A look at markets after the Black Sea Grain initiative

By Doug Tenney

Last month, as Cindy and I on a weeknight walked into an out-of-town restaurant, we were warmly greeted by four farmers I’ve enjoyed knowing for many years, Denny, Rick, Ron, and Russell (you know who you are). Cindy says she can’t take me anywhere without me seeing someone I know. She took some fun teasing from those guys. To their surprise, she dished it back. It was great to see them laughing, relaxed and enjoying a meal together. Farming is life and life is farming. It’s something to value and celebrate in the field as well as the table!

The Black Sea Grain Initiative (BGSI) ended last month on July 17 as expected. The last 10 days of July, Russia bombed Ukraine grain facilities for five consecutive days which included three grain export facilities in the Black Sea as well as one facility on the Danube River. The EU has been discussing the idea of working with Ukraine in order that its grain could be exported through other European ocean ports. If those plans were put into motion, it means moving grain via truck, rail, and barge which only adds additional costs, not yet finally determined. In addition, the EU has pledged 1.5 billion dollars to help repair and upgrade Ukraine infrastructure in order for its wheat and corn to be available to more countries.

The Aug. 11 USDA Supply and Demand Report (WASDE) will likely include changes to US corn exports with additional declines of 25-50 million bushels, continuing a trend of reductions for the past several months. The July 12 WASDE Report had US corn exports at 1.65 billion bushels, with the February 8 WASDE report detailing exports of 1.925 billion bushels. Brazil’s strong export trend with the majority of those exports shipped to China are a major reason for shrinking US corn exports.

The July 26 weekly Corn for Ethanol Report revealed 110 million bushels of corn was used for ethanol production, continuing a trend of nine straight weeks of 100 million bushels or higher. It was the largest weekly number since October 2021. Corn basis at ethanol facilities continues to be strong as of late July. Ethanol stocks are not growing proportionally larger in spite of increasing weekly grinds. Margins have greatly improved compared to the first months of 2023. Corn producers have captured basis bumps of 20 cents and more over posted bids at one central Ohio ethanol producer. One buyer chuckled he is finding corn moving from farm locations which previously had been reported to be “empty.”

Electric cars with their use of li-ion batteries continue to be in the news with a recent U.S. home fire containing an electric vehicle. In addition, the car carrier ship, Fremantle Highway, exited its origin port of Bremen, Germany on July 25 carrying 2,857 cars with only 25 electric vehicles (EV) on its way to Egypt when fire broke out on the electric vehicles. EV fires and especially those on ocean bound boats, are extremely difficult to extinguish due to chemical reactions within its batteries. Water cannot be used to extinguish those types of fires. Temperatures within those fires can reach 800 Celsius or 1,472 Fahrenheit according to shipping industry reports.

Note that while electric cars are in the news, VW reports less than 10% of its new car sales are electric. Also, Ford reports it is losing $32,000 per EV sold in is second quarter report to shareholders as EV sales account for only 2.8% of its total vehicle sales. Ford also reports that its Lightning F-150 EV truck when towing 3,500 pounds, struggles to tow a load even 100 miles before needing a recharge. Best not to be in a hurry to reach your final destination as the Lightning recharge takes 45 minutes. Strong reasons to really push those EV sales. Hmmm…

September 2023 CBOT wheat was up its 60 cent daily limit early in the last week of July when the Russian bombing of Ukraine grain facilities reached its maximum. Wheat’s price strength evaporated when the bombings did not take place for several days. That same week, December CBOT 2023 corn reached $5.72, closing out the week at $5.30. In addition, November 2023 soybeans reached $14.35, a new high for 2023, but closed the week at $13.82.

Corn, soybeans, and wheat continue to trade in choppy fashion as clear trends have been difficult to establish.

Quote for the day. “To be interested in food but not in food production is clearly absurd.” – Wendell Berry.

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