Marketing

Grain Outlook End users look to replace supplies

The following marketing analysis is for the week ending March 11.

CORN — We have been experiencing extremely volatile markets as we witness history in the making. Markets don’t usually like uncertain times and now is no exception. Relatively speaking, July corn had a quiet week with a 45.5 cent trading range and closed 7.5 cents higher for the week at $7.28.75 per bushel. The July contract set a new contract high at $7.47 per bushel. The December corn traded a 28.75 cent range and closed 25.75 cents higher at $6.55.25 per bushel. December corn posted a new high contract close and a new contract high at $6.56.25 per bushel as the week ended. From the close on Feb. 18 (before the Russian invasion of Ukraine) to PHYLLIS NYSTROM CHS Hedging inC. St. Paul the March 11 close, July corn has rallied 76 cents and December corn has gained 57.5 cents.

The importance of Ukraine in global corn trading has been the underlying factor in this jump higher. Ukraine and Russia combined account for 17 percent of global corn exports and 28 percent of world wheat exports. Ukraine is sixth in world corn production and ninth in world wheat production.

If fighting were to end today, it will take time to rebuild Ukraine’s infrastructure in addition to getting people back in place. Planting time is quickly approaching for Ukraine. Their growing season is roughly on the same schedule as the U.S. corn belt. While farmers have been exempted from military service, that doesn’t mean they aren’t participating, and getting enough farm labor will be difficult. Fuel is in short supply and could undercut progress. Fertilizer availability is in question, as it is in the United States and South America, after Russia halted fertilizer exports. Ukrainian farmers are being encouraged to plant crops which will be harvested in the summer — such as buckwheat, oats, millet, and peas — to help provide needed food sooner than later. The UN Food and Agriculture Organization estimates 20-30 percent of Ukraine’s winter crops, as well as corn and sunflower crops, may not be planted and/or harvested this year.

The March 9 World Agriculture Supply and Demand Estimates report was mostly neutral and largely ignored in favor of world headlines. The 2020-21 carryout was unchanged at 1.235 billion bushels. On the

Cash Grain Markets

corn/change* soybeans/change*

Stewartville $6.54 -.32 $15.72 -.33 Edgerton $7.03 +.02 $15.66 -.49 Jackson $6.99 +.21 $15.76 +.04 Hope $6.90 -.13 $15.68 -.44 Cannon Falls $6.75 +.02 $15.73 -.47 Sleepy Eye $7.03 +.02 $15.78 -.52 Average: $6.87 $15.72 Year Ago Average: $5.23 $13.74

Grain prices are effective cash close on March 15. *Cash grain price change represents a two-week period.

2021-22 balance sheet, there were no changes to the supply side. On the demand side, ethanol was raised 25 million bushels to 5.35 billion bushels and exports jumped 75 million to 2.5 billion bushels. This cut ending stocks 100 million bushels to 1.44 billion bushels and the ending stocks to use ratio to 9.6 percent from 10.4 percent last month. The average farm price increased by 20 cents to $5.65 per bushel. Brazil’s corn was unchanged at 114 million metric tons (4.5 billion bushels) with exports steady at 43 mmt. Argentina’s corn crop was lowered 1 mmt to 53 mmt (2 billion bushels) with exports unchanged at 39 mmt. Ukraine’s corn exports for 2021-22 were lowered 6 mmt to 27.5 mmt while its corn production was down just .1 mmt at 41.9 mmt. China’s corn imports were estimated at 26 mmt (1 billion bushels) and unchanged from last month. China has 260 million bushels of U.S. corn left to ship in this marketing year. World corn ending stocks were at expectations at 301 mmt vs. 302.2 mmt last month.

Weekly export sales were the highest of the marketing as end users look to replace lost Black Sea supplies and overall uncertainty. U.S. growers moved bushels on the first round of the rally and sales have slowed down considerably. Weekly sales were 84.4 million bushels to bring total commitments to 1.97 billion bushels of the U.S. Department of Agriculture’s 2.5 billion bushel forecast. Sales are down 16 percent from last year and we need 18.9 million bushels of sales per week to hit the USDA’s new target. New crop sales this week were just under one million bushels. Total new crop sales are 75.9 million bushels vs. 61.2 million bushels committed last year on this date.

