Morning report: Chicago wheat falls hard on improving prospects for Russian exports. (Comments are updated by 7:30 a.m. Central Time.)
Chicago wheat falls hard on improving prospects for Russian exports
Corn down 3-4 cents
Soybeans down 3-4 cents, Soymeal down $0.20/ton, Soyoil up $0.18/lb
Chicago wheat down 9-10 cents, Kansas City wheat down 4-5 cents, Minneapolis wheat down 1-3 cents
*Prices as of 7:10 am CST.
The weekend in the Black Sea: We were all in a tizzy last week after Russia came to the table and accepted an agreement to keep the Black Sea grain corridor open – safely – for business following the original November 19 deadline for the Black Sea Grain Initiative.
And the drama didn’t calm down over the weekend!
As market risk aversion to Russian grain and fertilizer supplies lessened following the deal extension announcement, Russian grain prices fell as its record-setting 2022 crop became more accessible to international buyers. The Russian government has helped prop up the domestic grain market following the bumper harvest, stockpiling 1.74 million metric tonnes (MMT) of grain for its state reserves until next summer’s harvest.
However, the lower prices have likely worked against any hopes for a second consecutive bumper crop for Russian growers next summer. Winter grains acreage is reported to be 4% lower than a year ago at 43.5 million acres, according to Black Sea ag consultancy SovEcon. Weather patterns have been largely conducive to favorable winter wheat crop development so far.
Meanwhile on the fertilizer side, Russia has become top global fertilizer buyer India’s largest supplier during the first half of the 2022/23 fiscal year. Steep discounts on Russian fertilizers due to increased transaction costs from Western banking sanctions allowed India to buy Russia’s products at a very affordable rate.
India has imported 2.15MMT of Russian fertilizer since April 1, a staggering 371% higher than the same time a year ago. India only imported 1.26MMT of Russian fertilizer during the entire 2021/22 fiscal year.
“India was struggling to secure fertilizers at reasonable prices after conflict escalated between Russia and Ukraine. Russian supplies were timely and at reasonable prices. It helped us to avoid possible scarcity,” an Indian government official told Reuters.
“It was a win-win situation for India and Russia,” a senior fertilizer industry official in Indian told Reuters. “India sometimes got discounts of more than $70 per tonne over global prices. Russia got a big buyer who can replace European buyers.”
If you’ll recall back to my early coverage of the Black Sea conflict, I had hypothesized that India would come out as a primary beneficiary of the turmoil. And to give it credit, I can’t help but to have a bit of respect for anyone who is willing to take on that much risk for the sake of a good bargain.
And over in Ukraine, the hits just keep coming – and not the good kind. Analysts at Ukrainian grain consultancy APK-Inform expect that a large volume of Ukraine’s corn crop will be left standing in the fields over the winter as farmers continue to battle fuel shortages and ongoing war activities that have slowed harvest progress.
Ukraine’s government expects that only half (50%) of the country’s corn crop had been harvested as of November 17. Plus, low domestic prices due to export limitations caused by the war are not providing enough of a price incentive to push farmers to harvest faster.
Yields have already taken a hit due to constrained fertilizer supplies and untimely planting due to the war as well as dry weather in Ukraine this summer. Any crops harvested later this winter or in the early spring will likely also face quality downgrades. Ukraine is hoping to harvest 1.083 billion – 1.098 billion bushels this year, down from last year’s record crop of 1.654 billion bushels.
Corn
Corn prices fell $0.03-$0.04/bushel overnight as commodity markets took cues from the broader financial and energy markets, which drifted lower on worries about rising COVID-19 cases in China that could reduce usage rates in the country if the government implements strict lockdowns to curb virus transmission. The dollar strengthened overnight on the concerns, which dampened U.S. grain export outlooks.
China has eased some of its stringent COVID-19 policies somewhat in recent weeks, though it remains to be seen how it will handle this latest surge. “The increase is COVID-19 cases in China is seen as a bearish demand factor for food and energy consumption,” market research firm Hightower said in a report, as reported by Reuters.
Friday’s Cattle on Feed report reflected the nation’s shrinking breeding stock following its release by USDA just after market close on Friday. Cattle on feed volumes as of November 1 came in just above pre-report trade estimates at 11.706 million head, down 2% from a year ago.
But the big surprise came from cattle placement volumes in Friday’s report. Analysts had been expecting placements to range between 2.051 million – 2.168 million head with an average guess of 2.092 million head projected ahead of the report’s release.
But Friday’s report saw year-over-year placement volumes fall a staggering 6% to 2.108 million head in October 2022. It was the smallest October placement volume ever reported since USDA began keeping records of placements in 1995.
Yet consumer demand for beef remains strong even as the breeding herd begins to show dire strains of shrinking. Sales for slaughter volumes in October 2022 were just a hair (0.6%) higher than a year ago at 1.802 million head, keeping largely in line with historical trends for the season.
In recent months, USDA has increased livestock feed and residual volumes for corn, which would suggest that forecasts indicate a growing cattle herd. And while Friday’s November 1 cattle on feed readings could make the case that herd sizes could start trending higher, the rapidly shrinking placements rate is raising alarms (at least in my head) that the past year’s losses to the nation’s breeding herd could have severe consequences for corn growers as the winter season drags on.
