Morning report: Federal Reserve raises interest rates. What does it mean for growers? (Comments are updated by 7:30 a.m. Central Time.)
Corn up 3-6 cents
Soybeans up 5-12 cents; Soymeal up $3.10/ton; Soyoil down $0.15/lb
Chicago wheat up 19-20 cents; Kansas City wheat up 22-25 cents; Minneapolis wheat up 17-19 cents
*Prices as of 6:55am CDT.
Feedback from the Field is live! There have been a lot of you left bored and frustrated with rain delays over the past couple days and you told me all about it! Hang in there, everyone. Clear skies are on the way.
Meanwhile, we are starting to see more responses about planting progress being made, especially from readers in the Plains. Want to see how your farm’s progress tacks up against other growers across the country?
Just click this link to take the survey and share updates about your farm’s spring progress. I review and upload results daily to the FFTF Google MyMap, so farmers can see others’ responses from across the country – or even across the county!
Corn
Corn prices edged slightly higher overnight, gaining $0.03-$0.06/bushel at last glance as planting delays continue to plague Midwestern growers. The corn complex also derived strength from the continued rally in the wheat market and higher energy prices overnight.
Soybeans
Brazilian farmers are slated to increase soybean acreage by 1.5% next year, according to projections from agribusiness consultancy Agrinvest Commodities. Brazil’s fertilizer imports through March 31 were 27.1% higher year over year despite the Russian war in Ukraine restricting global access to fertilizer supplies, so this is further verification that soybean acreage will continue to expand in Brazil next year.
The news had surprisingly little bearish impact on soybean prices this morning, which actually traded $0.05-$0.12/bushel higher at last glance, due largely to planting delays across the Midwest as cold and rainy weather continues to keep farmers out of fields.
Soyoil gave up gains on a broad round of profit-taking across the global edible oils complex. A crush plant closure in Minnesota helped keep soymeal prices in the green overnight.
Wheat
There was a bit of what can best be described as a market kerfuffle in the wheat complex yesterday as news sources traded info about India potentially restricting wheat exports next year as a heat wave decimates the probability of a sixth straight bumper crop for Indian wheat producers.
India is not historically a significant wheat exporter. But in the wake of Black Sea market closures over the past couple months, India’s excessive wheat supplies have found their way to the world market, easing broader market concerns about potential wheat shortages (which isn’t a thing that is going to happen, for the record).
“India supplied urgently needed wheat to offset the shortfall in wheat exports from Ukraine due to the war there. If less wheat now reaches the global market from India, we risk seeing supply tighten again, as reflected in yesterday’s price increase,” Commerzbank said in a note.
Regardless of what India decides to do with its wheat, global markets have renewed constricting supply concerns in the broad wheat market over the past 24 hours. After hitting a three-week low earlier this week, wheat prices have since risen to a one-week high overnight with prices rallying $0.18-$0.27/bushel higher on the speculation.
Inputs (domestic)
Fertilizer companies are poised to set new records for first quarter 2022 (Q1 2022) amid soaring inflationary pressures lifting product prices. CF Industries is not the exception, as indicated in an earnings call yesterday afternoon.
The Illinois-based company, among the largest fertilizer producers in the world, posted a record setting $883 million in net earnings during Q1 2022, up drastically from Q1 net earnings of $151 million a year ago.
Net sales nearly tripled year over year to $2.9 billion as high fertilizer prices supported CF Industries’ revenue stream. The company reported its highest quarterly volume of nitrogen shipped by rail over the last decade across North America during Q1 2022 alone. Plus, it expects to ship three times its normal volume of liquid nitrogen to global buyers in the coming year.
Fertilizer prices have risen over the past year due to an unprecedented compounding of multiple factors tightening global supplies including a global acreage expansion, production shortfalls due to COVID and constrictively high natural gas prices, rising raw materials costs, and supply chain disturbances.
But those limitations clearly have not hindered the fertilizer industry’s profit outlooks. CF Industries expects global fertilizer and grain inventories to remain “extremely tight” over the next couple years as the world adjusts to Russia’s occupation of Ukraine. Chief Executive Officer Tony Will expects that it could take “at least two to three yeas to replenish global grain stocks after the invasion.”
Weather
It has rained for several days in a row in the Colorado Front Range and I am so excited because my lawn is greening up like a dream! Apologies to growers who are frustrated about rain delays eating into planting season. But omg everyone – my lawn was almost on death’s doorstep and now it’s alive!!!
My husband managed the lawncare projects over the weekend, as I’ve been fighting off illness over the past week and a half. He did a healthy De-amine spray on our pesky weeds as it’s peak dandelion season on the Front Range. And while I do love a cute little dandelion here and there, I have no patience for a yard full of them. So lots of appreciation to my husband for taking care of that for me this weekend!
