Marketing

Grain Outlook Global uncertainty keeps market volatile

The following marketing analysis is for the week ending March 18.

CORN — Let’s repeat what we said last week: “Buckle up kids, we’re not finished yet.” The volatility in the market continues with low volumes being traded. Low volumes usually mean at times we see air pockets of trades with small numbers pushing prices further than they normally would.

The Chicago Mercantile Exchange reported March 15 volume in the ag space was the lowest of 2022. The ongoing uncertainty in Ukraine provides underlying support. The ramifications of events on the other side of the world will likely last PHYLLIS NYSTROM at least a crop year. We heard of CHS Hedging inC. a 15-point plan between the St. Paul countries in the first half of the week, but there was nothing to indicate it had affected the bombardment of Ukraine by Russia.

Ukraine’s planting season is just beginning with the lack of labor and fuel the top issues in areas that aren’t under fire. Farmers have been exempted from military service, but that doesn’t mean they haven’t left the farm to fight for their country. Estimates have been floated that Ukraine won’t plant 39 percent of its spring crops. Ukraine’s Deputy Agriculture Minister said their winter wheat crop is in good condition and they will have enough bread this year. He stated they have enough stocks of wheat, corn and sunflower oil for their domestic needs. Their president is encouraging them to plant and focus on early harvested crops. According to the Ukrainian Grain Association, 80 percent of farmers have enough inputs to put in the crop, but fuel will be a huge problem.

If you were a Ukrainian farmer, you’d have to decide to patriotically plant, but run the risk that when you harvest someone else may own the crop (Russia). Russia is planning to ban grain exports through at least June; but will allow some shipments under individual licenses but not to exceed their current quotas. It’s a horrible situation, but one we have to watch unfold and manage our own risk.

The International Grain Council cut Ukraine’s grain export outlook for this year from 62.8 million metric tons to 47.8 mmt. Corn exports were cut from 31.9 mmt to 21 mmt. Russia’s grain exports were

Cash Grain Markets

corn/change* soybeans/change*

St. Cloud $6.93 .00 $16.12 +.02 Madison $7.05 +.21 $16.24 +.38 Redwood Falls $7.12 +.23 $16.14 +.23 Fergus Falls $7.00 -.06 $16.29 +.18 Morris $7.15 +.14 $16.29 +.18 Tracy $7.10 +.09 $16.14 +.23 Average: $7.06 $16.20 Year Ago Average: $5.14 $13.83

Grain prices are effective cash close on March 22. *Cash grain price change represents a two-week period.

reduced to 37.1 mmt from 37.7 mmt.

Demand has picked up for corn with huge weekly export sales as well as a few fresh sales announced during the week. The weekly sales number surpassed the highest estimate at 72.1 million bushels. This brings total commitments to 2 billion bushels and reaches 80 percent of the U.S. Department of Agriculture’s forecast with over five months left in the marketing year. We need 16.7 million bushels of sales per week to hit the USDA’s target of 2.5 billion bushels of exports. We saw a couple of fresh export sales flashes during the week. We should expect the USDA to increase this outlook on subsequent World Agriculture Supply and Demand Estimates reports. New crop sales at 8.1 million bushels were all to China this week. Total 2022-23 commitments are 84 million bushels vs. 71 million on the books last year. Weekly ethanol production was unchanged from the previous week at 1.03 million barrels per day. Ethanol stocks were the highest in 98 weeks (since April 2020) and a record for this week at 25.9 million barrels. Gasoline demand was steady at 8.9 million bpd. Record high prices of retail gasoline may begin to show up next week.

The mid-Mississippi River has reopened and barges are moving out of the Dubuque area and will move north. At this writing, the workers on the Canadian Pacific Railway have authorized a strike but have not yet walked out. However, the railroad has said if no agreement is reached by March 20, the company would consider a lockout. Grain is the biggest business of the CP Railroad, but it also moves potash from Canada to the United States. High fuel charges have prompted fuel surcharges everywhere adding to the cost of movement.

The National Oceanic and Atmospheric Administration released its updated weather forecasts for April through June. The map showed abovenormal temperatures with below-average rainfall. However, the eastern Corn Belt may have aboveaverage rainfall.

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 trend- JOHNSON ing lower for several weeks, which Profinium in the past has suggested prices Wealth Management may be more manageable in the Advisor months 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

See JOHNSON, pg. 16

NYSTROM, from pg. 15

As of March 15, Brazil’s first corn harvest was 50 percent complete vs. 46 percent on average. Their safrinha corn planting was 84 percent complete vs. 72 percent on average and going in under good conditions. Argentina’s corn harvest is estimated at 7 percent complete. The Buenos Aires Grain Exchange pegs Argentina’s corn crop at 51 mmt, but has a lower bias on lower-than-expected yields so far. The USDA has Argentina’s corn at 53 mmt.

