Grain Spreads: Corn Inputs
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Commentary
March corn closed at its highest level in 6 weeks on Christmas Eve but saw some light selling today to finish the week at 4.50 basis March 26 futures. Grains prices pulled back as crude, gasoline, and diesel prices retreated as rumors of a Trump/Zelensky meeting this weekend gave thoughts of the four-year war ending sooner than later. I remain a skeptic about whether we see anything that resembles peace anytime soon in Ukraine. Russia continued to pummel Ukrainian grain and oilseed export infrastructure over Christmas, while Ukraine continues to target vessels in the shadow fleet moving Russian crude oil that is funding the war, while also attacking energy infrastructure deep inside of Russia. Strong demand continues to buoy corn prices near term in my view while the trade is looking at the next big data point, the January 12th crop report. Most estimates will likely call for a drop in yield from 186 to 184 bringing down production and ending stocks. That report is still two weeks away though. That moves weather outlooks in South America to the forefront. Expanding dryness is being seen in Argentina's expansive Pampas crop region. Argentina crop scouts report low leafhopper issues in this season's crop. Strong seasonal action, typical in the second half of December and into January, looks to be taking shape. The forecast for Brazil is for scattered wide rain coverage over the next 10 days with mostly favorable crop conditions. However, dryness in Argentina will continue in the southern half of the country for the next 10 days. Argentina is the key here though. Brazil's exportable variety won't go in the ground until March. The weekly corn close 6 cents higher points to a test of the mid-November highs in March corn at 457. Remember we closed last year at 4.58. Let’s see if the market can close above that level by New Years Eve. For the corn market to extend beyond this level will likely in my view need a continued weather premium in South America combined with a drawdown by USDA regarding last year’s yield and ending stocks projections on the January report. No trade recs into weekend.
Trade Ideas
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Risk/Reward
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Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
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