Morning report: ethanol output has tumbled 9% in the past three weeks. Why does it matter to farmers? (Comments are updated by 7:30 a.m. Central Time.)
Corn up 1-3 cents
Soybeans up 6-8 cents; Soymeal up $3.90/ton; Soyoil up $0.64/lb
Chicago wheat down 3-5 cents; Kansas City wheat down 1-3 cents; Minneapolis wheat mixed
*Prices as of 6:50am CDT.
Feedback from the Field updates! Are you combining yet?! Click this link to take the survey and share updates about your farm’s harvest progress. I review and upload results daily to the FFTF Google(TM) MyMap, so farmers can see others’ responses from across the country – or even across the county!
I published an updated Feedback from the Field column to our site on Tuesday. So far, few of our respondents have crops that are ready for harvest, but with warm and dry weather on the horizon, that is not likely to remain the trend. Check out the latest article for all of the top market insights!
Ethanol woes afoot?
U.S. weekly ethanol production has seen seasonal scale backs in output across the summer months over the past two years. But as the 2022/23 corn marketing year kicks off, output is suddenly dipping back to pandemic-era lows during the September reporting period.
From the beginning of the 2022/23 marketing year (Sept. 1) through the week ending September 16, average daily ethanol output has dropped a staggering 9% to 37.8 million gallons/day (901,000 barrels/day).
For context, yesterday’s figure from the U.S. Energy Information Administration (EIA) was the lowest weekly output volume for ethanol since the February 2021 cold snap depleted natural gas supplies across the country, forcing a large share of the country’s ethanol capacity offline.
Ethanol production has been the crown jewel for corn bulls during the past year, as post-pandemic travel blossomed. But surging gas prices – amid other inflationary pressures – influenced largely by Russia’s invasion of Ukraine are becoming a pain point for consumers, who are not seeing wage increases to affordably cover higher energy (and all other) costs within household budgets.
Ethanol plants have offered premium corn cash bids to farmers to supply production schedules over the past year and a half. Plus, extended blending mandates offered by the government this summer to offset higher gas prices also encouraged production.
Cash bids at ethanol plants across the Heartland continue to trade at a premium to futures prices, but recent bid cuts suggests that this year’s harvest prices may not be quite as lucrative for farmers as last year’s.
Ethanol is expected to surpass livestock and residual usage in 2022/23 as the largest consumer of corn for the first time since 2017. As the U.S. cattle herd continues to shrink amid drought in the Plains, high feed costs, and strong domestic and export beef demand, the cattle market continues to hover in a contraction phase that will reduce the volume of corn the sector consumes over the next year.
Ethanol started 2022 as a corn bull. But as consumer gas demand fades in the wake of high prices, ethanol producers are quickly adjusting output schedules lower. That is a very bearish omen for corn usage rates on top of lackluster livestock demand expected this year.
Corn prices continue to hover below the $7/bushel benchmark. But EIA’s latest data suggests that we could be moving towards a less lucrative pricing environment for corn as signs of demand destruction in the corn market begin to appear more prominently in market dynamics.
Harvesting is in its earliest phases and will typically add bearish price pressure to markets as supplies increase. Even with tight domestic and global supplies, sluggish demand could take a significant bite out of prices. That means if you can find a profitable harvest price this fall, it would be a good idea not to wait for higher prices.
Corn
Corn prices edged $0.01-$0.03/bushel higher this morning on lingering worries about Black Sea trade relations and rainy forecasts for the Midwest over the next couple days that will likely slow harvest activity.
Plus, global production concerns – particularly from South America – are keeping supply worries alive and well in the corn market, which is a bullish prospect for prices.
But even as the Dec22, Mar23, May23, and Jul23 contracts lingered about a dime below the $7/bushel benchmark, gains were limited by global recession fears following yesterday’s interest rate hikes from the Federal Reserve.
“It’s like with Putin the market’s up and with the Fed it’s down,” a European trader told Reuters.
“The Fed is effectively acknowledging that a recession is coming, but inflation will not fall quickly and there will be a lot of pain,” ING economists said in a note as reported by Reuters.
