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Weather premium running dry

Source: Wikimedia Commons

AUDIO: Brian Grossman, Zaner Group

The United States Department of Agriculture (USDA) Thursday released its March World Agricultural Supply and Demand Estimates (WASDE) report. A market strategist shares the reports findings.

Brian Grossman, Zaner Group market strategist, describes Thursday’s report as a “friendly corn report.”

“Corn (was) a big surprise for the market,” Grossman said. “U.S. exports gaining 175 million bushels with an expected 50 million added to ethanol. All-in-all, U.S. ending stocks dropping 2.25 million bushels. (We’re) still over the 2 million bushel mark, but getting closer to 2.127.”

Grossman notes USDA made a few adjustments to South American production. USDA lowered Argentina corn production by 3 million and exports by 2.5 million. Brazil corn production remained mostly unchanged, down .5 million metric tonnes (mmt).

Grossman says USDA’s soybean estimates were more concerning.

“USDA did pull the Band-Aid off Argentina, lowering them by 7 million metric tonnes to 47 million metric tonnes. However, we’re not seeing any business coming to the U.S.,” Grossman said. “U.S. exports estimates down another 35 million. Crush is up 10, but that still leaves another 25 million tacked to the soybean balance sheet.”

Grossman adds Thursday’s report carries a lot of weight. The United States can now better determine future export business as Argentina’s harvest draws near. He adds growers can expect to see weakened soybean future prices in the near future, as Argentina’s harvest gets underway and weather premium runs dry.

“I felt this was a very disappointing report,” Grossman said. “Getting the Band-Aid torn off Argentina and not seeing business come back to the United States is a concern we’re going to have to be aware of. You have to remember – from the December low, we have added over a buck back into this market. It’s a weather market, and it’s done its job.”

Grossman encourages soybean producers to lock in profits.

“If you’re concerned about missing out on top-end potential in the event of a weather rally, there’s always ways to step back in. But, the head winds are against you now,” Grossman said.