Corn, soybean, and wheat futures had a volatile week between China’s rejection of Brazilian soy imports due to phytosanitary concerns to Argentina’s move to bolster export sales.

By: Matthew Bresnahan

Grain markets closed higher for the third week in a row despite some bearish headlines late in the week. News broke Thursday that Argentina was lowering export taxes on corn, soybeans, and wheat to garner export demand. It’s a strategic move as U.S. Gulf ports in Louisiana are under Force Majeure due to the rare snowstorms there and after the Chinese rejected soy from 5 vendors in Brazil due to phytosanitary concerns. The charts below show the per-tonne export prices for the highest-traffic export terminals from Brazil, Argentina, and the U.S. Gulf. While the move makes Argy soybeans cheaper on a FOB basis, Brazilian beans remain the most competitive by a considerable margin. Likewise, U.S. Gulf corn remains the most affordable per tonne following the export tax reduction.  The Chinese crying foul on phytosanitary concerns comes at a curious time as the Brazilian harvest begins. While it’s very early, the Brazilian harvest is off to the slowest start in 7 years. Rains in Mato Grosso have slowed harvest pace, and if that persists, it could result in late second–crop corn planting. Wheat may be in the throughs of a technical breakout and garnered a bullish headline this week. Egypt’s return to the global markets was well-received after importing Russian grain and stating that they communicated with several European wheat suppliers.

Soybean FOB Export Prices

Corn FOB Export Prices

Corn

Corn Futures Market Overview

Despite Friday’s weakness, front-month March Corn futures managed to stage a third consecutive higher weekly close. For the week, corn settled at 486 ½ up 2 ¼ cents. Unlike last week, prices chopped around. On Thursday, March corn traded as high as $4.94 ½ – marking the highest price traded on the contract since late May. We’ve yet to stage a test of 3-star resistance between 499-502 ¼, but the foundation is solid. Prices were pressured Friday following the news of the export tax reductions coming out of Argentina, but the contract settled directly in line with the early June swing highs. The slow harvest pace from Brazil bodes well for corn futures. So long as there isn’t a marked increase in harvest pace, corn futures should continue scoring higher highs and higher lows. 

March Corn Futures (Daily)

Corn Money Flow Overview

There is ample risk for long liquidation in the corn market. Managed money has amassed a considerable net-long position, which now totals 311,678 contracts between futures and options. Long liquidation doesn’t necessitate the end of a rally, but it may result in a considerable correction. In the last 4 weeks, March corn futures have rallied more than 40 cents, approximately 10%. At the same time, commercials are holding a considerable net-short position of 590,251 positions between futures & options. The ideal outcome for corn bulls would be a choppy, sideways trade in which commercials and managed money unwind positions simultaneously and re-establish neutral positions. The commercial net-short position contracted just over 109,000 contracts from last week, but that may be due to end-user hedging activity. However, a realistic outcome may be managed money pulling out as the Brazilian harvest pace improves, Argentinian rains materialize, or American export pace begins to slow. If you have unmarketed ‘24 bushels, now is a prudent time to consider protective puts in the spring and summer contracts.

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