It may be an exaggeration to say that grain traders on the Chicago Board of Trade are “wary” of the Feb. 11 World Agricultural Supply and Demand report. The February report is usually the least important in the whole calendar, but things can happen.
Traders are aware that the January report did shake up the market, and memories are at least a month long in this business.
Inventory report
However, it must be remembered that the January report did rattle the market because there were some unexpected changes.
The January report is always watched carefully because it is referred to as the “inventory” report. It incorporates the best data of the year from a crop that is well counted. Last month, we had a surprise downward revision in corn yields, and thus production, and a small soybean yield correction that made changes large enough to bump us a dime higher in corn prices and extend the bull rally that goes back to the end of August.
The good news of the bull rally is that we have gained almost 95 cents in March corn futures since the end of August. The bad news is that we have only flirted with $5, and that is not enough to give much profit to American farmers. In fact, the headline that stuck with me the most this week came from an online article from Farm Progress. It detailed eight ways to keep your farm (financially) afloat in 2025. So, corn has rallied nearly a buck, and we are talking about how to survive!
Fundamentals
There are reasons to respect this report, even if historically it is a non-event. There are some fundamental things going on in the markets. Pre-report estimates have the corn stocks being reduced by 14 million bushels in the U.S.
The South American weather that has reduced corn and soybean yield estimates has improved with recent rains. Traders still expect Brazilian corn production to be down 26 MMT to 126.74 MMT. The Argentine crop is expected to be down 9.5 MMT to 49.5 MMT. The Russian wheat crop (Russia is normally the world’s largest exporter) are expected to be down a huge one-third this year. All of these expectations are “in the market,” that is, already reflected in current futures prices, to some extent. Changes are what we are looking for.
The March soybeans are best reviewed by looking at the chart for some technical analysis. We can connect three major highs with one line, giving us a long term downtrend. This is defined by a high July 23 at $11.08 1/4 and then a high Sept. 30 at $11.00 1/4, and finally, a double high on Jan. 23 at $10.76 1/4 and Feb. 5 at $10.79 3/4. That double top is important because it may indicate that the bull move of the last month has run out of steam. It is also important because all the excitement of the last month still leaves us with a price that is 21 cents short of the September and harvest high.
Within that long downtrend is another shorter and steeper downtrend. Connect the three highs on Sept. 30 at $11.00 1/4, Nov. 8 at $10.55 and Jan. 2 at $10.15 3/4. That shorter term downtrend was broken by the Jan. 10 WASDE report. That day, we gained 26 1/4 cents after a revision of the soybean yield and production for crop year 2023-2024.
That gain set up a move of 94 cents higher from the low the day before the January report to the second high at $10.79 3/4 on Feb. 5. I am not really good at technical analysis, but this sure looks like we are being prepared to go lower if the report Tuesday has no surprises.
Waiting for spring
As usual, I am in the dark right now. I am writing this at 5:30 a.m. on the morning of Feb. 11, report day. I know nothing until noon EST. By the time you read this, the report will be out and digested. Will something in that report spark corn to finally move above $5 after flirting with it for most of the last month? Will something spark soybeans to make one more leg upward?
The market is really using this February report to bridge us to the important report that leads us into spring. That is the March 31 Planting Intentions Report. Normally by this time, farmers have used December or January sales to finance seed purchases. The planting mix of corn and soybeans is normally already locked in. I would think that final decisions are not made this year by those who are inclined to react to the market more than follow the dictates of crop rotation on planting decisions. The February WASDE may have an impact on that.
Right now, the bias is to plant maximum corn because of the current corn/soybean price ratio. If we see corn higher and soybeans lower after this report, we likely will see maximum corn acres planted. If we see soybeans higher, all bets are off.
In reality, the corn/soybean planting mix is a lot like the weather. Everybody talks about it, but nobody is doing anything about it. You can bet that probably, most farmers will plant according to crop rotation, work load and storage considerations. Then they will hope soybeans go higher!