Argentina’s Rosario Grains Exchange reduced its production estimates for the country’s 2022/23 corn and wheat crops, citing ongoing drought as a significant threat for yields in the coming months. Argentina’s Pampas region, where the bulk of its cereal grains are grown, has received little to no rain from July to September, increasing risks that newly planted crops will not have adequate moisture to germinate and grow.
The Grains Exchange expects new crop corn production to fall to 2.2 billion bushels, down 79 million bushels from its last forecast. Wheat output was revised 44 million bushels lower to 606 million bushels. USDA’s current forecasts for Argentine corn and wheat production stand at 2.17 billion bushels and 698 million bushels.
Argentina is the world’s third largest corn exporter, trailing the U.S. and Brazil. It will likely be the world’s seventh largest wheat exporter this year.
Soybeans
Soybean prices clawed out a $0.06-$0.08/bushel gain this morning as showers across the Midwest threaten to disrupt harvest progress. Gains were capped by macroeconomic pressures from yesterday’s interest rate hike and strong farmer sales in Argentina in the middle of peak U.S. soybean export season.
Wheat
Wheat prices bore the brunt of fallout from yesterday’s Fed decision to increase interest rates by 0.75%. The $0.01-$0.03/bushel losses in the wheat market this morning reflected a stronger dollar and growing economic uncertainty in global financial and commodity markets.
Some profit-taking was also at play after the December 2022 Chicago SRW contract notched its highest price point since early July following Putin’s decision to mobilize reserve military forces to fight in Ukraine.
Weather
Temperatures are going to continue trending cooler across the Corn Belt today, according to NOAA’s short-range forecasts. The Northern and Central Plains are likely to see showers continue in the region today, though precipitation totals are likely to be smaller than yesterday’s showers in the region.
The showers are expected to drift east into the Upper Midwest through tomorrow and Saturday, which could disrupt any early harvest activity in the region. But clear skies and warm temps should return to most of the Corn Belt late in the weekend, which means than any rain delays in the next couple days are likely to be short-lived.
Luckily, silage harvest finished at the Holland farm in Northwestern Illinois last weekend, so we escape the growing season (mostly) unscathed this year!!!
Hurricane Fiona is barreling up the U.S.’s Southern Atlantic coast and could disrupt weather patterns out east through this weekend. While the storm – now classified as a Class 3- is not likely to make landfall in that region, it is expected to run parallel up the East Coast and is likely to have the most significant weather impact on New England by tomorrow morning.
The 6-10-day NOAA outlook continues to forecast high heat and excessive dryness for most of the Heartland through the end of September. The 8-14-day NOAA outlook is also trending warmer, much like the 6-10-day forecast. But the end of September is likely to be drier across the country. That will aid harvesting progress, which is likely to hit its peak activity by the end of September.
Financials
As expected, the Federal Reserve raised interest rates 0.75% yesterday. The benchmark Federal funds rate now hovers between 3% and 3.25%. Federal Reserve Chairman Jerome Powell continued to reiterate a hawkish stance on inflation in comments following the conclusion of the September 2022 Federal Open Market Committee (FOMC) meeting.
“We have just moved into a very low threshold of what is considered restrictive policy,” Powell cautioned.
Powell’s increasingly simple and direct language on aggressive rate hikes to stop inflation through the summer months has triggered a selloff of equities on Wall Street and fueled a mass investor migration to safe haven assets like the dollar and U.S. Treasury bonds.
Powell has abandoned any hopes for a “soft landing” from inflationary pressures and is vocally bracing for a potential recession as aggressive rate hikes continue. For more insights on this, I recommend this article by KPMG’s Chief Economist Diane Swonk.
You have likely seen Swonk featured on market commentaries across several news outlets recently. She is one of the economy’s forefront thinkers on labor economics/monetary policy and her insights on the Federal Reserve’s policies have been among the sharpest I’ve read over the past couple years.
Markets continued to drift lower on the ongoing economic jitters currently at play, with the S&P 500 falling 0.18% at last glance to $3,799.50 on the overarching sentiments.
