Afternoon report: Volumes may be thin, but grain markets produced gains on broad financial strength and Ukrainian worries
Happy early Thanksgiving! There will be no AM or PM newsletter tomorrow as markets are closed in observance of the holiday. But we will be back on Friday when markets reopen with all the latest insights and analysis.
I hope you and yours have a happy and healthy Thanksgiving! And for those of you running a Turkey Trot race tomorrow – good luck and treat yoself to an extra slice of pie at dinner!
Note about this week
Remember – a lot of traders are out of the office for the holiday this week, so that can leave a lot of the price variation throughout the week dependent upon algo trading and low volumes.
Which is just a fancy way of saying that while Mom and Dad are away, the quants will play! There might be some price activity this week that seems erratic and not easily explained. Don’t expect the markets to make or break your 2022 (or 2023) this week but remember that trading will revert back to normal(ish) conditions when everyone returns to the office next week.
Corn
Corn prices rose $0.01-$0.07/bushel today on a smaller Ukrainian grain harvest. Volumes were thin today and the financial markets closed on a high note, both of which helped support the day’s gains.
Markets are prepping for this week’s Export Sales report from USDA, which will be released on Friday morning due to the Thanksgiving holiday tomorrow. Weekly corn export sales are forecast between 66.9 million – 98.4 million bushels for 2022/23 sales and 24.6 million – 61.5 million bushels for 2023/24 sales following several substantial corn export purchase orders booked by Mexico over the November 11-17 reporting week.
Monday’s Export Inspections report from USDA saw an 8% weekly decline in corn volumes inspected for export – a total of 19.5 million bushels, which could limit some of the optimism coming from the sales side of USDA’s weekly report.
Cash offerings for corn were mixed today as markets prepared for the Thanksgiving holiday. Basis rose at an Ohio elevator and Indiana ethanol plant though it eased slightly at an Eastern Iowa processor. Corn cash trends have not changed significantly during the week. If anything, basis has slightly strengthened at Midwestern ethanol plants this week as new farmer sales remain slow.
That prospect was evidenced in today’s weekly Petroleum Inventory Status update from the U.S. Energy Information Administration. The weekly report found that for the week ending November 17, U.S. daily ethanol output averaged 1.041 million barrels of production per day, which marked a 3% increase from the previous week.
It was the second-highest average output recorded since early August 2022, which helps justify the growing cash premiums offered at U.S. ethanol plants across the Midwest over the past couple weeks.
Processors, buyers in the Western Corn Belt, and ethanol plants continue to derive premiums from their cash sales while Eastern Corn Belt elevators and export terminals are still offering basis at a discount to nearby futures contracts.
Soybeans
Soybean prices rose $0.01-$0.07/bushel in today’s trading session due in large part to strength in the global edible oils market. But the U.S. market also received a boost from an export sale to China announced by USDA this morning. The day’s gains are likely limited amid ongoing concern about China’s demand prospects amid a recent uptick in COVID-19 cases and restrictions.
Weekly soybean export sales estimates expected on Friday morning range between 18.4 million – 62.5 million bushels for 2022/23 sales and up to 5.5 million bushels for 2023/24 sales based on pre-report analyst estimates. Export volumes are expected to edge higher from last week, if Monday’s Export Inspections report is any indicator.
The Monday report from USDA found 19% more soybeans had been inspected for export than the previous week. Through the week ending November 17, 85.6 million bushels of soybeans were inspected for export at U.S. terminals.
USDA released a daily flash export sale announcement this morning, which helped lift soybean prices out of the red following the early morning trading session. China reportedly ordered 4.0 million bushels of U.S. soybeans to be delivered during the 2022/23 marketing year.
New farmer sales of soybeans on the cash market today were slow despite the futures price uptick. Cash offerings for soybeans were largely unchanged as a result.
While soymeal futures prices edged slightly higher today on China’s purchase, cash soymeal prices were largely unchanged across U.S. rail and truck terminals today. Markets have been quiet during this holiday week as many buyers had already booked supplies last week in advance of Thanksgiving. Sellers expect Friday will also be a quiet day in the soymeal cash markets.
