War and weather

By Jon Scheve, Superior Feed Ingredients, LLC 

Sideways trading continued. Corn traded between $6.75 and $6.80 every day last week, while beans finished the week at the upper end of its recent month long $15.00 to $15.40 range.

Last month 30% fewer ships were loaded out of Ukraine than in the previous month. Then on Friday tensions increased with more missile strikes hitting critical infrastructure. The increased potential risk of getting the grain out of the region contributed to the rally on Friday. Questions still abound about how much grain will be raised there in 2023.

Weather conditions in Argentina suggest their corn crop’s yield may be lower than where the market has priced it in at. Plus, the planting pace of Brazil’s Mato Grosso region, where nearly 50% of their second corn crop is grown, is slightly behind the 5-year average. A late planted crop there could be impacted by the May dry season and potentially reduce yields. The market will continue monitoring the situation there closely over the next few weeks. 

New Crop

Crop insurance prices are set by the average closing price of December futures in February. After 8 of the 23 trading days of the month, it looks like corn is averaging about $5.95.

Over the last 33 years, the calendar high or low of December corn has never been made in February. And over the last 23 years, the calendar high or low for the year has never been in March either. 

In those same 33 years, January has only had December corn’s calendar high twice (2001 and 2013) and its low three times (1995, 2011, and 2021). Currently, January has recorded both the high of the calendar year at $6.11 on Jan. 3 and its low of $5.84 on Jan. 23. History would suggest there is almost a 90% chance neither of these two numbers will end up being the high or the low for the year.

Bottomline

Usually, February is not an exciting month for the markets. Market participants are waiting and watching for the next few months to see what happens with the war in Ukraine and weather in the southern hemisphere, because both can change prices substantially. It could mean the market will continue trading sideways for the next few weeks until more is known.

Please email jon@superiorfeed.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.

Trading of futures, options, swaps and other derivatives is risky and is not suitable for all persons. All of these investment products are leveraged, and you can lose more than your initial deposit. Each investment product is offered only to and from jurisdictions where solicitation and sale are lawful, and in accordance with applicable laws and regulations in such jurisdiction. The information provided here should not be relied upon as a substitute for independent research before making your investment decisions. Superior Feed Ingredients, LLC is merely providing this information for your general information and the information does not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision. The contents of this communication and any attachments are for informational purposes only and under no circumstances should they be construed as an offer to buy or sell, or a solicitation to buy or sell any future, option, swap or other derivative. The sources for the information and any opinions in this communication are believed to be reliable, but Superior Feed Ingredients, LLC does not warrant or guarantee the accuracy of such information or opinions. Superior Feed Ingredients, LLC and its principals and employees may take positions different from any positions described in this communication. Past results are not necessarily indicative of future results.

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