Weekly ethanol production was up 31,000 barrels per day to 1.03 million bpd. Ethanol stocks rose by 338,000 barrels to 25.27 million barrels.

As far as South American corn goes, the Buenos Aires Grain Exchange improved Argentina’s corn rating 4 percent to 25 percent good/excellent with 5.7 percent of the crop harvested vs. 4.9 percent on average. The Rosario Grain Exchange has Argentina’s corn

See NYSTROM, pg. 16

Financial Focus Is inflation peaking?

You see it in prices at the grocery store and the gas station. You feel it in your monthly budget. So why don’t the financial markets seem too concerned about inflation?

Remember, financial markets are considered “discounting mechanisms,” meaning they are looking six to nine months into the future. And by June 2022, the financial markets expect that inflation will be lower than today. (Investopedia. com, 2021)

One lesser-known indicator which helps support that forecast is called the Baltic Dry Index. It measures the cost of transporting raw materials — such as coal and MARISSA steel. The index has been trending JOHNSON lower for several weeks, which in Profinium the past has suggested prices may Wealth Management be more manageable in the months Advisor ahead. (CNBC.com, Nov. 10, 2021)

No indicator is fool-proof. That’s why the Baltic Dry Index is just one of the many indicators that our professionals follow when watching inflation. They also keep a close eye on the Federal Reserve System, which is responsible for controlling inflation. (CevelandFed.org, 2021)

With the economy improving, the Federal Reserve has indicated it will be tapering bond purchases this month. That may help with inflation. The Fed also has prepared the markets for higher interest rates in 2022. That, too, may help. (CNBC.com, Nov. 3, 2021)

For now, it’s important to understand that Inflation can influence interest rates, which often play a role in how a portfolio is constructed. We’re keenly focused on what’s next for inflation to determine if any portfolio changes are appropriate in the future.

Investing involves risks, and investment decisions should be based on your own goals, time horizon, and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.

The forecasts or forward-looking statements are based on assumptions, subject to revision without notice, and may not materialize.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult

NYSTROM, from pg. 15

crop at 47.7 and Conab is carrying Brazil’s corn crop at 112.3 mmt. As of March 8, Brazil’s safrinha corn was 81 percent planted. A group of six South American countries is lobbying for excluding fertilizers from export sanctions on Russia. Approximately 20 percent of Brazil’s fertilizer imports come from Russia.

The wheat markets plunged this week with nearly a dollar pullback in Chicago and Kansas City, and Minneapolis down nearly 70 cents. From their contract highs, Chicago July wheat has plunged $2.01, Kansas City $1.78, and Minneapolis $1.27.5 per bushel. The daily trading range for Chicago and Kansas City wheat was raised to 85 cents per bushels with expanded limits, if needed, to $1.30 per bushel. Here’s how volatile the wheat markets have been: On March 8, May Chicago wheat traded a $1.92.75 range in a span of 15-20 minutes.

Outlook: The Ukrainian situation will remain as front-page news, but it doesn’t mean prices have to go up every day. Old crop corn has moved to a higher trading range and is moving into consolidation. New crop corn pushed to new highs in a definite uptrend.

Brazil’s safrinha corn crop is off to a very good start and accounts for 75 percent of its total corn crop.

On March 31, the USDA will release Grain Stocks as of March 1 and Prospective Planting reports. These reports will give us a starting point for what growers are intending to plant this year and if prices need to do a better job of rationing. The stocks report will be interesting not only for the quantity of stocks but also for who holds those stocks — growers vs. commercials.

This year is a very different landscape than what we are familiar with. Manage your own risk and what you are comfortable with. There are various marketing tools to do this. Standing aside is also a choice, but don’t get caught standing still if the world situation changes and prices retreat. Trying to predict how high prices will climb is a low percentage game. Money flow in and out of commodities makes for high volatility and is not for the faint of heart. Buckle up kids, we’re not through yet.