Argentina has sold 72.6% of its 2021/22 soybean crop, according to Argentina’s agriculture ministry. That number continues to trail year ago paces of 75.6% despite a surge in farmer sales following Argentina’s currency devaluation in September.
The Argentine government is considering another currency devaluation in December to spur another round of soybean sales from farmers. Soybeans and soymeal exports are a key revenue source for the Argentine government, which has been struggling with far higher inflation values for far longer than the rest of the global economy. The entire Argentine economy could face trouble next year if soybean crops fall short again this year.
Soybean prices continue to hold at a price floor as markets remain uncertain about the fate of the Brazilian soybean crop during a third consecutive La Ni?a year. And while Brazil has received beneficial rains in recent weeks, its southern neighbor, Argentina, has not, research firm Hightower noted in a memo, as reported by Reuters.
Argentina’s crops are facing severe yield shortfalls as dry weather persists. “The situation in Argentina remains catastrophic as a result of the continuing drought. After having impacted wheat production, corn and soybean sowings are well behind a normal year,” consultancy Agritel told Reuters this morning.
Brazil is the world’s largest soybean exporter, while Argentina ranks as the third largest and the largest soymeal exporter. Brazil and Argentina are the world’s second and third, respectively, largest corn exporters.
More Brazil
If you follow my E-corn-omics columns, you’ll know that I went down a rabbit hole after Brazil’s runoff election earlier this month.
A Wall Street Journal article published today dives deeper into the nature of Brazilian politics and explains how its wealthy agriculture sector is fighting to keep legislative power, even though leftist former president Lula da Silva was ultimately reelected to Brazil’s presidency.
Throw your younger family members for a loop tomorrow at the Thanksgiving meal by bringing up Brazilian politics instead of American politics!
I’m kidding – remember your manners and do NOT talk about politics at family get togethers. Ever.
And treat yoself to an extra piece of pie if you successfully refrain from doing so tomorrow! You deserve it, you troublemaker!
Wheat
Wheat prices rose $0.02-$0.12/bushel primarily due to worries about Ukraine’s grain harvest. A senior Ukrainian government official warned that this year’s grain harvest could drop to 51 million metric tonnes (MMT). Last year, the country harvested 86MMT of grain – a significant portion of which remains in the country as the Russian war stalled Ukrainian ag exports for five months.
Ukrainian farmers have already harvested 76% of 2022 crops, though corn remains unharvested and the market incentives to finish harvest – as well as plant winter crops for the 2023 season – are drying up as the Russian invasion continues.
Wheat export sales expected for the November 11-17 reporting week in Friday morning’s weekly report from USDA are forecast to range between 9.2 million – 22.0 million bushels for 2022/23 sales and up to 1.8 million bushels for 2023/24 sales.
Export inspection volumes for wheat from Monday’s USDA report came in nearly two-thirds higher than the previous week at 10.3 million bushels, which is a positive sign for the U.S. wheat export market headed into Friday’s trading session.
Cash offerings for soft red winter wheat in the Midwest was unchanged today and continues to be offered at a $0.30/bushel (ish) discount to nearby Chicago futures contracts. Basis for hard red winter wheat in the Southern Plains largely held steady today, though a Goodland, Kansas facility weakened its cash offering slightly. Farmer sales were slow ahead of the holiday.
International buyers came to the international market with their checkbooks today. Thailand snapped up 2.2 million bushels of feed wheat for shipment between January and March 2023. Traders expected the deal was priced around $9.39/bushel C&F and that the shipment would originate in Australia. Algeria also started buying durum wheat for delivery over the next two months, though further details were not available at press time.
European wheat prices eased after a flurry of sales over the past week. Some spillover weakness was also present after Euronext rapeseed futures fell 3.2% following lower energy prices. But front month (likely a Dec22 contract) prices are likely to hold firm as market chatter continues of a large Chinese purchase of French wheat.
Rumors continue to swirl that European wheat is being imported into a Florida mill, though the belief that it will be sourced by a German or Polish seller is wavering.
