Corn and soybeans ended sharply higher on Friday with the push from USDA’s bullish supply cuts in the January reports.
The agency slashed corn yields 3.8 bu. resulting in a 275 million bu. drop in production and resulting 198 million bu. cut in ending stocks to 1.54 billion.
Shawn Hackett with Hackett Financial Advisors says this is extremely bullish but will it get corn to $5?
“It just seems that once you start getting momentum, they like those round numbers at $5, at $4. And so it wouldn’t surprise me if we get some momentum early next week with the funds, trading momentum, moving the momentum that we could get a push to $5.”
However, he thinks it will be difficult for corn to run much higher than $5 because of the potential for increased acreage ahead in 2025.
Plus, he says the report just confirmed what the market already knew, which was that was the crop was smaller than projected due to late season dryness.
“Corn has already rallied $1 off the lows and so it has priced much of this bullishness in. To get to $5 we will need another major catalyst such as problems with the second crop corn in Brazil,” he explains.
Soybean yield was also cut 1 bu. which ended up dropping ending stocks to 380 million bushels.
While that is supportive to soybeans, he thinks topside price potential may be limited to below $11.
The reason is the record South American production, historically low Brazilian Real
He says, “Especially after this rally, and they’re going to be aggressive sellers into peak harvest here over the next 30 to 45 days. Very difficult to see. July soybeans, for example,
getting over $11 from closing around $10.50. I just don’t think there could be that much upside despite today’s report and despite the fact that we will likely plant less soybean acres in the U.S.”
USDA left Brazil and Argentina corn and soybean production unchanged in the reports as Hackett says its too early for the agency to make adjustments.
However, without a major production issue it looks like they will still have a record soybean crop and global ending stocks are also at record levels.
Hackett is also cautious on a soybean rally due to possible retaliatory tariffs as a result of the Trump Administration’s trade policy.