Soybeans
Soybean prices were also sensitive to worries about China’s latest COVID-19 surge. U.S. soybean prices fell $0.03-$0.04/bushel on the news as well as increased competition from Ukrainian edible oil exports and worries about a potential surge in Argentine soybean sales.
Drama in Argentina over the weekend – Bloomberg reported that Argentina is considering devaluing its currency in December to encourage soybean growers to boost export sales. The Argentine government tried this strategy in September, and it boosted export volumes as international buyers flocked to discounted soybean supplies.
I have yet to hear official confirmation that this policy will once again be reinstated, but U.S. farmers should be prepared for U.S. soybean prices to drop if – or when – this policy is finalized.
Wheat
Wheat prices drifted $0.03-$0.10/bushel lower this morning as market risk aversion to Russia’s bumper wheat crop eased following last week’s Black Sea Grain Initiative extension. A stronger dollar and broad financial weakness also took a heavy toll on wheat prices this morning.
Weather
Happy Thanksgiving week! Mostly clear skies are forecasted for the Heartland this week, according to NOAA’s short-term forecasts. A chance of snowfall is possible in the Northern Plains overnight, though any accumulation will likely remain light.
NOAA’s 6-10-day forecasts are now trending closer to normal in terms of temperature for the Eastern Corn Belt and Upper Midwest. But temperatures are likely warm in the Central Plains during that time. Chances for rain will be below normal across the Heartland during Thanksgiving, but the Pacific Northwest will see an above average chance of moisture during that time.
Those trends will begin to shift slightly in the 8-10-day outlook. Forecasts during that time are much warmer for the Western two-thirds of the country than in the 6-10-day forecast. The chances for excessive dryness during that time will recede slightly and center over the Central Plains, with the Eastern Corn Belt expecting an above average chance of moisture during that time.
Financials
It’s a holiday week, so expect some erratic algo trading and low volumes until everyone returns to the office next week. S&P 500 futures traded 0.46% to $3,955.75 as Asian markets drifted lower on concerns about rising COVID-19 cases in China.
Plus – Disney drama overnight!
What else I’m reading this morning on our website, FarmFutures.com:
Is another rail strike on the horizon? This Bloomberg article reports how farmers will be impacted by a railway shutdown.
The last Feedback from the Field column from the 2022 growing season, which features a yard update!
My latest E-corn-omics column features a recap of the top highlights from last Tuesday’s USDA Data Users’ Meeting.
Last week was a busy one at USDA. Here are all the agency’s announcements over the past week.
Roger Wright explains how to manage basis in order to maximize your cash price.
Indiana farmer Kyle Stackhouse writes about finishing fall tillage activities and working on drainage projects in the latest Between the Fencerows column.
Morning Ag Commodity Prices – 11/21/2022
Contract
Units
High
Low
Last
Net Change
% Change
DEC ’22 CORN
$ / BSH
6.6675
6.62
6.635
-0.0425
-0.64%
MAR ’23 CORN
$ / BSH
6.6925
6.65
6.665
-0.035
-0.52%
MAY ’23 CORN
$ / BSH
6.67
6.63
6.645
-0.035
-0.52%
JUL ’23 CORN
$ / BSH
6.6225
6.5775
6.59
-0.035
-0.53%
SEP ’23 CORN
$ / BSH
6.22
6.1875
6.1925
-0.035
-0.56%
DEC ’23 CORN
$ / BSH
6.1
6.0675
6.07