“Currently the consensus seems to be that Baltic wheat is believed to have been sold to one U.S. flour mill only, suspected to be in Florida,” a German trader told Reuters. “The attention will now be on whether this low price/cheap shipping window will be used by other U.S. mills or feed makers.”
U.S. wheat is currently very expensive on the world market and European supplies are being offered at a discount to domestic prices. This particular deal is likely to involve European wheat supplies harvested next summer (2023), so it could shake up new crop pricing substantially in the coming weeks.
“Currently U.S. wheat is looking too expensive,” another German trader said. “This price window had been available for European wheat for some time. There is also market talk about more recent sales of Russian wheat to Mexico, although details are unavailable.”
Inputs
In an overnight televised meeting with Russian fertilizer industry leaders (including the oligarch Dmitry Mazepin who formerly controlled Uralchem-Uralkali – and a stake in Haas’s F1 team), Russian President Vladimir Putin reassured the leaders that Russian fertilizer supplies would soon begin flowing freely on the international market again.
“The main problem was probably the fact that quite a lot of fertilizer was frozen in European ports,” Mazepin said, dancing around accountability regarding the international banking sanctions that had been enforced on his business holdings following Russia’s unprovoked military invasion into Ukraine.
Russia has been losing ground in its Ukrainian campaign after illegally (by international laws, mind you) annexing four Ukrainian territories. And Putin is suddenly taking a more agreeable tone with international organizations regarding the war, following Moscow’s agreement to extend the Black Sea Grains Initiative.
“We will also work with the U.N., with our colleagues from the organization. We will see what comes of it,” Putin said following Mazepin’s disgruntled comments that the recent Black Sea Grains Initiative extension had not yet benefited Mazepin’s Uralchem-Uralkali fertilizer operation.
It will be interest to see going forward if Putin continues to take such a diplomatic tone on matters of war and commerce regarding Ukraine, especially as his inner circle clearly remains unhappy with the ongoing effects of international banking sanctions. The West is likely going to be unrelenting in their willingness to repeal the sanctions while Russian forces remain in Ukraine.
And as pressure at home mounts, it finally appears that Putin may have something to lose in this war after all.
Weather
Happy Thanksgiving week! Mostly clear skies are forecasted for the Heartland today, according to NOAA’s short-term forecasts. Thanksgiving Day is likely to see snow edge into the Northern and Central Plains while a much-needed rain system will develop over the Southern Plains. Snow accumulation will be very light over the next 24 hours, but areas of the Southern Plains could see up to an inch of rain during that time.
NOAA’s 6-10-day forecasts are now trending warmer and wetter for the end of the month. Higher than average temperature prospects are at play for the Southern and Central Plains and Eastern Corn Belt through the end of November, but cooler chances are prevailing for the West and Northern Plains in that time period. Chances for rain will be above average for the North and Central Plains and entire Midwest during that time while the Southern Plains remain dry.
Those trends will stay consistent in the 8-10-day outlook with only slight shifts expected. Temperature forecasts will remain warmer than usual for the Southeastern half of the country, but cooler temperatures will start to shift into the Upper Midwest during that time. The above average chances for rain will recede slightly from the Central Plains during that period and leave more dryness in its wake, but the higher chances for moisture will continue to linger over the Northern Plains, Great Lakes Region, and Eastern Corn Belt.
Financials
Deere & Co. released positive fiscal year earnings results this morning. The equipment behemoth’s stock share price soared to a new record high after net profits were projected 75% higher than last year thanks to strong performance across the entire company.
Deere also expects to top net income projections in the coming year as farmer profits remain strong. Deere has already filled orders all the way through its third quarter in 2023 (April-June 2023) and is optimistic that ongoing supply chain bottlenecks are beginning to clear.
“They had broad-based strength across all their divisions,” Matt Arnold, an equity analyst at Edward Jones, told Reuters this morning. “The demand environment is really healthy, and (Deere) is translating that into a big upturn in earnings.”
The S&P 500 rose 0.67% to $4,060.21 amid thin holiday trading volumes. Federal Reserve meeting minutes show that Fed officials are warming to the idea of slower rate hikes in the coming months. Home-sales data released this morning for October 2022 was better than expected and cryptocurrencies even reported earnings today following its recent market crash.