What else I’m reading this morning on our website, FarmFutures.com:
Harvest is ramping up across the Heartland! Our upcoming Farm Progress 365 session has the latest insights to help farmers maximize yields and time sales effectively – join online from September 27 – September 29!
In Farm Futures’ September 2022 issue, Ben Potter offers insights for growers to maintain profitability in an uncertain 2023 following profitable 2021 and 2022 growing seasons.
AgMarket.Net’s Jim McCormick weighs bullish farm-level corn signals against bearish global price outlooks and explains what it means for farmers.
Jacqui Fatka previews potential tweaks to conservation programs in the upcoming Farm Bill.
Advance Trading’s Brady Huck outlines the four factors moving grain markets right now. Spoiler alert – none of them are occurring in the U.S.!
Morning Ag Commodity Prices – 9/22/2022
Contract
Units
High
Low
Last
Net Change
% Change
DEC ’22 CORN
$ / BSH
6.91
6.815
6.88
0.025
0.36%
MAR ’23 CORN
$ / BSH
6.9575
6.865
6.9225
0.02
0.29%
MAY ’23 CORN
$ / BSH
6.9575
6.8725
6.9325
0.025
0.36%
JUL ’23 CORN
$ / BSH
6.895
6.8175
6.87
0.025
0.37%
SEP ’23 CORN
$ / BSH
6.43
6.39
6.42
0.015
0.23%
DEC ’23 CORN
$ / BSH
6.3
6.2425
6.29
0.0175
0.28%
AR2 ’24 CORN
$ / BSH
6.355
6.3175
6.355
0.0125
0.20%
AY2 ’24 CORN
$ / BSH
6.3725
6.33
6.3725
0.005
0.08%
JUL ’24 CORN
$ / BSH
6.3375
6.32
6.3375
-0.0025
-0.04%
NOV ’22 SOYBEANS
$ / BSH
14.76
14.4875
14.675
0.0625
0.43%
JAN ’23 SOYBEANS
$ / BSH
14.81
14.5425
14.725
0.055
0.37%
MAR ’23 SOYBEANS
$ / BSH
14.8275
14.56
14.735
0.05
0.34%
MAY ’23 SOYBEANS
$ / BSH
14.84
14.5875
14.76
0.0525
0.36%
JUL ’23 SOYBEANS
$ / BSH
14.825
14.575
14.74
0.0425
0.29%
AUG ’23 SOYBEANS
$ / BSH
14.5925
14.4025
14.485
0.01
0.07%
SEP ’23 SOYBEANS
$ / BSH
14.155
14.0775
14.1025
0.06
0.43%
NOV ’23 SOYBEANS
$ / BSH
13.945
13.725
13.8275
-0.015
-0.11%
AN2 ’24 SOYBEANS
$ / BSH
11.5
#N/A
13.8675
0
0.00%
AR2 ’24 SOYBEANS
$ / BSH
13.875
#N/A
13.775
0
0.00%
AY2 ’24 SOYBEANS
$ / BSH
0
#N/A
13.73
0
0.00%
OCT ’22 SOYBEAN OIL
$ / LB
68.5
67.13
68.18
0.35
0.52%
DEC ’22 SOYBEAN OIL
$ / LB
65.75
64.33
65.43
0.43
0.66%
OCT ’22 SOY MEAL
$ / TON
463.7
452.8
458.6
3.9
0.86%
DEC ’22 SOY MEAL
$ / TON
443.8
435.4
440.8
2
0.46%
JAN ’23 SOY MEAL
$ / TON
435.9
428.7
433.3
1.9
0.44%
MAR ’23 SOY MEAL
