For the week grains were mostly lower. March corn was down 16 ¾ cents, May down 16, December lost 9 ¼. May soybeans plunged 34 ½, November lost 18 ¼, May soybean meal fell $10.90 per short ton and May soybean oil was 148 points lower. May Chicago wheat ended 4 cents higher, May Chicago wheat was up 10 cents and May Minneapolis fell 8 ¼ cents.
March corn hit another new contract low and settled under $4 and March soybeans also scored contract lows and both markets are still searching for bottoms. Tommy Grisafi, Advance Trading, says the selling pressure was largely a result of farmer selling going into the end of the month as March options expired on Friday, plus first notice day for March contracts comes up next week.
“Puts were worth an incredible amount of money, the calls pretty much expired worthless. I mean we went through $4 on corn today. It was a blood bath. With the basis contracts farmers underestimated the potential for the market to go lower. The last time we had carryout this big we had $3.50 corn.
The basis tells the truth and there is too much corn in America and too many people that held on to corn and beans because the biofuels industry needs them,” he adds.
So, will the farmer selling dry up next week or will the funds take their foot off the accelerator? Grisafi says, “If the funds are still adding to their short position this could get really ugly yet in corn and soybeans.”
The stock market and S and P 500 are making new highs, while the corn market is making new three-year lows, and he says that is not a good sign either. “Remember for funds the trend is your friend and there is plenty of money around if the funds want to continue to add to their short position,” he adds.
Grisafi doesn’t see anything right now that can change the market trend, except some unforeseen event or a big production problem with the U.S. crop during the planting or growing season.
The same selloff happened in the grains when the December options expired, and the December contracts went into delivery. Unfortunately corn and soybean prices are lower now than they were then, and farmers are losing money when they roll to a deferred contract like the May because of the carry in the markets.
Grisafi says, “As you roll you know every month in the futures is higher than the next so it’s expensive to do that. We’ve dealt with inverses the last few years, before the Ukraine war, during the Ukraine war especially during that.”
February 24 is the two-year anniversary of the Russia Ukraine war and Grisafi says when the war broke out, he told farmers it was the worst thing that could ever happen because it would stimulate production around the world.
“And when Ukraine comes back on like it’s going to decimate the markets. Even worse than that Ukraine is not all the back online, they are at like 70%. However, he says Russia had big crops, the U.S. had big crops and South America has planted fence row to fence row. We’ve expanded acres and hectares all over the world right into poor demand,” he says.
Grisafi says there are couple of things that should really scare the U.S. grower. “Number one interest rates are three times higher than they were the last three or four years and the last 10 years before that. Two, if you adjust the price of corn based on inflation not only are we $3.99 futures and $3.66 cash across the country, but adjusted for inflation this is like them selling $3 corn.” The cost of everything is so expensive in comparison and the cost of producing the 2023 crop was one of the most expensive ever, according to Grisafi.
Conversely, funds have been buying cattle and hogs as lower feed prices have made margins more attractive. Grisafi expects that to continue, especially in cattle with the strong fundamentals. “Any time the cattle drop they are bought very quickly,” he says. Both cattle and hogs hit new near-term highs on Friday with cattle supported by higher cash ahead of the Cattle on Feed Report.
April live cattle futures ended 35 cents higher, June was up $1.05, with April feeder cattle futures up $6.42, May gained $6.45. April lean hog futures ended $1.97 higher with June up $1.62.
