Mexico then last year and consumption from an ethanol market that has been running at top end for both total production and positive profit margins when taking the previous year into account. However, ethanol margins and demand have taken a hit in the last month partially due to seasonal tendencies and the first bout of cold weather but it’s not a given or even an expectation that returns will be the same as last year. 

March corn futures are down $0.24 since the start of the year settling at $4.47/bu today.

Projected 2023/24 soybean ending stocks were raised from 245 million bu to 280 million bushels.  Still a tight enough number that could be swallowed by an increase in demand from surprise Chinese purchases but with the weather straightening out in South America recently and offers for soybeans originating south of the equator crumbling in price the last two weeks if there is a “surprise” from China it would be more likely cancelations of previous purchases from the U.S. 

March Soybean futures are down $0.73 since the start of the year settling at $12.25/bu today.

The only comfort for grain bulls is that prices are technically very oversold in both the corn and soybean markets and due for a bounce.  That and the markets are closed for an extra day this weekend due to Martin Luther King Day.

“Laughter and tears are both responses to frustration and exhaustion.  I myself prefer to laugh since there is less cleaning up to do afterward” – Kurt Vonnegut

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Opinions are solely the writers. Derrick Hermesch is a commodity futures broker with Paragon Investments LLC.  This is not a solicitation of any order to buy or sell nor does it provide any recommendations regarding the market. Information contained herein is believed to be reliable but cannot be guaranteed as to its accuracy or completeness. Past performance is no guarantee of future results or profitability. Futures and options trading involve substantial risk of loss and is not suitable for all investors.