Market Analysis

By Doug Tenney, Leist Mercantile

USDA numbers today include U.S. Prospective acres and U.S. quarterly grain stocks as of March 1. 

Soybeans friendly with stocks less than expected.

U.S. acres: corn -91.9 million acres; soybeans – 87.5 million acres; and all wheat – 49.9 million acres. U.S. grain stocks: corn – 7.401 billion bushels; soybean stocks – 1.685 billion bushels, and wheat stocks – 946 million bushels. 

Note: The reports today did not include supply and demand tables which is normal on the days for U.S. quarterly grain stocks reports as well as the planting intentions report day. The next WASDE report will be on April 11. Some are already projecting that the April report will be a yawner with little changes. The recent string of 11 days or more of U.S. corn sold to China, means the threat of USDA reducing U.S. corn exports next month is drastically declining. 

Just after the noon report release, corn was up 5 cents, soybeans up 26 cents, and wheat down 10 cents.… Continue reading

By Jon Scheve, Superior Feed Ingredients, LLC 

Corn continues to see good export demand and is trading 37 cents off the lows posted only 2 weeks ago. If export announcements continue corn has upside potential.

Beans have the opposite problem with reports that Brazilian beans are priced low enough to be imported into the United States. The South American crop is the largest in history despite a record drought in Argentina. This is likely a major reason for a $1.20 per bushel drop in prices over the last month.

Stocks & Acreage Report

The upcoming March 31^st USDA report is highly anticipated for several reasons:

• It provides the estimated remaining stocks stored on farms and at commercial elevators.
• It shows how tight stocks are and if price rationing is necessary.
• It includes the first official planting intentions estimate for the upcoming year based upon surveys filled out by producers in early March.

Last month the USDA Economic Outlook Forum estimated 91 million corn acres and 87.5 million soybean acres would be planted in 2023. However,… Continue reading

By Jon Scheve, Superior Feed Ingredients, LLC 

May corn finished the week ending March 18 up 17 cents, largely due to China providing export announcements four days in a row. Each day with an export announcement, old crop corn futures also increased. There has not been a 4-day rally on the May contract since early January. 

It was announced that the funds have been liquidating a significant amount of their long positions since late February. It now seems end users and likely China were buying old crop corn during the pullback. 

If the funds move to a holding pattern while farmers are planting, a floor price might have been established. And if more exports are announced in the next few weeks, higher prices are a possibility.

Ukraine uncertainty continues

Currently, it is unclear how many days the Ukraine grain corridor will be extended. Ukraine said it was renewed for the normal 4 months, while the Russians have said it was only for 2 months.… Continue reading

By Jon Scheve, Superior Feed Ingredients, LLC 

Watching the corn market slide the last three weeks has been painful for producers. However, it feels a little too early for the corn market to pull back this much this fast. It seems possible the corn market could turn around like beans did in the fall.

Last September when beans were trading around $13.80, the trade was suggesting the U.S. bean export program may be in trouble due to low water levels and a slow export pace. Many market participants thought that beans would trade in a $13.50 to $14.50 range going forward because of concerns over Brazil’s large upcoming bean crop that could potentially make meeting USDA export estimates at the time more difficult. 

Two months later, Brazil was still on track to raise a record crop, and despite dry conditions in Argentina, it was still likely South America’s production would hit a new record.  Many… Continue reading

By Doug Tenney, Leist Mercantile

Big surprise: USDA lowered Argentina soybean production 8 million tons to 33 million tons.

The word for of today is: unrelenting. Argentina’s current drought conditions are expected to continue for another two weeks with daily highs in the 90s and even into the 100s.

US highlights

U.S. corn exports were down 75 million bushels, U.S. soybean exports were up 25 million bushels, crush down 10 million bushels. U.S. corn ending stocks up 75 million bushels. U.S. soybean ending stocks down 15 million bushels.  

World highlights

Brazil soybean production 153 million tons, last month was 153 million tons. Brazil corn production 125 million tons, last month was 125 million tons. Argentina soybean production 33 million tons, last month was 41 million tons. Argentina corn production 40 million tons, last month was 47 million tons. USDA today projected China would be importing 96 million tons of soybeans during the current marketing year from September to August.… Continue reading

By Jon Scheve, Superior Feed Ingredients, LLC

Rumors of corn exports to China had the market on edge last week with futures finishing almost 18 cents off the lows from a few days earlier. With the March contract, which is in the delivery process, trading higher than the May contract, along with basis increases throughout the U.S., some are expecting export announcements in the next few weeks.

The U.S. is about the only exporter of corn right now and we are competitively priced with the rest of the world, so export numbers should increase. Brazil export facilities have switched over almost completely to beans, as their new crop is being harvested right now. Argentina’s corn crop will likely be 20% to 30% lower than normal due to the worst drought in over a half century. And, Ukraine continues to have logistical issues due to the war.  

So, even though the corn export pace is currently behind USDA estimates, there are still some variables that would make it possible to hit their projections.… Continue reading

By Jon Scheve, Superior Feed Ingredients, LLC 

Corn closed down for the third day in a row. However, it has still remained range bound between $6.50 and $6.90 since Dec. 20.

