Marketing

Grain Outlook Corn acres projected to drop 4 percent

The following marketing analysis is for the week ending April 1.

CORN — The market volatility continues as prices were swayed by headlines out of Ukraine and Russia and then we added in the surprisingly bullish corn acreage report. Corn dipped to the lower side of the monthly range early in the week when Russia said they were going to reduce attacks in Ukraine with May and July corn briefly locked down the daily 35-cent limit. When no deescalation was observed within 24 hours, prices rebounded to where they began the week. Then came the Prospective Planting and Grain Stocks reports on March 31 which shocked corn traders with a significantly friendlier corn acreage number than was anticipated. The grain PHYLLIS NYSTROM CHS Hedging inC. St. Paul stocks report was a non-event.

The Prospective Planting report showed a year-toyear slash of 3.86 million acres to 89.5 million acres (a 4 percent decline) expected to be planted to corn this year versus 92 million estimated and below even the lowest trade expectation. This would be the lowest U.S. corn acreage in five years and the fourth year in a row the U.S. Department of Agriculture’s number was outside the range of trade guesses. The February USDA Outlook Conference’s projection was 92 million acres. Last year U.S. farmers planted 93.4 million acres of corn.

Minnesota’s corn acres will reportedly be down 600,000 this year to 7.8 million and soybean acres up 350,000 this spring. Iowa’s corn acreage is the lowest since 2005 with a 300,000 acre decline this year to 12.6 million acres. Illinois corn acres are expected to fall 300,000 acres to 10.7 million, and North Dakota is expected to plant 500,000 fewer corn acres this year. U.S. hay acres were pegged at their lowest since 1907!

March 1 corn stocks were pegged at 7.85 billion bushels, up 2 percent from last year, with 52 percent on-farm (4 billion bushels) and 48 percent (3.77 billion bushels) held in off-farm storage. The on-farm stocks are up 1 percent from last year and off-farm stocks rose 3 percent from last year. This compares with the average trade estimate of 7.88 billion bushels and 7.7 billion bushels last year on March 1. The stocks number has not come in below the average trades guess for the last three years. This year’s stocks are the second lowest in six years.

Cash Grain Markets

corn/change* soybeans/change*

St. Cloud $7.05 +.12 $15.51 -.61 Madison $7.28 +.23 $15.59 -.65 Redwood Falls $7.30 +.18 $15.49 -.65 Fergus Falls $7.18 +.18 $15.64 -.65 Morris $7.22 +.07 $15.64 -.65 Tracy

$7.22 +.12 $15.54 -.60 Average: $7.21 $15.57 Year Ago Average: $5.21 $13.54

Grain prices are effective cash close on April 5. *Cash grain price change represents a two-week period.

Ukraine did export its first corn train to the west in the last week. Reports were circulating that Ukraine was in talks with Romania to use their Black Sea port to ship grain exports. I heard the rail gauge between the two countries is different which could make this shipping alternative more difficult. Adding to Ukraine’s export troubles are reports that Russia mined areas of the Black Sea, and some had drifted into waters off Turkey and Romania. Military diving teams from Turkey and Romania were disarming the mines. Russia is considering demanding payment terms for several commodities, including grain and crude oil, to be made in rubles. Germany is making emergency plans to ration natural gas supplies in case Russia shuts off or disrupts the supply chain. Russia accounted for 55 percent of Germany’s natural gas imports last year. Ukraine’s president of the Ukrainian Agrarian Confederation expects their spring planting of corn, soybeans and sunflowers will fall at least 30 percent with production suffering at least a 40-45 percent decline. UkrAgroConsult says Ukraine has started planting on at least 15-20 percent of spring crop acres. Their Agricultural Minister estimated 11.9 million acres will be planted with sunflowers this year, down from 16.5 million acres last year. It’s estimated that Russian troops have mined about 50,000 hectares.

The weekly ethanol report wasn’t what you want to see with slightly lower production but stocks that swelled to 101-week highs and near-record levels. Weekly production decreased 6,000 barrels per day to 1.04 million bpd. Ethanol stocks jumped 381,000 barrels to 26.5 million barrels. Gasoline demand fell to an eight-week low. Crush margins fell 8 cents to a positive 8 cents per gallon. This isn’t what you want to see at a time when gasoline demand usually begins to climb through the summer. High gasoline prices at the pump are affecting consumers’ demand. Production is still running slightly above what is needed to hit the USDA’s corn for ethanol usage, but the increasing stocks are concerning. News that

See NYSTROM, pg. 17

Financial Focus Try this 6-step budget check-up

Every year, about 150 million households file their federal tax returns. For many, the process involves digging through shoe boxes or manila folders full of receipts; gathering mortgage, retirement, and investment account statements; and relying on computer software to take advantage of every tax break the code permits. (IRS.gov, 2021)

It seems a shame not to make the most of all that effort.

