Money flow and headline trading is still the major guiding force in grains right now. The USDA did offer an updated look at the US production and supply & demand tables this week as well. For the most part the report was well within inline with expectations. US corn carryout dropped slightly to 2.32 billion bushels from 2.355 billion. The drop in stocks came from a 35 million bushel increase in the Food/Seed/Industrial category. Of the 35 million increase, 25 million is expected to come from increased ethanol grind. The weekly ethanol figures came in on Wednesday showing a slight drop in production week over week, but still very near record production levels set in the past few week. Soybean carryout was left unchanged for the month.
Two big questions on the mind of producers everywhere is why have we rallied and how long will it last? The easy answer to the first part is money flow. Fundamentals of ample worldwide stocks have taken a back seat to funds wanting to get into commodities for a multitude of reasons from fears of inflation to too much rain in Argentina and strong demand. That last part is what makes predicting a top, or the end of the rally, so difficult. When funds decide to take profit, it is very possible we will see a turn lower for a period of time where fundamentals will regain influence.
Through this rally one would typically think local basis would slip as futures and basis are usually inversely related. However, this week was atypical. As corn gain nearly a time in the futures, local basis has only lost a couple cents. Producer movement has been slow on the premise we have seen these prices before. We need to make another jump higher for the next big round of producer sales. Soybeans were in a similar boat.
CHS – Rochester Grain Team
Kasson: 507-634-7545 ext 7
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