Morning report: Corn, soybeans and wheat all post moderate overnight gains. (Comments are updated by 7:30 a.m. Central Time.)
Overnight trends:
Corn: Up 14 to 15 cents
Soybeans: Up 20 to 22 cents
Wheat: Up 14 to 28 cents
*Prices as of 6:50am CST.
Volatility has been the main hallmark of grain prices in March. The Russian invasion of Ukraine has been one of the biggest drivers of doubt, with so much of the world’s corn and wheat exports locked up due to that turmoil. And lingering doubts about South America’s production potential has kept soybean prices in relatively good shape. As planting season approaches, traders will have plenty more to mull over in coming sessions.
Overseas stock markets were mixed but mostly higher to start the week. In Asia, Japan’s Nikkei index moved more than 0.5% higher while Hong Kong’s market slumped nearly 1% lower. European markets were mostly slightly higher in midday trading. And on Wall St., Dow futures dropped 146 points ahead of Monday’s open to 34,485, although the three primary U.S. indexes last week posted their best performance since November 2020.
Energy futures were red-hot in overnight trading. Crude oil jumped 4.5% higher to $109 per barrel. Diesel trended more than 5% higher, while gasoline rose 2.5%. The U.S. Dollar firmed slightly.
The latest 72-hour precipitation map from NOAA shows plenty of wet weather for the central U.S., with parts of the Mid-South in particular bracing for 3″ to 4″ between today and Thursday. Official 6-to-10-day forecasts show seasonally cool weather likely for most areas east of the Mississippi River between March 26 and March 30, with a return to drier-than-normal conditions for the Midwest and Plains during that time.
Last Friday, commodity funds were net buyers of soymeal (+2,000) contracts but were net sellers of corn (-7,500), soybeans (-5,000), soyoil (-5,500) and CBOT wheat (-12,000).
Corn
Corn prices continue to take cues from the ongoing geopolitical turmoil in the Black Sea region as well as forecasts in South America as Brazil is heavily counting on a solid second corn (safrinha) crop to replenish its stocks. Add in USDA’s planting intentions report, out at the end of the month, and there will plenty of fresh data to digest in coming sessions.
Matthew Kruse, president of Commstock Investments, notes that Brazil’s second corn crop will need “perfect weather” – meaning ample rains – through at least April to stay on track for solid production to resupply the country’s dwindling stocks. Kruse offers plenty of quality analysis in a recent Ag Marketing IQ blog – click here to learn more.
Later this morning, USDA will serve up a new round of grain export inspection data. Last week, the agency reported flagging corn export inspections, falling to 45.1 million bushels. Cumulative totals for the current marketing year are nearly 170 million bushels below last year’s pace, with 1.021 billion bushels.
South Korea purchased 2.4 million bushels of corn, likely sourced from the United States, in a private deal that closed late last week. The grain is for arrival by June 15.
The preliminary report from the CBOT showed daily futures volume moving to 172,215, with open interest dropping 1,977. Options volume moved to 84,918 and moderately favors calls (46,654) versus puts (38,264). Implied volatility for near-the-money May contracts reached 39.6%, which don’t expire for another 32 days.
Soybeans
Soybean prices firmed moderately overnight, supported by spillover strength from corn and wheat as traders continue to monitor this season’s South American harvest closely. Prices are tantalizingly close to $17 per bushel but have remained relatively volatile in recent sessions.
The Brazilian consultancy Patria AgroNegocios reported that nearly 72% of the country’s 2021/22 soybean crop has been harvested. The results so far “show a lot of variability,” the consultancy noted, with some areas “bringing disappointing numbers in relation to initial expectations.” Most entities are expecting total production to fall well below 5 billion bushels this season.
In a move to combat inflation, Argentina announced it will raise its export tax rate on soyoil and soymeal to 33% until the end of 2022. Inflation is out of control in Argentina at the moment, running around an annual rate of 50%. Argentina is a top exporter of both soymeal and soyoil.
China’s state planner announced earlier today that it plans to release 1 million metric tons of its state potash reserves. It is also taking measures to amp up domestic production and increase imports to ensure there will be adequate fertilizer supplies this season.
Soybean export inspections look to improve upon a largely stagnant 28.4 million bushels last week. Cumulative totals for the 2021/22 marketing year are well below last year’s pace, at 1.549 billion bushels. USDA’s next batch of data comes out later this morning.
The preliminary report from CBOT showed daily futures volume moving to 125,523 and open interest firming by 932. Options volume was at 34,405 and still moderately favors calls (20,658) over puts (13,747). Implied volatility for near-the-money May contracts moved to 23.05% and expire in 32 days.
Wheat
Wheat prices remain highly dependent on headlines coming out of Ukraine, where war has dragged on for nearly a month now. An extended conflict will affect the country’s ability to both export current grain stocks and plant additional crops this season. Ukraine among the world’s top exporters of both corn and wheat. Overnight prices trended significantly higher, with most contracts up nearly 3% ahead of Monday’s session.
With USDA’s next grain export inspection report out later this morning, wheat will have a chance to rise above sluggish results of 10.4 million bushels a week ago, which was below the entire range of analyst estimates. Cumulative totals for the 2021/22 marketing year have been relatively disappointing, staying moderately below the prior year’s pace at 595.0 million bushels.
Russian consultancy Sovecon estimates that the country’s wheat exports in March will reach 80.8 million bushels. That would be the lowest monthly tally since last July but still significantly higher year-over-year, if realized.
India is not a significant wheat exporter, despite being the No. 2 producer in the world. However, the country is sitting on an ample stockpile after several consecutive bin-busting harvests and is reportedly in talks with Egypt, Israel, Oman, Nigeria and South Africa about potential sales. “The government is working closely with the Indian Railways and port authorities to smoothen the process,” according to one government official. India produces more than 14% of the world’s wheat but accounts for less than 1% of global exports.
Last week, China sold 19.2 million bushels of its state wheat reserves on auction to boost domestic stocks and ease high prices. The sale accounted for nearly all (99.6%) of the total amount offered.
South Korea purchased 1.7 million bushels of milling wheat, likely sourced from the United States, in a purchase late last week. The grain is for shipment between mid-May and mid-June. This was the ninth state wheat auction held so far this year.
Volume in HRW wheat moved to 49,888, while open interest inched 11 higher. Options were at 15,064, with puts (8,692) moderately outpacing calls (6,372). Implied volatility for near-the-money May contracts are still extremely high, at 56.2%, and don’t expire for another 32 days.
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