Tax preparation may be the only time of year many households gather all their financial information in one place. That makes it a perfect time to take a critical look at how much money is coming in and where it’s all going. In other words, this is a great time to give the household budget a checkup. MARISSA JOHNSON Profinium Wealth Management Advisor

A thorough budget checkup involves six steps.

Creating some categories — Start by dividing expenses into useful categories. Some possibilities: home, auto, food, household, debt, clothes, pets, entertainment, and charity. Don’t forget savings and investments. It may also be helpful to create subcategories. Housing, for example, can be divided into mortgage, taxes, insurance, utilities, and maintenance.

Following the money — Go through all the receipts and statements gathered to prepare taxes and get a better understanding of where the money went last year. Track everything. Be as specific as possible, and don’t forget to account for the cost of a latte on the way to the office each day.

Projecting expenses forward — Knowing how much was spent per budget category can provide a useful template for projecting future expenses. Go through each category. Are expenses likely to rise in the coming year? If so, by how much? The results of this projection will form the basis of a budget for the coming year.

Determining expected income — Add together all sources of income. Make sure to use net income.

Doing the math — It’s time for the moment of truth. Subtract projected expenses from expected income. If expenses exceed income, it may be necessary to consider changes. Prioritize categories and

See JOHNSON, pg. 18

NYSTROM, from pg. 16

President Biden is considering releasing 1 million bpd of Strategic Petroleum Reserves per day over several months pressured crude oil prices in the latter half of the week. It was rumored that up to 180 million barrels may be released which would account for nearly one-third of the reserve. Another option to battle high costs at the pump the administration is considering is allowing the sale of E15 throughout the summer.

Weekly export sales for corn were humbling at 25.1 million bushels vs. the 65 million bushels we’ve averaged over the last three weeks. We are still above the 15.4 million bushels of sales needed per week to reach the USDA’s 2.5 billion bushel export outlook. Total old crop export commitments are 2.1 billion bushels, down 18 percent from last year when the USDA is predicting a 9.2 percent year-over-year export reduction. New crop sales this week were 11.3 million bushels to bring total 2022-23 sales to 95.5 million bushels compared to 78.7 million bushels last year at this time.

Weather forecasts for the United States look cool and slightly wet for the first half of April. While there is no correlation between weather during this time frame and final production, it does suggest we won’t have an aggressive start to this year’s planting. The United States usually has 20 percent of corn acreage planted by the end of April.

Brazil’s first corn harvest was 62 percent complete as of March 29 vs. 58 percent on average and 59 percent last year. Their safrinha corn planting was 99 percent complete vs. 93 percent on average and 96 percent last year. The safrinha corn planting is off to a good start.

APK-Inform expects Ukraine will produce 14.8 million metric tons of wheat this year, down from 32.3 mmt last year. Corn production is projected at 18.5 mmt vs. 42.1 mmt last year. It’s estimated that Ukraine has planted 988,000 acres (400,000 hectares) of spring crops as of the end of March. Ukraine’s deputy minister of agriculture believes they have 13 mmt of corn and 3.8 mmt of wheat to export, but logistics is making it nearly impossible. They are in talks to use Romania’s port on the Black Sea at Constanta.

Brazil’s safrinha corn crop has gotten off to a decent start and we may see its estimate creep up if weather conditions hold. The Buenos Aires Grain Exchange rated Argentina’s corn crop at 32 percent good/excellent, up 1 percent from last week, with 30 percent of the crop mature and harvest at 14 percent complete.

Outlook: This week’s USDA reports reinforce the need for the market to do its job of attracting more corn acres and rationing old crop supplies. We can’t afford weather problems anywhere this year. The events in Ukraine will remain a significant focus until further notice, but without any fresh input, the

MARKETING

news tends to get stale at times. The next tier of influence includes U.S. spring planting weather, safrinha pollination in Brazil, China’s need to buy corn to replace Ukrainian purchases, and the huge net length that funds are carrying. High volatility will likely be a constant in the next few months. If we see more breaks in energy or soybeans, the upside in corn could be limited; however, if events escalate in Ukraine or weather casts doubt on U.S. progress, new highs can’t be ruled out.