Since the ethanol mandate started in 2007, May corn futures have been above $4.29 on the first trading day of the year 8 out of 16 years (including this year – 2023). The chart below shows for those other 7 years how the price then fluctuated through April. 

As one can see, when May corn futures have started the year off above $4.29, they have eventually rallied above the closing value of this point in the year by the end of April every time. While past performance is never a guarantee of future results, it will be interesting to see if this trend continues in 2023. 

Market Movers

The market continues to watch the Mato Grosso region’s planting pace in Brazil, where nearly 50% of their second corn crop is grown. … Continue reading

By Joe Janzen, Department of Agricultural and Consumer Economics, University of Illinois and Carl Zulauf, Department of Agricultural, Environmental and Development Economics, Ohio State University

Feb. 24, 2023 marked the one-year anniversary of the Russian invasion of Ukraine. On that date, Russian forces dramatically escalated the existing Russia-Ukraine conflict, initiating a “special military operation” intent on seizing Ukrainian territory including the capital of Kyiv. In the year since, Ukraine has resisted the invasion with assistance from European and American allies.

The war has caused significant damage to Ukrainian agriculture, particular in eastern regions most impacted by fighting. Recent estimates from the Kyiv School of Economics suggest over $6.6 billion in agricultural infrastructure has been destroyed. The war has also substantially limited the ability of Ukrainian farmers to grow and ship their crops. The same source estimates the war has imposed an additional $36.2 billion in indirect costs to agriculture, mainly in the form of foregone production and higher logistics costs for continuing agricultural exports.… Continue reading

By Jon Scheve, Superior Feed Ingredients, LLC 

Export sales have been very good for beans up to this point in the marketing year, but there are still a high percentage of beans left that have not shipped out of the country yet. As March approaches this might become a concern because Brazil’s beans are valued 80 cents less for shipment a month from now. This may lead to cancelations soon, which could mean a bigger carryout and price pull back.

What are cancelations?

The term “cancelation” in grain trading does not mean foreign buyers can just walk away from contracts without penalties. It instead means there are offsetting trades between two parties that effectively cancels the original contract. This often involves a money exchange between two parties as the original sales need to be shifted to other buyers.

How do cancelations work?

To answer this, it helps to first understand how grain trading works after farmers sell and deliver their grain.… Continue reading

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… Continue reading

By Doug Tenney, Leist Mercantile

This month’s USDA WASDE Report tends to be benign. Grains were higher in the overnight at the 8:45 am pause with soybeans up 10 cents, corn up 1 cent, and wheat up 2 cents as traders reacted to overnight news headlines. Mid-morning soybeans were unchanged.

The phrase for the day, “not working,” was coined as we slept last night. Russian Deputy Foreign Minister Alexander Grushko said that the Ukraine Grain Corridor was not working properly as western nations, mainly the EU, are getting too much grain. Russia continues to complain that Ukraine grain is not moving to the world’s neediest in Central Africa or SE Asia. In a mostly sarcastic tone, it appears Russia is complaining about the solution they helped engineer and agreed upon, to a problem they created.

U.S. numbers highlights: U.S. corn exports unchanged, corn for ethanol down 25 million bushels.  U.S. corn ending stocks up 25 million bushels.… Continue reading

By Jon Scheve, Superior Feed Ingredients, LLC 

Since Christmas, March corn has traded between $6.75 and $6.80 on 22 out of 27 days. March beans have also traded sideways with values between $15.00 and $15.40 for 25 out of 27 days. The market continues to search for direction.

The USDA released their cattle on feed estimates, which produced alarming headlines stating: “U.S. Beef Cow Herds in January Fall to Lowest Level Since 1962.” However, U.S. beef cows only represent 30% of total cattle on feed numbers, which is only down about 3% from last year. This number is only about 100,000 head or .3% below the 2014 beef cow numbers when cattle numbers were last this tight. 

Putting this into perspective, the USDA decreased current feed usage estimates over 7% from last year. Beef, hogs, and poultry each account for 25% of total feed demand, while milk, eggs, and turkey production make up the final 25% of corn feed usage.… Continue reading

By Doug Tenney, Leist Mercantile

The hour clock sand is nearly empty for producers to finish pricing fertilizer needs for 2023 corn and soybeans. “Don’t delay the inevitable,” was a comment heard in regard to locking in fertilizer prices for 2023 crops. The gargantuan drop in natural gas prices the last 4 months has played a significant role in declining fertilizer prices of roughly $100 to $200 per ton. Europe’s winter to date of above normal daily low temperatures has sharply reduced their demand for natural gas, a major contributor for today’s sharply lower natural gas prices. 

