Market pressure is all about money flow, not fundamentals

Weather conditions improving in South America and southern Plains. Winter stronghold in northern Plains starting to cause concern for planting.

A field of wheat long before heading out.
U.S. wheat stocks are at their lowest level in 14 to 15 years, however, demand remains stagnant.
Erin Ehnle Brown / Grand Vale Creative LLC

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The third week of March saw the grains closing mixed with Minneapolis wheat mixed, Chicago wheat lower, Kansas City wheat higher, corn mixed, and soybeans sharply lower. But that was not how the grains started the week. Wheat and corn started the week lower while soybeans were higher. Early activity was centered on improving weather conditions in both the U.S. and South America. Soybeans were higher due to another lower production estimate for Argentina.

Tuesday’s session started off looking like what appeared to be a turnaround type activity, but once the session started, the grains started to fade their gains and traded lower into the close. Early support was due to technical buying and calmer heads in the financial sector. Corn saw losses trimmed due to a 136,000 metric tons export sale of U.S. corn to China. Dr. Michael Cordonnier released updated production estimates for Argentina. His updated estimate puts corn production at 36 million metric tons and soybeans at 26 million metric tons. Agroconsult’s production estimate for Brazil increased 2 million metric tons to 155 million metric tons versus USDA’s 153 million metric tons.

Wheat was supported by technical buying and a slight change in the weather forecasts as rains have been reduced for the U.S. southern Plains. But the extension of the Black Sea Initiative and lack of demand proved to be too much for the wheat bulls to overcome.

Informa released their acreage estimates for 2023. For corn they are looking for acreage to increase to 90 million versus 88.58 million last year, soybean acreage is estimated at 88.2 million versus 87.45 million last year, other spring wheat acreage is estimated at 10.6 million versus 10.835 million last year, and durum acreage is estimated at 1.697 million versus 1.622 million last year.


Seasonally the grains do not perform well in March but do start to see strength in April and May due to the need to price in new crop production concerns.

In broader economic news, the Federal Reserve only increased rates by 0.25% on Wednesday, which was expected by the trade. The increase marks the 11th straight increase in rate by the Federal Reserve and the highest rate since 2008. In his speech after, Powell indicated that the Federal Reserve will likely increase rates one more time in 2023. This sent pressure into the stock market after the commodities closed. Once again, the pressure in the markets is all about money flow and nothing to do about fundamentals.

Wheat continues to be under pressure from the lack of demand. Although U.S. wheat stocks are at their lowest level in 14 to 15 years, the fact that demand remains stagnant is keeping a lid on any potential push in this market. Selling is also tied to expectations of rain in the southern Plains, which could help improve the winter wheat outlook if realized. The next big issue for wheat will come in the northern Plains due to planting concerns. But that won’t start to be an issue until closer to the acreage estimate at the end of the month.

Corn saw two-sided trading on Wednesday. Corn started on the defense with selling tied to spill over pressure from the lower wheat complex. Light selling was also tied to weather forecasts calling for improving conditions in South America. Dry conditions in Brazil will allow for soybean harvest and the planting of the second corn crop to advance. Rain is in the forecast for Argentina, but at this point it likely will not be helpful.

Corn’s front two months were able to see late session strength due to reports of more exports. China was in and bought another 178,000 metric tons of U.S. corn. This brings their total corn purchased this past week to 2.4 million metric tons (over 95 million bushels). This helps to verify the concerns about Brazil’s second corn crop potential.

Soybeans are seeing a bit of heavy selling pressure, which is seasonal this time of year as the U.S. hands exports over to Brazil. But the expectations of steady acreage in 2023 should be helping to limit pressure in the new crop soybean complex, but as of now it has not made much impact. Technically, November soybeans appear to be on a mission to close a gap that was created on July 25, 2022, at $12.6925. That gap was closed this week when November traded down to a low of $12.69.

MSGA said the recent biennium budget agreement doesn't reflect the importance of agriculture to Minnesota's economy.

Wheat is trying to correct an oversold market condition but just can’t seem to gather enough traction to hold gains during the day session. Kansas City is seeing support from weather concerns as the western regions of the winter wheat belt continue to miss out on the rain events. Minneapolis is seeing some support from planting delays as it appears that the northern Plains will not see much field activity in April. Chicago continues to be the dead weight of the wheat complex as traders are using Chicago wheat as a short leg in a corn spread. This is lowering the price of wheat versus the front month corn contract, and making Chicago wheat more attractive to feed.

Corn continues to trade in two worlds. The recent surge in exports to China has resulted in the old crop May to trade to a huge inversion over the deferred contracts. The bull spreading is a result of traders needing to cover needs now. The expectation for higher acreage and a record yield is keeping the new crop market in check. The market has not paid much attention to the delayed planting issues in the northern Plains or Delta region as of yet, but once the calendar flips to April, more attention will be given to the U.S. weather woes. At this point, North Dakota, the northern third of South Dakota, and western third of Minnesota (same region as last year) is going to see challenges in getting corn planted timely.


Soybeans seem to have drawn the short straw. This market has been hit by heavy fund selling early in the third week of March and the hits appear to continue. Seasonally soybeans come under heavy pressure as the U.S. loses the soybean export market to Brazil. And that is no different this year. Brazil’s weather forecasts have improved and are showing a dry stretch that will allow for combines to roll and ships to be loaded. That will result in a decline in exports of U.S. soybeans for at least the next six weeks.

Adding pressure are expectations that if planting is delayed in the north, more acres of soybeans will be planted.

Late Friday, Brazil’s crop progress reports were released. As of March 24, soybean harvest was estimated at 67% completed versus 69% average. First corn crop harvest was estimated at 56% complete versus 57% average, and second corn planting was estimated at 94% complete versus 96% average.

Next week will be the last week of March (hard to tell with the weather we are having in the northern Plains). Once the calendar flips to April, traders’ attentions start to focus more on U.S. crop activity and less on South American crops. This will bring more attention to the weather woes in the northern Plains.

USDA is set to release two important reports on March 31, the Prospective Planting Report and Quarterly Grain Stocks estimate.

Ahead of the reports, the average trade estimate for all wheat acreage is 48.85 million versus 49.5 million in February and versus 45.74 million last year. Winter wheat acreage is estimated at 36.26 million versus 36.95 million in January and versus 33.27 million last year. Other spring wheat acreage is estimated at 10.95 million versus 10.84 million last year. Durum acreage is estimated at 1.67 million versus 1.63 million last year.

The average trade estimate for corn acreage is at 90.88 million versus 91 million in February and 88.56 million last year. Soybean acreage is 88.242 million versus 87.45 million last year and the Feb. Ag Outlook’s estimate of 87.5 million acres.

The average trade estimate for the Quarterly Grain Stocks are:
Wheat stocks at 934 million bushels versus 1.029 billion bushels last year.
Corn stocks at 7.47 billion bushels versus 7.758 billion bushels last year (if realized would be the lowest March 1 stocks since 2014), and soybeans stocks is 1.742 billion bushels versus 1.932 billion bushels last year.


“The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results.”

Opinion by Randy Martinson
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