But that doesn’t mean you should talk about crypto at Thanksgiving. No one wants to hear about it. Unless you’re making fun of it, of course. Then go ahead. And get yourself another piece of pie as a reward!!!
What else I’m reading this morning on our website, FarmFutures.com:
Mike Downey asks – what is the practical value of your farmland?
Farm Futures executive editor Mike Wilson reports that farmers looking to invest profits, lower tax bills and boost productivity may need to get in line as drainage contractors try to meet hot demand.
Advance Trading’s Brady Huck tells farmers the four necessary steps to take to become a better grain marketer.
Bryce Knorr has calculated out crop budgets for the 2023 growing season and all signs point to profits as 2022 comes to a close.
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.
Closing Ag Commodity Prices – 11/23/2022
Contract
Units
High
Low
Last
Net Change
% Change
DEC ’22 CORN
$ / BSH
6.6375
6.5575
6.6275
0.06
0.91%
MAR ’23 CORN
$ / BSH
6.6675
6.5825
6.6575
0.065
0.99%
MAY ’23 CORN
$ / BSH
6.6575
6.5775
6.6475
0.06
0.91%
JUL ’23 CORN
$ / BSH
6.6025
6.5275
6.5775
0.04
0.61%
SEP ’23 CORN
$ / BSH
6.2075
6.155
6.1925
0.0325
0.53%
DEC ’23 CORN
$ / BSH
6.09
6.04
6.0575
0.005
0.08%
AR2 ’24 CORN
$ / BSH
6.155
6.11
6.1275
0.0075
0.12%
AY2 ’24 CORN
$ / BSH
6.165
6.135
6.16
0.01
0.16%
JUL ’24 CORN
$ / BSH
6.165
6.125
6.145
0.0075
0.12%
JAN ’23 SOYBEANS
$ / BSH
14.41
14.2225
14.37
0.0725
0.51%
MAR ’23 SOYBEANS
$ / BSH
14.465
14.29
14.42
0.055
0.38%
MAY ’23 SOYBEANS
$ / BSH
14.5275
14.365
14.4925
0.0575
0.40%
JUL ’23 SOYBEANS
$ / BSH
14.55
14.395
14.5175
0.0575
0.40%
AUG ’23 SOYBEANS
$ / BSH
14.3775
14.2425
14.3475
0.04
0.28%
SEP ’23 SOYBEANS
$ / BSH
13.9975
13.8775
13.97
0.0225
0.16%
NOV ’23 SOYBEANS
$ / BSH
13.805
13.7
13.78
0.0175
0.13%
AN2 ’24 SOYBEANS
$ / BSH
13.815
13.72
13.7875
0.0075
0.05%
AR2 ’24 SOYBEANS
$ / BSH
13.72
13.63
13.6625
-0.02
-0.15%
AY2 ’24 SOYBEANS
$ / BSH
13.6225
13.6
13.615
-0.0225
-0.20%
UL2 ’24 SOYBEANS
$ / BSH
13.64
13.5775
13.6125
-0.0275
-0.26%
DEC ’22 SOYBEAN OIL
$ / LB
75.01
73.24
74.89
1.05
1.42%
JAN ’23 SOYBEAN OIL
$ / LB
72.3
70.76
72.21
0.77
1.08%
DEC ’22 SOY MEAL
$ / TON
411.9
408
409.7
1.1
0.27%
JAN ’23 SOY MEAL
$ / TON
409
404.6
407.6
2.6
0.64%
MAR ’23 SOY MEAL
$ / TON
405.2
401.7
403.8
2.2
0.55%
MAY ’23 SOY MEAL
$ / TON