Producers continue to express much agony and frustration that fall 2023 corn prices are below those for February by over a dollar in many cases. Corn margins for 2023 are the highest in 3 years, based upon pricing fertilizer in the spring and pricing corn for fall delivery in the spring. This is only one example of corn margin comparisons.… Continue reading

By Jon Scheve, Superior Feed Ingredients, LLC 

The recent announcement that NATO forces will be supplying Ukraine with tanks indicates hostilities may be heating up. This should give the market some additional risk to evaluate as it is now uncertain how many corn acres Ukraine will get planted this upcoming spring.

The Ukraine Grain Association recently suggested that a reduction in plantings was likely due to the war. If Ukraine’s weather conditions are normal, they estimate only 18 million metric tons (MMT) would be produced, and if weather is poor, it would be closer to 12 MMT. These numbers are much lower than the 22 MMT produced last year and the 40 MMT produced the year before the war started. With Ukraine needing about 6 MMT for domestic feed use each year, the fourth largest corn exporter in the world may have extremely limited supply next year.

With this massive corn production decrease, Brazil’s second corn crop being planted next month will need to hit current estimates.… Continue reading

By Jon Scheve, Superior Feed Ingredients, LLC

It has been over a week since the latest USDA report.

The biggest surprise was harvested acres being down significantly due to dry weather in Nebraska and Kansas. With those acres removed from production, the national yield average rebounded slightly. Still, overall production is lower than previously estimated.

The USDA also decreased corn export demand to an attainable level as the U.S. prime corn export season begins. Currently it is uncertain if world buyers will fill their storage facilities or wait to see how big the next crop in Brazil will be in May. There were some additional surprises in the January report that will take time for the market to digest.

Sorghum

While many market participants have discussed the drop in harvested corn acres and the slight increase in yield, they have overlooked sorghum. Sorghum had a 58% production decrease from last year, which means 200 million fewer bushels of a crop that competes directly with corn in the southern plains feed channel.… Continue reading

By Doug Tenney, Leist Mercantile

U.S. numbers highlights: U.S. corn exports down 125 million bushels; corn for ethanol unchanged; U.S. corn ending stocks down 17 million bushels; U.S. soybean exports down 55 million bushels; US soybean ending stocks down 10 million bushels.

World numbers highlights: Brazil soybean production 153 million tons, up 1 million tons. Argentina soybean production 45.5 million tons, down 4 million tons.

Expect price changes for the grains to be immediate with lots of fireworks in the first 20 minutes after the reports are released.

Here’s your tidbit for the day. The January USDA report day has been bullish for grains with gains for the day taking place 70% of the time since 2007. Also, just a reminder that USDA in recent months has tended to punt, leaving many of the demand numbers unchanged when traders were expecting increases or decreases. At times it results in confusion, with the bubble above your head reading, “What were they thinking?”   … Continue reading

By Jon Scheve, Superior Feed Ingredients, LLC

As the market moves into 2023, there are many reasons bean prices could go up or down. The following provides rationale for both.

Reasons the bean market may go lower

• La Niña is forecasted to end in February, which could help stabilize southern Brazil’s crop that was just planted, and the balance of Argentina’s bean crop being planted right now.
• Brazil is expected to produce 20% more beans than last year, which is the equivalent of 50% of Argentina’s entire production. Total South American production is expected to be a record with normal precipitation from this point forward.
• World economy concerns may mean a decrease in grain demand globally.
• While China’s economy may be coming out of lockdown, some people may continue to self-isolate, which could keep food and feed demand suppressed for several more months.
• As China opens up there are concerns a new covid variant may emerge and quickly spread around the world, causing widespread demand issues.

By Jon Scheve, Superior Feed Ingredients, LLC

As the market moves into 2023, there are many reasons corn prices could go up or down. The following provides rationale for both.

Reasons the corn market may go higher

• Ukraine produced around 45% less corn in 2022 compared to 2021, a drop of 800 million bushels.
• Europe also produced nearly 500 million fewer bushels than expected.
• Argentina has had limited precipitation so far, and forecasts indicate dry weather may continue for at least another 2 weeks. This may mean 250 million fewer bushels will be produced than expected.
• Brazil is nearly done exporting corn until their second crop is harvested in June. Ukraine has logistical issues due to the war. This leaves the U.S. as the main corn supplier globally over the next 5 to 6 months.
• China appears to be opening again, which could lead to more feed demand.
• Year over year animals on feed estimates indicate feed demand may be understated by the USDA.

By Jon Scheve, Superior Feed Ingredients, LLC

The market is in “holiday mode” with light trading, the weather in Brazil and Argentina is being monitored closely. Any dry conditions could further reduce corn and bean yields over the next few weeks.

On Oct. 3 when corn was trading at $6.85, I suspected corn prices would likely be range bound or slightly higher after harvest was finished. Therefore, I placed a trade to maximize some profit potential if that happened. On 10% of my 2022 production, I sold a $6.85 January straddle (i.e., sold both the $6.85 January put and the $6.85 January call which are based upon March futures). This allowed me to collect a net positive value of 68 cents.

What does this mean?

If the value of March corn on Dec. 23 is:

• Above $7.53 — I must sell futures at $6.85 but keep all the 68 cents collected on the trade, so it would be like selling $7.53 futures.