Mark's Market Talk

May 17, 2021

The past several weeks we have seen the markets move higher as if there was no end in sight. It seems we may have found the end of the old crop corn market last week. On Wednesday, the USDA released their May WASDE report, and it was bearish for the corn market. They jacked several numbers around and when they were done the current year carryout stayed above 1.25 billion while the new crop carryout was estimated at a little over 1.5 billion bushels. The trade was expecting lower numbers so the market headed south. At weeks end July corn was 88 cents lower while Dec corn was 94 cents lower. This report did not make any acre adjustments as they leave that to the late June report. If we end up with 2 million more acres of corn at trend line yield, we jump production another 358 million bushels and suddenly we are headed back to the old days with carry outs above 1.8. Normally we see a dead cat bounce after a strong move down like we saw late last week. Will this happen right away? That answer depends on several things that include South American weather, domestic demand, and Chinese purchases. China has cancelled some current year corn contracts, but they are moving these plus more to the new crop to take advantage of the inverse. They can stretch some supplies to fall to allow this to work for them. Major cattle feed yards have been using wheat in many of their rations. There is a large supply of feed wheat in the country, and it has been waiting for price spreads to allow its use. Corn fell much harder than wheat this week so this change may be short lived. Last Wednesday’s report was somewhat neutral for the bean market. The current year carryout was left at 120 million bushels while they pegged next year’s at 140. July beans finished the week down 4 cents while November beans were 33 cents lower. Again, they did not adjust the acres, and many think we will be 1.5 million acres higher when the dust clears. Using trend line yield of 50.8 that could raise the new crop carryout 75 million which would put us above 200 million. That would not be a bearish number, but without more exports or usage it will not push us higher.  Last week brought us back to reality in the corn market. The rally had run further then we had ever seen in such a short time. Now it will become a game of catching the bounces.