Today’s showers in the Central and Southern Plains will start shifted north and east into the Mississippi River Valley today, according to NOAA’s short-range forecasts. The system will hover over the Eastern Corn Belt through at least Saturday afternoon, likely leaving any hopes for planting progress at bay until early next week.
Financials
The U.S. Federal Reserve raised the core Federal Funds rate by 0.5% yesterday to 0.75% in response to rising inflationary pressures across the economy.
Federal Reserve chairman Jerome Powell’s comments following the conclusion of the Fed’s two-day Federal Open Market Committee meeting also reassured markets that future interest rate hikes would not be greater than 0.5%, a worry which speculators had stoked within markets.
As inflationary pressures have grown both at home and abroad, Federal Reserve officials have increasingly adopted a more hawkish tone on monetary policy measures, meaning that they are increasingly more in favor of rising interest rates and tightening monetary policy to cool rising inflation.
And while Fed officials have been incredibly transparent about these planned strategies leading up to the implementation, markets continued to speculate that Fed officials would take more drastic action than previously signaled to combat inflation. Powell’s comments yesterday kept markets in the loop on the Fed’s planned interest rate hikes as he reaffirmed that hikes are not likely to occur in increments greater than 0.5%.
Powell’s reassurances sent markets soaring yesterday. “We are puzzled why the market thinks that Fed hikes are going to stop inflation,” Nancy Davis, founder of Quadratic Capital Management, told Bloomberg this morning. “We see inflation as driven by massive government spending, supply chain disruptions and, more recently, by Russia’s invasion of Ukraine.”
Rising inflation has largely been driven by massive and sudden changes in consumer spending following the pandemic’s onset, soaring commodity prices, pressures from the Ukrainian war, ongoing supply chain issues, and increased government spending during the pandemic.
Navigating the pandemic’s economic recovery has been challenging for the Fed as other key economic indicators remain bullish and consumer behaviors have shifted so massively in a short amount of time. For example, markets expect that the monthly unemployment rate likely fell to 3.5% during April. If Friday’s jobs report holds true to that estimate, it would be the lowest jobless rate since the 1960s and could fall even lower in the coming months.
The interest rate hike means that access to capital for growers could be more costly going forward, especially if operating loans have not been refinanced yet this year or if growers are considering using financing options to make capital purchases in the coming months. It necessitates the need for larger working capital volumes to serve as a hedge against more costly credit supplies, so if you haven’t been aggressive about taking advantage of recent cash sales, now may be the time to reevaluate marketing strategies.
S&P 500 futures drifted 26.75 points (0.62%) lower to $4,268.50 this morning after yesterday’s massive market rally on Powell’s reassurances. More central banks across the world are expected to increase interest rates this week in response to slowing global growth and rising worldwide inflation. The prospect of prolonged economic contraction amid hopes for pandemic recovery continues to linger over markets this morning, pushing stocks lower.
Also worth a read on our website, FarmFutures.com
Advance Trading’s Luke Williams has recommendations for farmers on locking in profitable grain prices without even making a sale.
Water Street Solutions CEO Darren Frye reminds farmers that practicing leadership skills can help to make them better decision makers. Frye offers growers tips for practicing financial, business leadership, and marketing skills so they can confidently make decisions when the time comes.
The latest shortage at the farmgate? Properly trained technicians who can quickly and accurately diagnose and repair farm equipment.
Purdue University’s Ag Economy Barometer strengthened in April as high commodity prices improved producer outlooks.
Bryce Knorr previews next week’s WASDE reports, which will provide the first look at 2022/23 marketing year estimates.
