For the week, March corn was 10½ cents lower, March soybeans dropped 41¾ cents, March soybean meal down $16.60 per short ton and March bean oil lost 55 points. March Chicago wheat fell 12 cents, March Kansas City wheat ended 14 cents lower and March Minneapolis wheat dropped 10¾ cents. March cotton was down 81 points for the week.
Grain markets started off 2024 with lower weekly closes led by the soybean complex. Funds hit the sell button in soybeans, taking out chart support areas from June, and made new lows in the process.
“We are now looking at $12.54 support in March soybeans, so we’ll see if that holds next week, but the market has shown no action confirming a bottom is in,” says Darren Frye with Water Street Solutions. “Plus, the funds are now net short in soybeans.”
The catalyst was improved weather in Brazil with rains last weekend in dry areas of the northern and central soybean belt, plus additional chances in the extended forecast through Jan. 15.
Brazil has suffered damage to the soybean crop, but the market is not acknowledging it, even with lower private crop estimates. Frye says that’s because Brazil’s crop will need to get below 140 million metric tons before the market gets really concerned. For prices to rally, he says the crop has to shrink enough to shift some soybean export demand back to the U.S. and tighten ending stocks below the current 245 million bushels.
Frye believes the rains came too late to help the early planted soybeans in Brazil and that production is down about 15% from the record high estimates early in the season.
“I’ve been kind of thinking that for a long time (I just haven’t been proven right yet), but I could see the market coming around if we turn warmer and drier again in the extended forecast. There are signs of that happening,” Frye explains.
About 57% of the crop was planted in November and December, and so those soybeans would be susceptible without rain in February and March.
Corn was also lower for the week, and the March contract made new contract lows again Friday at $4.60. A marketing year low in weekly corn exports, the lower soybean complex and improved weather in Brazil also weighed on corn. Frye says there are no signs of a bottom in the corn market, and it might not be able to bottom without help from either wheat or soybeans, as corn is looking to other commodities for direction.
It will also be difficult to bottom the grain markets before the January WASDE, Frye says. He thinks it’s possible to get a supply shock, such as a 2 bu. to 3 bu. drop in corn yield based on some of the data he’s collected from clients across the U.S.
“We’re probably lower on corn yield than where we were in the November crop report, and we could be slightly higher on soybeans,” he explains.
Wheat also had lower weekly closes in all three exchanges, but Frye thinks Chicago wheat has confirmed a bottom and will be the leader of the three classes. He says the funds have already covered a portion of their short position and recent China export business has tightened soft red winter wheat ending stocks.
“I would be a buyer in the $6 area in Chicago wheat if we pull back to there; I really like the action off of Thursday’s low where we posted an outside day higher,” he explains. “We’ll see if we can get some follow-through into next week.”
Frye isn’t as confident about hard red winter wheat or hard red spring wheat.
