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Marketing
Grain Outlook Russia and Ukraine lead market talk
The following marketing analysis is for the week ending Feb. 18.
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CORN — Corn traders gave the market a little love on Valentine’s Day, only to crush it on the next day with a nearly 18 cent dive. Prices spent the balance of the week climbing out of the hole to finish with small weekly gains.
The December and beyond new crop contracts set fresh contract highs ahead of the three-day Presidents’ Day weekend. Headlines were about the same every day with just a different spin on them. South American weather stayed on the front page along with happenings between Russia and Ukraine. We didn’t see any daily export sales flashes for corn, but demand has remained firm.
The most recent forecast for Argentina at this writing was for beneficial rainfall to begin Feb. 18 and stick around for the next two weeks. The Buenos Aires Grain Exchange lowered Argentina’s corn rating 5 percent to 19 percent good/ excellent and cut its production estimate 6 mmt to 51 mmt. Brazil’s latest outlook was for more warm and dry weather. Brazil’s safrinha corn is considered now the most at risk with planting ongoing. It’s too late for the soybeans to garner many benefits if the rain events prove accurate, but it won’t hurt in areas that aren’t harvesting yet.
Ukraine is the second-largest exporter of corn in the world with 13 percent of world exports. If shipments out of the Black Sea region are disrupted, it may push business to the United States and South America. As trading wrapped up before the weekend, there were news reports of Russian-backed separatists evacuating citizens out of eastern regions in Ukraine and into Russia. A report of a car bomb explosion in Donetsk near government buildings in an empty parking lot in Ukraine was also reported. No injuries were reported. Some believe these events will be used by Russia as a reason to invade. President Putin continues to stand by statements that Russia has no plans to invade Ukraine, saying earlier in the week that Russian troops were being moved away from the border. NATO and the United States found no proof this was the case. Everyone is on edge; and politics being politics, I will not assume what happens next. Manage the risk that you can control and sleep better at night.
PHYLLIS NYSTROM
CHS Hedging inC. St. Paul
Cash Grain Markets
corn/change* soybeans/change*
St. Cloud $6.55 +.33 $15.85 +.71 Madison $6.53 +.39 $15.90 +.61 Redwood Falls $6.55 +.38 $15.80 +.71 Fergus Falls $6.55 +.38 $15.80 +.51 Morris $6.52 +.35 $15.85 +.56 Tracy
$6.54 +.38 $15.75 +.66 Average: $6.54 $15.83 Year Ago Average: $5.16 $13.38
Grain prices are effective cash close on Feb. 22. *Cash grain price change represents a two-week period.
A report from the University of Wisconsin, partially funded by the National Wildlife Federation and the Department of Energy, stated that ethanol is at least 24 percent more carbon-intensive than gasoline. This is the opposite of the goals set by the Renewable Fuel Standards in 2005 to reduce emissions and cut our reliance on foreign energy sources. The findings included the amount of farmland required, tillage, and fertilizers, to produce the crops used to produce ethanol. U.S. corn acreage has increased by nearly 7 million acres between 2008 and 2016. The Renewable Fuel Association refutes the findings in the study, saying data was “cherry-picked” and it presented worst-case assumptions. This is important since the RFS expires at the end of this year and the current administration is promoting the move to electric vehicles.
Weekly export sales were neutral at 32.3 million bushels for old crop and 4.4 million bushels for new crop. Old crop commitments at 1.8 billion bushels remain 21 percent behind last year. China has just 8 million metric tons of unshipped purchases on the books vs. 11.1 mmt last year. New crop commitments at 61.6 million bushels are well ahead of last year’s 42.6 million bushels.
The weekly ethanol report had mixed reviews with production higher than expected, but ethanol stocks also higher than expected. Production was up 15,000 barrels per day to million bpd and stocks rose 684,000 barrels to 25.5 million barrels. Margins improved a dime to a positive 8 cents per gallon. Gasoline demand for the week fell to 8.6 million bpd from 9.1 million bpd in the previous week.
In other news, Mato Grosso farmers are in talks to sell 5 mmt (196.8 million bushels) of corn directly to Iran in exchange for Iran committing to providing them with fertilizer. Iran was the second-largest buyer of Brazilian corn last year with 3.1 mmt.
Outlook: Corn had a relatively mild week with May futures gaining 2.25 cents to close at $6.52.75 cents, July up 1.75 cents at $6.47, and the December 3 cents higher at $5.97.75 per bushel (new contract high at $5.99.5 per bushel).
Hang on tight as we head to the U.S. Department of Agriculture February Outlook Conference in the coming week, traders return from a long weekend, South American forecasts are updated, and we see what Russian troops do when their military exercises end on Sunday. Remember, the Olympics end Feb. 27 and many nations signed an agreement nothing would happen until then.
SOYBEANS — Soybeans continue to enjoy nearly daily export sales flashes. We have seen them in nine of the last ten days. There were reports of China canceling Brazilian purchases as China’s crush margins decline. The March and May soybean contracts settled above $16 for the first time!
While the headlines continue to feature South American weather and political tensions between Russia and Ukraine, demand for U.S. soybeans remained strong. May soybeans posted an outside, lower session early in the week, but climbed their way back to finish the week on a strong note. The November contract made a new contract high at $14.72 per bushel before the long holiday weekend.
Uncertainty about the size of South American crops should keep a premium in prices until harvest is further along. For now, estimates continue to decline. Interest in U.S. soyoil has also been rising on worries about the availability of South American supplies. The BAGE pegged Argentina’s soybean crop at 31 percent good/excellent, down 6 percent from the previous week. They also lowered the production estimate 2 mmt to 42 mmt. The most current forecast puts rain in Argentina and southern Brazil for the next 10-14 days, but northern Brazil stays on the warm, dry side.
China suggested this week they could slash their soybean imports by 30 mmt (1.1 billion bushels) as they continue to reduce the percentage of soymeal in their feed rations with other proteins. They have been cutting the amount for the last year. China imports approximately 100 mmt of soybeans per year. They presently have 1.8 mmt of unshipped old crop U.S. purchases on the books.
The percentage of meal in livestock feed averaged 15.3 percent last year, which was down 2.4 percent from 2020. Will this offset some of the demand that will be coming in the next three years from additional U.S. crushing capacity? If all the current plans for additional U.S. crush capacity come to fruition, we may have an additional 400 million bushels of new demand by the beginning of 2025.
Weekly export sales were extremely good for new crop and within expectations for old crop. Old crop sales were 50 million bushels, improving cumulative sales to just 19 percent behind last year. We need to average 9.9 million bushels of sales per week to hit the USDA’s 2.05 billion bushel target. New crop sales were 56.1 million bushels. Total new crop commitments are 165.3 million bushels, just 3.5 million