-0.035
-0.57%
AR2 ’24 CORN
$ / BSH
6.1575
6.135
6.135
-0.0375
-0.61%
AY2 ’24 CORN
$ / BSH
6.185
6.165
6.165
-0.0325
-0.52%
JUL ’24 CORN
$ / BSH
6.16
6.145
6.145
-0.0325
-0.53%
JAN ’23 SOYBEANS
$ / BSH
14.2775
14.1725
14.245
-0.0375
-0.26%
MAR ’23 SOYBEANS
$ / BSH
14.325
14.22
14.2925
-0.04
-0.28%
MAY ’23 SOYBEANS
$ / BSH
14.38
14.2825
14.36
-0.0375
-0.26%
JUL ’23 SOYBEANS
$ / BSH
14.41
14.3075
14.3825
-0.04
-0.28%
AUG ’23 SOYBEANS
$ / BSH
14.2475
14.17
14.2225
-0.0375
-0.26%
SEP ’23 SOYBEANS
$ / BSH
13.91
13.83
13.8675
-0.0475
-0.34%
NOV ’23 SOYBEANS
$ / BSH
13.7225
13.63
13.69
-0.045
-0.33%
AN2 ’24 SOYBEANS
$ / BSH
13.7
13.6575
13.7
-0.055
-0.40%
AR2 ’24 SOYBEANS
$ / BSH
13.6275
#N/A
13.6525
0
0.00%
AY2 ’24 SOYBEANS
$ / BSH
13.58
#N/A
13.6075
0
0.00%
UL2 ’24 SOYBEANS
$ / BSH
11.75
#N/A
13.6075
0
0.00%
DEC ’22 SOYBEAN OIL
$ / LB
73.18
72.3
72.95
0.21
0.29%
JAN ’23 SOYBEAN OIL
$ / LB
71.03
70.12
70.81
0.2
0.28%
DEC ’22 SOY MEAL
$ / TON
410.6
408.6
409.9
-0.5
-0.12%
JAN ’23 SOY MEAL
$ / TON
406.5
404.1
405.6
-0.5
-0.12%
MAR ’23 SOY MEAL
$ / TON
402.3
399.4
401.1
-0.6
-0.15%
MAY ’23 SOY MEAL
$ / TON
399.5
396.6
398.1
-0.8
-0.20%
JUL ’23 SOY MEAL
$ / TON
398.3
396.3
397.4
-0.8
-0.20%
DEC ’22 Chicago SRW
$ / BSH
8.0875
7.8875
7.9125
-0.12
-1.49%
MAR ’23 Chicago SRW
$ / BSH
8.27
8.08
8.1025
-0.1175
-1.43%
MAY ’23 Chicago SRW
$ / BSH
8.3625
8.1775
8.1975
-0.1175
-1.41%
JUL ’23 Chicago SRW
$ / BSH
8.3975
8.2175
8.24
-0.1125
-1.35%
SEP ’23 Chicago SRW
$ / BSH
8.445
8.275
8.3125
-0.095
-1.13%
DEC ’23 Chicago SRW
$ / BSH
8.525
8.37
8.39
-0.1025
-1.21%
AR2 ’24 Chicago SRW
$ / BSH
8.5475
8.405
8.4375
-0.09
-1.06%
DEC ’22 Kansas City HRW
$ / BSH
9.42
9.2625
9.305
-0.0375
-0.40%
MAR ’23 Kansas City HRW
$ / BSH
9.3125
9.15
9.1775
-0.06
-0.65%
MAY ’23 Kansas City HRW
$ / BSH
9.25
9.095
9.1325
-0.0525
-0.57%
JUL ’23 Kansas City HRW
$ / BSH
9.175
9.0175
9.0775
-0.035
-0.38%
SEP ’23 Kansas City HRW
$ / BSH
9.155
9.0175
9.0575
-0.0475
-0.52%
DEC ’23 Kansas City HRW
$ / BSH
9.07
9.07
9.07
-0.07
-0.77%
AR2 ’24 Kansas City HRW
$ / BSH
0
#N/A
9.0875
0
0.00%
DEC ’22 MLPS Spring Wheat
$ / BSH
9.5475
9.475
9.48
-0.035
-0.37%
MAR ’23 MLPS Spring Wheat
$ / BSH
9.62
9.55
9.5675
-0.02
-0.21%
MAY ’23 MLPS Spring Wheat
$ / BSH
9.65
9.6
9.625
-0.0075
-0.08%
JUL ’23 MLPS Spring Wheat
$ / BSH
9.6325
9.585
9.6075
-0.005
-0.05%
SEP ’23 MLPS Spring Wheat
$ / BSH
9.4075
9.39
9.39
-0.0075
-0.08%
DEC ’23 MLPS Spring Wheat
$ / BSH
9.44
9.44
9.44
-0.005
-0.05%
AR2 ’24 MLPS Spring Wheat
$ / BSH
0
#N/A
9.48
0
0.00%
DEC ’21 ICE Dollar Index
$
107.825
106.78
107.76
0.934
0.87%
DE ’21 Light Crude
$ / BBL
80.3
79.18
79.59
-0.49
-0.61%
JA ’21 Light Crude
$ / BBL
80.5
79.12
79.51
-0.6
-0.75%
DEC ’22 ULS Diesel
$ /U GAL
3.5181
3.4557
3.5149
-0.0032
-0.09%
JAN ’23 ULS Diesel
$ /U GAL
3.4026
3.3407
3.3958
-0.001
-0.03%
DEC ’22 Gasoline
$ /U GAL
2.4296
2.385
2.4088
-0.012
-0.50%
JAN ’23 Gasoline
$ /U GAL
2.3613
2.317
2.344
-0.007
-0.30%
JAN ’23 Feeder Cattle
$ / CWT
0
#N/A
180.775
0
0.00%
MAR ’23 Feeder Cattle
$ / CWT
0
#N/A
183.125
0
0.00%
DE ’21 Live Cattle
$ / CWT
0
#N/A
153.075
0
0.00%
FE ’21 Live Cattle
$ / CWT
0
#N/A
155.85
0
0.00%
DEC ’22 Live Hogs
$ / CWT
0
#N/A
84.225
0
0.00%
FEB ’23 Live Hogs
$ / CWT
0
#N/A
89.55
0
0.00%
NOV ’22 Class III Milk
$ / CWT
21.02
21.01
21.01
0
0.00%
DEC ’22 Class III Milk
$ / CWT
21.47
21.35
21.4
-0.07
-0.33%
JAN ’23 Class III Milk
$ / CWT
20.57
20.53
20.55
-0.15
-0.72%
Get our top content delivered right to your inbox. Subscribe to our morning and afternoon newsletters!
