By Jon Scheve, Superior Feed Ingredients, LLC
This past week the market focused on the possibility Russia would allow grain to be exported out of Ukraine through “humanitarian maritime corridors” from ports on the Black Sea. For this to happen it requires a deal between the US, EU, UN, Ukraine and Russia. It’s doubtful all five will be able to agree on something, but the market continues to watch closely.
If a substantial amount of grain trapped in Ukraine could be exported out by sea, wheat prices would likely be significantly overvalued and would put corn prices under pressure too. If Ukrainian grain stays trapped, then wheat and corn values are arguably undervalued at current prices. ark
China and Brazil made an agreement that corn can be traded between the two countries. This agreement does not change world supply and demand. Long term this agreement is more of a logistical price issue between China, South America, and U.S. freight rates the market will trade around.
Weather remains a wildcard. Regardless of what happens in Ukraine, if there is widespread hot and dry weather in June and July throughout the Corn Belt, then more upside potential is possible. And, that assumes all projected corn acres get planted.
The planting pace throughout most of the U.S. progressed well last week, except for North Dakota which continues to move very slowly. The full insurance guarantee for corn plantings in the northern Corn Belt has now passed; however, given current price levels farmers there have indicated they will likely keep planting until around June 4. After that date, most indicate they will switch to soybeans before taking prevent plant.
By Friday, prices still encouraged U.S. farmers to plant as much corn as possible. North Dakota will probably lose 1 to 2 million corn acres this year, but the rest of the U.S. will likely add that many acres, at the expense of beans. Last month many in the trade expected corn acres to be added to the total by the June 30 report. Now it seems more likely that total corn and bean acres will be closer to the March 31 report estimates. While there may be a few more corn acres at the expense of beans, the change probably will not be substantial.
The bottom line is that the situation in the Black Sea region has taken a strange turn and increased market volatility. North Dakota weather has switched from drought conditions last year to too much precipitation this year. Total planted acres for the country continue to be a question mark. June and July could still get exciting.
Please email email@example.com with any questions or to learn more. Jon grew up raising corn and soybeans on a farm near Beatrice, NE. Upon graduation from The University of Nebraska in Lincoln, he became a grain merchandiser and has been trading corn, soybeans and other grains for the last 18 years, building relationships with end-users in the process. After successfully marketing his father’s grain and getting his MBA, 10 years ago he started helping farmer clients market their grain based upon his principals of farmer education, reducing risk, understanding storage potential and using basis strategy to maximize individual farm operation profits. A big believer in farmer education of futures trading, Jon writes a weekly commentary to farmers interested in learning more and growing their farm operations.
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