December 2022, 2023, and 2024 corn contracts made new contract highs this week at $6.93.75, $6.22.75, and $5.62.25 per bushel, respectively. For the week, May corn fell 19 cents to $7.35, July was 13 cents lower at $7.21.75, and December rallied 10 cents to $6.88 per bushel.

SOYBEANS — Soybeans have not been as directly affected by the events in Ukraine as have corn and wheat since Ukraine is not a significant exporter of soybeans. Soybeans did react negatively to the shortlived hope of a ceasefire, but the negative USDA reports on March 31 slammed prices lower for the week. It is not common for soybean acres to exceed corn acres. The grain stocks report was viewed as neutral.

Soybean acres this year were pegged at a record 91 million acres on the March 31st report which is up 3.8 million acres or 4 percent year-on-year. Last year we planted 87.2 million acres and the average trade estimate was 88.7 million acres. At the USDA February Outlook Conference, they were using 88 million acres. Soybean acres have been below the average trade estimate in 12 of the last 15 years.

Iowa’s soybean acres are expected to be the highest since 2005 with a 300,000 increase in acres to 10.4 million acres. Illinois acres are estimated to increase 400,000 acres to 11 million, Minnesota up 350,000 acres to 8 million, and Missouri up 400,000 acres. North Dakota’s soybean acres are estimated to drop 250,000 acres this year to 7 million acres.

Soybean stocks on March 1 were up 24 percent from last year at 1.93 billion bushels. This was near the average trade estimate of 1.9 billion and well above last year’s 1.56 billion bushel March 1 stocks. On-farm stocks were 750 million bushels (39 percent of stocks), up 26 percent from last year. Off-farm stocks at 1.18 billion bushels (61 percent of stocks) were 22 percent higher than last year. The stocks number has been above the average trade guess in 9 of the last 15 years and now in all of the last six years.

The investment bank Itau BBA expects Brazil’s soybean acres this year will only increase by 0.5 percent — the slowest growth in 15 years due to the high cost of converting pastureland. Brazil planted 100.5 million acres to soybeans in 2021-22. Brazil’s soybean harvest was 76 percent complete as of March 29 vs. 69 percent on average and 67 percent last year. Cofco was granted a 25-year concession, which options to extend it, to build a new grain terminal in Brazil at the Santos port. It is expected to be operational by 2026 and would bring Cofco’s Brazilian port capacity to 14 mmt.

Weekly export sales were very good at 48 million bushels for old crop. This brings total commitments to 2 billion bushels and down just 9 percent from last year. We only need to average 2.5 million bushels of sales per week to hit the USDA’s 2.09 billion bushel export forecast. New crop sales were 2 million bushels, bringing total commitments to 300 million bushels vs. 193.7 million bushels last year.

Argentine is raising a warning flag over potential diesel shortages that may affect corn and soybean harvest. Argentina is the world’s largest exporter of meal and soyoil and the second-largest corn exporter. The BAGE’s rating for Argentina’s soybean crop improved 1 percent to 33 percent good/excellent with 49 percent of the crop mature and 4 percent harvested.

Outlook: Soybean prices are back to pre-Ukrainian invasion levels after this week’s plunge in prices. Wide ranges will be expected as U.S. and South American weather continues to influence prices and any developments in Ukraine may overshadow other news. Watch for any increase in export interest or end user buying, but with current conditions, we may have seen the highs. May soybeans are $1.76.5 off their contract high and November soybeans are $1.48.25 off their contract high. High volatility will likely continue to be a part of daily pricing.

For the week, May soybeans skidded $1.27.5 lower to $15.82.75, July dropped $1.21.75 to $15.66.75, and November fell 90 cents to $14.06.75 per bushel.

Weekly price changes in July wheat for the week ended March 25: Chicago wheat down $1.08.25 at $9.84.25, Kansas City down 93.25 cents at $10.13.75, and Minneapolis down 37 cents at $10.65.25 per bushel. The wheat acreage report was neutral with all wheat acreage at 47.35 million acres and stocks were also neutral at 1.025 billion bushels as of March 1. v