401.6
398.4
400.4
2
0.50%
JUL ’23 SOY MEAL
$ / TON
400.3
397.4
399.2
1.9
0.48%
DEC ’22 Chicago SRW
$ / BSH
7.975
7.8125
7.925
0.01
0.13%
MAR ’23 Chicago SRW
$ / BSH
8.17
8.0025
8.135
0.03
0.37%
MAY ’23 Chicago SRW
$ / BSH
8.26
8.1
8.225
0.025
0.30%
JUL ’23 Chicago SRW
$ / BSH
8.275
8.13
8.25
0.025
0.30%
SEP ’23 Chicago SRW
$ / BSH
8.3275
8.19
8.3075
0.0275
0.33%
DEC ’23 Chicago SRW
$ / BSH
8.41
8.2825
8.4
0.035
0.42%
AR2 ’24 Chicago SRW
$ / BSH
8.4475
8.3375
8.435
0.035
0.39%
DEC ’22 Kansas City HRW
$ / BSH
9.34
9.11
9.315
0.06
0.65%
MAR ’23 Kansas City HRW
$ / BSH
9.2325
9.005
9.2075
0.0875
0.96%
MAY ’23 Kansas City HRW
$ / BSH
9.16
8.9475
9.1325
0.075
0.83%
JUL ’23 Kansas City HRW
$ / BSH
9.0625
8.865
9.025
0.0575
0.64%
SEP ’23 Kansas City HRW
$ / BSH
9.035
8.86
9.0025
0.045
0.50%
DEC ’23 Kansas City HRW
$ / BSH
9.05
8.895
9.03
0.045
0.50%
AR2 ’24 Kansas City HRW
$ / BSH
8.93
8.91
8.93
-0.0025
-0.03%
DEC ’22 MLPS Spring Wheat
$ / BSH
9.6125
9.445
9.5825
0.1225
1.29%
MAR ’23 MLPS Spring Wheat
$ / BSH
9.5725
9.445
9.5225
0.02
0.21%
MAY ’23 MLPS Spring Wheat
$ / BSH
9.5975
9.4725
9.52
-0.015
-0.16%
JUL ’23 MLPS Spring Wheat
$ / BSH
9.565
9.47
9.495
-0.0225
-0.24%
SEP ’23 MLPS Spring Wheat
$ / BSH
9.33
9.235
9.265
-0.04
-0.43%
DEC ’23 MLPS Spring Wheat
$ / BSH
9.33
9.3
9.3
-0.03
-0.32%
AR2 ’24 MLPS Spring Wheat
$ / BSH
0
#N/A
9.2875
0
0.00%
DEC ’21 ICE Dollar Index
$
107.135
105.91
105.965
-1.15
-1.07%
JA ’21 Light Crude
$ / BBL
81.95
76.83
77.35
-3.6
-4.45%
FE ’21 Light Crude
$ / BBL
81.7
76.95
77.58
-3.15
-3.90%
DEC ’22 ULS Diesel
$ /U GAL
3.5097
3.35
3.3555
-0.1158
-3.34%
JAN ’23 ULS Diesel
$ /U GAL
3.3982
3.2631
3.2645
-0.1019
-3.03%
DEC ’22 Gasoline
$ /U GAL
2.56
2.4047
2.4647
-0.0758
-2.98%
JAN ’23 Gasoline
$ /U GAL
2.4543
2.3241
2.3833
-0.0605
-2.48%
JAN ’23 Feeder Cattle
$ / CWT
182.05
179.05
179.375
-2.3
-1.27%
MAR ’23 Feeder Cattle
$ / CWT
184.775
182.175
182.425
-2.15
-1.16%
DE ’21 Live Cattle
$ / CWT
154.725
153.225
153.325
-0.475
-0.31%
FE ’21 Live Cattle
$ / CWT
156.95
155.275
155.5
-0.925
-0.59%
DEC ’22 Live Hogs
$ / CWT
85
83.825
84.225
-0.025
-0.03%
FEB ’23 Live Hogs
$ / CWT
90.5
88.625
89.075
-1
-1.11%
NOV ’22 Class III Milk
$ / CWT
21.05
21.02
21.05
0.02
0.10%
DEC ’22 Class III Milk
$ / CWT
21.08
20.3
20.35
-0.65
-3.10%
JAN ’23 Class III Milk
$ / CWT
20.44
20.02
20.06
-0.38
-1.86%