$ / TON
426.4
419.6
423.7
1.7
0.40%
MAY ’23 SOY MEAL
$ / TON
421.2
414.9
418.5
1.7
0.41%
DEC ’22 Chicago SRW
$ / BSH
9.13
8.91
9.01
-0.0275
-0.30%
MAR ’23 Chicago SRW
$ / BSH
9.24
9.025
9.125
-0.0275
-0.30%
MAY ’23 Chicago SRW
$ / BSH
9.2875
9.1
9.18
-0.0375
-0.41%
JUL ’23 Chicago SRW
$ / BSH
9.155
8.98
9.0375
-0.065
-0.71%
SEP ’23 Chicago SRW
$ / BSH
9.105
8.9675
8.9875
-0.085
-0.94%
DEC ’23 Chicago SRW
$ / BSH
9.105
8.9625
8.9975
-0.0925
-1.02%
AR2 ’24 Chicago SRW
$ / BSH
9.05
8.9975
8.9975
-0.0425
-0.47%
DEC ’22 Kansas City HRW
$ / BSH
9.75
9.5175
9.6625
-0.0075
-0.08%
MAR ’23 Kansas City HRW
$ / BSH
9.7175
9.4675
9.625
-0.01
-0.10%
MAY ’23 Kansas City HRW
$ / BSH
9.675
9.4525
9.6075
-0.0075
-0.08%
JUL ’23 Kansas City HRW
$ / BSH
9.54
9.34
9.465
-0.0175
-0.18%
SEP ’23 Kansas City HRW
$ / BSH
9.4125
9.4125
9.4125
-0.005
-0.05%
DEC ’23 Kansas City HRW
$ / BSH
9.31
9.31
9.31
-0.1225
-1.30%
AR2 ’24 Kansas City HRW
$ / BSH
0
#N/A
9.3925
0
0.00%
DEC ’22 MLPS Spring Wheat
$ / BSH
9.73
9.5225
9.6225
-0.02
-0.21%
MAR ’23 MLPS Spring Wheat
$ / BSH
9.7625
9.585
9.7175
0.0325
0.34%
MAY ’23 MLPS Spring Wheat
$ / BSH
9.76
9.6025
9.76
0.0425
0.44%
JUL ’23 MLPS Spring Wheat
$ / BSH
9.7225
#N/A
9.675
0
0.00%
SEP ’23 MLPS Spring Wheat
$ / BSH
9.4
9.345
9.4
0.04
0.43%
DEC ’23 MLPS Spring Wheat
$ / BSH
9.34
9.33
9.34
0.06
0.65%
AR2 ’24 MLPS Spring Wheat
$ / BSH
0
#N/A
0
0
0.00%
DEC ’21 ICE Dollar Index
$
111.58
110.22
110.68
0.334
0.30%
NO ’21 Light Crude
$ / BBL
84.49
82.4
84.08
1.14
1.37%
DE ’21 Light Crude
$ / BBL
83.95
81.89
83.58
1.15
1.40%
OCT ’22 ULS Diesel
$ /U GAL
3.4078
3.3057
3.4078
0.074
2.22%
NOV ’22 ULS Diesel
$ /U GAL
3.33
3.2302
3.3255
0.064
1.96%
OCT ’22 Gasoline
$ /U GAL
2.5363
2.4609
2.5362
0.0497
2.00%
NOV ’22 Gasoline
$ /U GAL
2.4578
2.3863
2.4566
0.0442
1.83%
SEP ’22 Feeder Cattle
$ / CWT
0
#N/A
178.175
0
0.00%
OCT ’22 Feeder Cattle
$ / CWT
0
#N/A
179.225
0
0.00%
CT2 ’21 Live Cattle
$ / CWT
0
#N/A
145.875
0
0.00%
DE ’21 Live Cattle
$ / CWT
0
#N/A
150.75
0
0.00%
OCT ’22 Live Hogs
$ / CWT
0
#N/A
94.425
0
0.00%
DEC ’22 Live Hogs
$ / CWT
0
#N/A
86.45
0
0.00%
SEP ’22 Class III Milk
$ / CWT
19.83
19.83
19.83
-0.05
-0.25%
OCT ’22 Class III Milk
$ / CWT
21.65
21.51
21.51
-0.19
-0.88%
NOV ’22 Class III Milk
$ / CWT
21.45
21.31
21.45
0.02
0.09%
