Winter markets

By Doug Tenney, Leist Mercantile

March 2022 CBOT soybean price activity since Oct. 1 has seen a huge range of $2.22. The March soybean low during the fall was early November when they reached $11.93. They rallied to $14.15, closing up 23 cents on Jan. 7, just days before the Jan. 12 USDA Report Day. The close on Jan. 7 marked the first time the March 2022 CBOT soybeans had crossed the $14 threshold since June 11. The price run up was a result of prolonged dry weather concerns in both southern Brazil and northern Argentina. The weather premium was quickly extracted in the week which followed Jan. 7, when forecasts finally changed with numerous rains moving through the drought parched regions of Brazil and Argentina.

Jan. 12 USDA report day 

The January report day is often called one of the most important report days for the entire year. It is a big deal because the final U.S. 2021 corn and soybean production numbers are detailed within the WASDE Report. More than just the monthly WASDE (Supply and Demand) Report is published. In addition, that report day also contains the U.S. Quarterly Grain Stocks Report as well as U.S. Winter Wheat Acres. Bottom line, the reports in totality were called neutral.

U.S. corn production for 2021 was 15.115 billion bushels, up 53 million bushels from December. Corn ending stocks were estimated at 1.540 million bushels, up 47 million bushels. The U.S. corn yield was estimated at 177 bushels per acre. Corn demand had changes but the net result was zero. Corn used for ethanol increased 75 million bushels while corn exports were lowered 75 million bushels. Many traders think USDA still has U.S. corn exports too low as they expect corn exports to increase 200 million bushels in coming months.

Upcoming USDA reports this quarter will include the Feb. 9 and March 9 Monthly WASDE Reports. The Quarterly Grain Stocks Report and Planting Intentions Report both will be March 31.

Weather 

South America was widely varied during December and early January. The central and northern areas of Brazil received numerous rains during that period. Some were even calling the rains excessive at times in those regions of Brazil. In contrast, southern Brazil and northern Argentina experienced drought with excessive heat in that December and January six week period. Temperatures in Argentina were as high as 110 to 115 degrees during a 7-day stretch in early January. Some analysts had even suggested that potential yields had been zapped and would not recover even with timely rains into February. 

Winter in Ohio 

Snow as of mid-January has been largely non-existent across much of Ohio. There have been several periods since early December when temperatures reached single digit lows. Wheat producers are obviously concerned as there could be wheat acres where yield could be drastically reduced with “winter kill” taking place. Those cold periods and no snow can be problematic. 

Weather will provide uncertainty in the next three months, both in South America and the U.S. Unless the drought trends in South America are reversed in the next 30 days, Brazil’s soybean and corn production could see further declines. USDA on Jan. 12 estimated Brazil’s soybean production at 139 million tons, down from 144 million tons in December 2021. The decline of 5 million tons was larger than expected. During the week before the January 12 USDA report, some private estimates published declines of 10 million to 14 million tons for Brazil’s soybean production. Keep in mind those declines are worst case scenarios. However, the USDA reduction was quickly discounted when needed rains moved through Brazil and Argentina in those drought parched regions the balance of that second week of January. March soybeans for the week ending January 14 were down 40 cents. The previous week, soybeans closed up 71 cents. 

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