Morning Ag Commodity Prices – 5/5/2022
Contract
Units
High
Low
Last
Net Change
% Change
MAY ’22 CORN
$ / BSH
8.0475
7.9975
8.04
0.055
0.69%
JUL ’22 CORN
$ / BSH
8.02
7.9375
7.995
0.0525
0.66%
SEP ’22 CORN
$ / BSH
7.585
7.525
7.5675
0.04
0.53%
DEC ’22 CORN
$ / BSH
7.415
7.36
7.3975
0.035
0.48%
MAR ’23 CORN
$ / BSH
7.45
7.3975
7.435
0.035
0.47%
MAY ’23 CORN
$ / BSH
7.46
7.41
7.445
0.0325
0.44%
JUL ’23 CORN
$ / BSH
7.43
7.3375
7.405
0.0225
0.30%
MAY ’22 SOYBEANS
$ / BSH
16.825
16.825
16.825
0.1275
0.76%
JUL ’22 SOYBEANS
$ / BSH
16.67
16.42
16.5275
0.1225
0.75%
AUG ’22 SOYBEANS
$ / BSH
16.1725
15.9375
16.0275
0.105
0.66%
SEP ’22 SOYBEANS
$ / BSH
15.45
15.25
15.33
0.1025
0.67%
NOV ’22 SOYBEANS
$ / BSH
15.0675
14.8775
14.9475
0.0825
0.55%
JAN ’23 SOYBEANS
$ / BSH
15.0925
14.9025
14.9775
0.0775
0.52%
MAR ’23 SOYBEANS
$ / BSH
14.96
14.7925
14.8375
0.06
0.41%
MAY ’23 SOYBEANS
$ / BSH
14.9425
14.7975
14.8375
0.065
0.44%
JUL ’23 SOYBEANS
$ / BSH
14.9675
14.7925
14.845
0.0575
0.39%
MAY ’22 SOYBEAN OIL
$ / LB
87.15
86.93
86.93
-0.15
-0.17%
JUL ’22 SOYBEAN OIL
$ / LB
83.78
81.7
81.84
-0.59
-0.72%
MAY ’22 SOY MEAL
$ / TON
428.1
#N/A
428.3
0
0.00%
JUL ’22 SOY MEAL
$ / TON
422.8
418.4
422
3.8
0.91%
AUG ’22 SOY MEAL
$ / TON
415.8
412.3
415.3
3.6
0.87%
SEP ’22 SOY MEAL
$ / TON
408.5
405.7
408.4
3.5
0.86%
OCT ’22 SOY MEAL
$ / TON
401
398
400.9
3.7
0.93%
MAY ’22 Chicago SRW
$ / BSH
10.1875
#N/A
10.66
0
0.00%
JUL ’22 Chicago SRW
$ / BSH
11.06
10.7725
11.0125
0.2475
2.30%
SEP ’22 Chicago SRW
$ / BSH
11.0775
10.795
11.03
0.2375
2.20%
DEC ’22 Chicago SRW
$ / BSH
11.0925
10.835
11.0525
0.235
2.17%
MAR ’23 Chicago SRW
$ / BSH
11.085
10.8725
11.0275
0.205
1.89%
MAY ’22 Kansas City HRW
$ / BSH
0
#N/A
11.125
0
0.00%
JUL ’22 Kansas City HRW
$ / BSH
11.5275
11.2325
11.4975
0.265
2.36%
SEP ’22 Kansas City HRW
$ / BSH
11.5525
11.2775
11.53
0.2625
2.33%
DEC ’22 Kansas City HRW
$ / BSH
11.605
11.39
11.575
0.2625
2.32%
MAR ’23 Kansas City HRW
$ / BSH
11.485
11.22
11.475
0.185
1.64%
MAY ’22 MLPS Spring Wheat
$ / BSH
10.01
#N/A
11.7325
0
0.00%
JUL ’22 MLPS Spring Wheat
$ / BSH
11.9825
11.7625
11.9375
0.165
1.40%
SEP ’22 MLPS Spring Wheat
$ / BSH
11.925
11.7125
11.885
0.1625
1.39%
DEC ’22 MLPS Spring Wheat
$ / BSH
11.9075
11.725
11.8525
0.1425
1.22%
MAR ’23 MLPS Spring Wheat
$ / BSH
11.82
11.7675
11.8175
0.135
1.16%
JUN ’21 ICE Dollar Index
$
103.35
102.375
103.295
0.701
0.68%
JU ’21 Light Crude
$ / BBL
109
107.35
108.77
0.96
0.89%
JU ’21 Light Crude
$ / BBL
107.42
105.87
107.22
1
0.94%
JUN ’22 ULS Diesel
$ /U GAL
4.2455
4.1134
4.1509
-0.0461
-1.10%
JUL ’22 ULS Diesel
$ /U GAL
3.9268
3.8402
3.8701
-0.0121
-0.31%
JUN ’22 Gasoline
$ /U GAL
3.685
3.6385
3.6699
0.0176
0.48%
JUL ’22 Gasoline
$ /U GAL
3.5967
3.5524
3.5839
0.0164
0.46%
MAY ’22 Feeder Cattle
$ / CWT
0
#N/A
162.25
0
0.00%
AUG ’22 Feeder Cattle
$ / CWT
0
#N/A
176.2
0
0.00%
JU ’21 Live Cattle
$ / CWT
0
#N/A
134.825
0
0.00%
AU ’21 Live Cattle
$ / CWT
0
#N/A
137.075
0
0.00%
MAY ’22 Live Hogs
$ / CWT
0
#N/A
102.6
0
0.00%
JUN ’22 Live Hogs
$ / CWT
0
#N/A
105.1
0
0.00%
MAY ’22 Class III Milk
$ / CWT
24.95
24.77
24.95
0.23
0.93%
JUN ’22 Class III Milk
$ / CWT
24.84
24.4
24.84
0.54
2.22%
JUL ’22 Class III Milk
$ / CWT
24.57
24.35
24.57
0.45
1.87%
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