SOYBEANS — Soybeans are following the same pattern as corn with gains all around — but without any new contract highs this week. July soybeans were up 18.25 cents for the week at $16.51.25 per bushel. November soybeans surged 40.75 cents for the week to close at $14.91 per bushel. Since Feb. 18, July soybeans have rallied 50.25 cents and November soybeans 27.25 cents per bushel. The situation in Ukraine has not affected the soybeans as much as corn since Ukraine is not one of the top three global exporters of soybeans.

The size of the South American soybean crop is uncertain, and we may not know the final number for a few months when harvest is complete. Chinese buying of U.S. soybeans has been constant and provided good underlying support on nearly a daily basis. The strength in energies and vegetable oil has contributed to general buying interest.

The March WASDE report for U.S. soybeans showed only one change. U.S. exports were increased 40 million bushels to 2.09 billion bushels. The U.S. crush remained record large at 2.215 billion bushels. Ending stocks were down 40 million at 285 million bushels. The ending stocks to use ratio fell 1 percent to 6.4 percent and the average farm price jumped 25 cents to $13.25 per bushel. China’s soybean imports were lowered 3 mmt to 94 mmt or 3.45 billion bushels.

The USDA cut Brazil’s soybean production more than expected to 127 mmt (4.67 billion bushels), down 7 mmt from last month. Its soybean exports were cut 5 mmt to 85.5 mmt. Argentina’s soybean production fell 1.5 mmt to 43.5 mmt (1.6 billion bushels), and Paraguay fell 1 mmt to 5.3 mmt. Argentina’s soybean exports were lowered 1 mmt to 2.8 mmt. World ending soybean stocks were 90 mmt vs. 89.5 mmt estimated and 92.8 mmt last month.

The Rosario Grain Exchange is estimating Argentina’s soybean crop at 40 mmt. Conab has Brazil’s soybean crop at 122.8 mmt with exports of 80.2 mmt. The BAGE pegged Argentina’s soybean crop at 30 percent good/excellent — a 5 percent improvement from last week. It’s estimated 10.6 percent of the crop is mature vs. 17.4 percent on average. As of March 7, Brazil’s soybean harvest was estimated at 51 percent vs. 41 percent on average.

Weekly export sales were the second-largest of the marketing year at 81 million bushels and are only 13 percent behind last year. Total commitments are 1.9 billion bushels with 6.5 million bushels of sales needed to achieve the USDA’s outlook for 2.09 billion bushels. New crop soybean sales were 32.9 million bushels to bring total new crop sales to 281 million bushels. Last year at this time we had 186.5 million bushels on the books.

Outlook: The current Black Swan event has many rethinking previous sales and what to do next. I won’t be foolish enough to say how high the price may go or how much of a retracement we could see if or when a ceasefire comes. Even without Russia’s actions, soybeans had support stemming from lower production estimates out of South American and nearly daily Chinese demand. China will begin auctioning a portion of its state-owned reserve soybeans next week.

The United States also needs to attract additional acres this spring. In fact, we need more acres of everything. And looking down the curve, where will the soybeans come from in the next three years to feed the proposed new crush capacity? Until there is more certainty about world supplies, pullbacks should find support from end-users.

Weekly price changes in July wheat for the week ended March 11: Chicago wheat dropped 98 cents to close at $10.77.25, Kansas City plunged 93.5 cents to $10.81, and Minneapolis fell 67.5 cents to $10.53.25 per bushel. v

2022 ending stocks look to be lower

THIESSE, from pg. 14

or summer weather issues with the 2022 crop in the United States. On the other hand, the corn and soybean market prices may face some downward pressure later in 2022 if we get favorable growing conditions or domestic grain demand in the United States is reduced. The continuation or the resolution of the Russia and Ukraine conflict is also likely to be a major factor in global grain trade and prices in the coming months.

Kent Thiesse is a government farm programs analyst and a vice president at MinnStar Bank in Lake Crystal, Minn. He may be reached at (507) 726-2137 or kent.thiesse@minnstarbank.com. v

Always consult legal or tax professionals

JOHNSON, from pg. 15

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The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SECregistered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. v