Outlook: Farmer selling has virtually evaporated as we have seen these prices before and as the world situation ebbs and flows, but nothing has been resolved. The market for now will likely want to maintain a risk premium. A huge unknown is what Ukraine will be able to produce and export this year. Despite lower prices for the week, corn is holding above support. The big uncertainties surrounding world grain markets have been keeping daily volumes low and highly volatile. Whatever the next headline is will drive price direction, but the upcoming acreage and stocks reports on March 31 should have an impact, too. Until then, look for big swings and lots of volatility.

If technicals mean anything anymore, the May contract has respected support at $7.25 and the July and December contracts have held their 20-day moving average support lines on a closing basis. The December contract made a new contract high this week at $6.58 per bushel. For the week, May corn dropped 20.75 cents to $7.41.75 per bushel with most of the loss happening just before the weekend. July corn fell 16.25 cents to $7.12.5 and the December contract was 9.75 cents lower at $6.45.5 per bushel.

SOYBEANS — World events have not had as big an impact on soybeans since Ukraine and Russia are not big world exporters of soybeans or products. South American weather has been shoved to the back burner as conditions have improved. The BAGE increased Argentina’s soybean rating by 4 percent to 34 percent good/excellent with 22 percent of the crop filling pods. They also raised Argentina’s corn conditions 2 percent to 29 percent good/excellent with 15 percent of the corn harvested.

The strong crude oil market has provided spillover support to world oil markets that are used in biofuels. The demand for vegetable oil has also been

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strong. Covid cases in China spiked and resulted in lockdowns of some cities and businesses which could last until April. This cast a shadow on demand, but that panic seems to be subsiding at this writing.

Weekly export sales were on the low side of expectations at 46 million bushels. Total commitments at 1.97 billion bushels are 11 percent behind last year, but are 94 percent of the USDA’s 2.09 billion bushel forecast. This number may be expected to increase in future USDA reports. New crop sales were 17.5 million bushels. Total 2022-23 commitments are 298.5 million bushels vs. 186.5 million bushels on the books last year. We didn’t get any export sales flashes this week. Safras and Mercado lowered their Brazilian export forecast to 78 mmt from 86 mmt last year.

Brazil’s soybean harvest was 61 percent complete as of March 15 vs. 52 percent on average. The February National Oilseed Processors Association soybean crush came in as expected at 165.1 million bushels, but was the smallest crush in five months. Soyoil stocks were above trade estimates at 2.059 billion pounds and a 22-month high.

Argentina has temporarily suspended the registration of new export sales of soymeal and soyoil. It’s reported they are planning to increase the export tax on both products by 2 percent to 33 percent, which is in line with the soybean export tax. There are also rumors the soybean tax could be raised to 35 percent to support product exports vs. raw soybeans. Argentina accounts for 41 percent of the world’s meal exports and 48 percent of the world’s soyoil exports.

China stated they plan to increase soybean acres this year by 3.3 million acres, a 16 percent increase from last year. The USDA attaché in China predicts China will import 100,000 metric tons of soybeans in 2022-23.

The U.S. dollar index faded after the Federal Reserve announce a 25-point basis increase in interest rates. They suggested there will be another six increases this year.

Outlook: Soybeans have been moving in a sideways fashion with the nearby contract still unable to close over $17.00 per bushel, July to close over $16.60, and the new crop November contract unable to close over $15.00 per bushel. The Ukraine situation will remain as the featured headline, but next up is the Prospective Planting and Grain Stocks reports will be out on March 31. Trade estimates should be to surface in the coming week; but look for an increase in soybean acres, and a decline in corn acres. I’m hearing many producers are planning to stick with what they planted last year. In 2021, U.S. farmers planted 93.4 million acres of corn and 87.2 million acres of soybeans. What are your plans? Markets will remain volatile with big daily ranges until the next headline comes along.

For the week, May soybeans were 8 cents lower at $16.68 per bushel, July down 5.5 cents at $16.45.75, and the November contract dropping 24.25 cents to $14.66.75 per bushel.

Weekly price changes in July wheat for the week ended March 18: Chicago wheat plunged 32.5 cents to $10.44.75, Kansas City fell 19 cents to $10.62, and Minneapolis was 1.5 cents higher at $10.54.75 per bushel. Wheat was like a teeter-totter during the week — up/down, up/down. Rain is finally in the twoweek forecast for the U.S. plains. 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