6 minute read
Marketing
Grain Outlook Wheat market up, corn along for the ride
The following marketing analysis is for the week ending Nov. 24.
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CORN — This week’s article only covers through Nov. 24 due to the Thanksgiving holiday. The market was open for a short session on Nov. 25, but I opted to take a long weekend.
The markets headed into the holiday week with a bang, led by the wheat markets! Chicago wheat rallied to nine-year highs! Corn was pulled along despite the strongest U.S. dollar in 16 months and little news of its own to drive prices. March corn pushed out of its recent range to the upside the day before PHYLLIS NYSTROM Thanksgiving, but was unable to CHS Hedging inC. close there. The March corn had St. Paul been confined from $5.73.5 to $5.89.5 since Nov. 11 but surged to $5.96.75 before fading into the holiday. This was its highest level since mid-August when it hit $5.99.75 per bushel.
Ethanol margins continue to be strong and support domestic demand. Weekly export inspections were disappointing at 24.3 million bushels and the lowest in nine weeks. Cumulative inspections are down 18.2 percent from last year when the U.S. Department of Agriculture is forecasting year-on-year exports to be down just 9.2 percent. China has 433 million bushels of unshipped corn on the books compared to 322.8 million bushels left last year by this date. The only fresh export sale announcement was 3.9 million bushels to Mexico in routine business. Weekly export sales were not reported until the day after Thanksgiving.
Much of the corn action was attributed to the soaring wheat markets. Excessive rain in Australia has delayed their harvest and thrown quality into uncertainty. In the next week, eastern Australia may receive another 4 to 5 inches of rain. Low protein is now a risk as well as lower production. Dryness in the U.S. Plains is being monitored.
Political tensions are rising between Ukraine and Russia as Russia builds up troops along the border. Declining soft red winter wheat production is expected after a wet eastern soybean harvest (wheat is planted on soybean acres in many cases). Canada is battling logistical issues due to flooding.
Cash Grain Markets
corn/change* soybeans/change*
St. Cloud $5.47 -.04 $11.82 -.39 Madison $5.53 -.04 $11.92 -.36 Redwood Falls $5.58 -.03 $11.97 -.34 Fergus Falls $5.52 -.04 $11.87 -.34 Morris $5.52 -.04 $11.92 -.34 Tracy $5.52 -.07 $11.84 -.46 Average: $5.52 $11.89 Year Ago Average: $3.81 $10.98
Grain prices are effective cash close on Nov. 30. *Cash grain price change represents a two-week period.
Ukraine this week raised their corn production estimate for this year to a record 40 million metric tons compared to 37.1 mmt previously. The USDA is projecting their crop at 38 mmt. The Ukraine corn harvest is 80 percent complete.
Weekly ethanol production increased 19,000 barrels per day to 1.08 million bpd — the highest production in three weeks and above the pace needed to hit the USDA forecast. Ethanol stocks were 83,000 barrels higher at 20.16 million barrels. Stocks are the lowest in five years for this date. Gasoline demand was 9.3 million bpd vs. 9.2 million bpd in the previous week. Demand is 14.8 percent higher than last year for this week and over the last four weeks it is up 11.6 percent vs. last year. Margins jumped 19 cents per gallon to $1.60 per gallon!
Outlook: Concerns over rising inflation may be behind a portion of the buying in agricultural commodities and growers’ reluctance to sell; but strong crushing margins in both corn and soybeans also contributed to strength. Spillover support from the wheat market may limit short-term pressure, but short-term conditions are getting overbought.
High input costs have traders watching for signs that corn acres may fall more than expected this coming spring; or that less fertilizer may translate into lower yields. In the end, we will likely see erratic markets into the end of the year as we enter the holiday season. Basis level may have to remain firm to attract bushels into the pipeline as bin doors get welded shut.
Futures will need help from South American weather, export demand, wheat prices, and/or the U.S. dollar to make the next leg higher. Limiting the short-term downside is good domestic demand, strong wheat prices, and a long way to go before the crop is better defined in South America. March corn’s first resistance is $6.00 per bushel, which it hasn’t traded above since July 2. First support is in the $5.75 area, then closer to $5.60 per bushel.
December 2022 corn made a new contract high at $5.65 per bushel this week.
SOYBEANS — Soybeans made a move higher to begin the week before settling into consolidationtype trade. January soybeans have been trapped within the Nov. 17 range of $12.50.75 to $12.89.25 per bushel.
Weather in South America has been a non-event, but possible dryness in Argentina and southern Brazil bears monitoring. The welcome rain which has been received in Argentina is being used to get the crop in and up; but any prolonged period of dryness may quickly translate into talk of a smaller crop.
The USDA announced the sale of 12.1 million bushels of soybeans to unknown and 30,000 metric tons of soyoil to India in its daily flashes this week. Weekly export inspections were 61.9 million bushels, as expected, but were the lowest in seven weeks. China has 231.5 million bushels of outstanding U.S. soybean purchases vs. 422.5 million bushels left to ship last year by this date. Weekly export sales were released after this writing.
In the first three days of the holiday week, meal closed lower every day and soyoil closed higher every day.
The shortage of the livestock feed additive lysine had pushed meal higher before we saw a pullback in the shortened holiday week. If the United States ran out of lysine, it could increase meal usage by 50 percent. But that would be a worst-case scenario according to a news article quoting a swine nutritionist. The supply of dry lysine is tight, but not catastrophic at this time. Lysine is an amino acid used in pig, poultry and dairy feed to improve performance. This week’s decline in meal prices may be signaling the lysine issue may be overblown at this time.
President Biden announced the United States would release 50 million barrels of crude oil from the Strategic Petroleum Reserve in conjunction with 30 million barrels from China, 5 million from India, and 10 million each from Japan and South Korea. This would be the largest U.S. release since 2011. The 50 million barrels from the United States represent approximately two-and-a-half days of U.S. consumption. OPEC will honor their 400,000 bpd production increase for December, but any further increases will be under discussion when they meet on Dec. 2.
According to GasBuddy, the average gasoline price
