Market Analysis




Market factors to watch

By Jon Scheve, Superior Feed Ingredients, LLC

The USDA only increased corn acres by 500,000 from the March survey. This is not real bearish news because the market has been pushing new crop corn values to levels encouraging a lot more corn acres be switched over from beans this spring. Evidently, wet weather in North Dakota and Ohio this spring prevented a lot more acres being switched to corn.

Weather

This week I drove through southern Minnesota on I-35 to Des Moines and west along I-80 to Lincoln. Iowa’s corn is at least one week behind normal, which should push pollination dates back until after July 20. This means even after the long 3-day weekend, the 2-week weather forecasts will not yet reach the critical growing time period.

Current longer-term forecasts suggest weather should be close to normal though. If this happens, the current 177 yield projected by the USDA could be achieved.… Continue reading

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Bullish soybeans

By Doug Tenney, Leist Mercantile

Soybean acres were 2.1 million acres below trade estimates.

Just after the noon report release, corn was down 10 cents, soybeans up 12-15 cents, and wheat  down 4 cents. Prior to the reports, corn was down 15-17 cents, soybeans down 13-20 cents, and wheat down 8 cents. Non-threatening Midwest weather along with disappointing weekly U.S. grain sales contributed to the price weakness for grains prior to the noon report release.

The USDA report day for today consists of two reports, 2022 US acres and June 1 U.S. grain stocks. This report day has been volatile in recent years. USDA will not publish supply and demand tables today. The next S/D report or WASDE, will be July 12. 

U.S. acres: corn 89.9 million acres, soybeans 88.3 million acres, and wheat 47.1 million acres. 

U.S. grain stocks as of June 1: corn 4.35 billion bushels, soybeans 971 million bushels, and wheat 660 million bushels.… Continue reading

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Some market answers are coming soon…

By Jon Scheve, Superior Feed Ingredients, LLC

This past week many funds exited their long grain positions. Some in the market were concerned over a worldwide economic recession and the two-week weather forecast that suggests widespread good growing conditions. 

Basis and spreads

Record basis levels throughout the western Corn Belt suggest farmers are not selling cash corn. That’s why end users are increasing bids because they likely do not have all their July needs covered. The July corn futures spread between September and December also increased, indicating strong demand for the immediate shipment of corn. 

Both factors have likely forced commercial facilities to sell out of all remaining grain ownership, which means any grain still left in the U.S. is likely owned by farmers who have not priced corn stored in the bins. 

Farmer vs. end user

Farmers who still have unpriced grain are telling me they are not selling anything until they know more about weather conditions in mid-July.… Continue reading

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Mid-June market watching

By Doug Tenney, Leist Mercantile

Producers and traders continue to wonder what is coming down the road with USDA reports. The June USDA WASDE Report was boring as few numbers in the U.S. and world tables were changed. It was puzzling that U.S. old corn exports were lowered 50 million bushels in spite of Census Reports indicating exports are 100 million bushels plus, ahead of weekly grain inspection reports.

Weather continues to be an important puzzle piece for the balance of summer. As we stare at the reality of the July 4 holiday, just days away, three questions remain. First, were weather conditions sufficient from June 10 forward to allow the rest of many acres across Ohio to finally get planted? Second, will weather the second half of June as hot and dry as predicted on June 10 with at least four days of 90-degree temperatures in the upcoming 10-day period?… Continue reading

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Record-setting meat exports add value to U.S. crops

Record-level red meat exports of $18.7 billion in 2021 had a major impact on the corn and soybean industries, according to an independent study by the Juday Group. The study quantified the returns that red meat exports brought to corn and soybean producers in 2021 nationally, and at state levels for leading corn-producing and soybean-producing states.

“The study validates the red meat industry’s collaborative approach to export market development,” said U.S. Meat Export Federation (USMEF) Chair-elect Dean Meyer, who produces corn, soybeans, cattle and hogs near Rock Rapids, Iowa. “Beef and pork exports drive value directly back to my farm and this study helps confirm the return on this investment for all corn and soybean producers.”

Corn and soybean growers support the international promotion of U.S. pork, beef and lamb by investing a portion of their checkoff dollars in market development efforts conducted by USMEF.

Key findings from the Juday Group study, which utilized 2021 export data, include:

  • Nationally, beef and pork exports accounted for 537 million bushels of corn usage, equating to $2.94 billion (at an average corn price of $5.48 per bushel).
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Are crops still undervalued?

By Jon Scheve, Superior Feed Ingredients, LLC

Last week:

  • July corn finished up 46 cents
  • December corn finish up 30 cents
  • November soybeans finished up 40 cents
  • July wheat finished up 30 cents.

 

Corn

Corn managed to erase most of its losses from the previous week, likely due in part to the cash market’s desire to find corn for immediate use. It seems farmers are uninterested in selling corn with July futures below $8. Also, many farmers think there could be substantial upside potential with any July dry weather and are just not selling anything at these values.

 

USDA report

The June USDA report is one of the least important reports of the marketing year, and this year was no different. One of the few notable adjustments was in export demand. Beans had an increase while corn had a slight reduction.

 

Ukraine

The market continues to be extremely volatile because no one knows how much grain will get exported out of Ukraine. … Continue reading

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USDA report neutral

By Doug Tenney, Leist Mercantile

Old crop soybean exports jumped 30 million bushels. Old corn exports dropped 50 million bushels.

Traders were looking for a pretty boring report with little changes compared to last month. US old soybean exports were expected to increase from last month’s estimate at 2.170 billion bushels. While there is lots of talk about Ukraine still having in excess of 400 million bushels of unshipped grain sales yet to take place, it is anybody’s guess as to when shipments will take place.

Barring a drastic change in the Russian invasion, the market still needs to account for grain deficits in multiple regions in the world.

Continue to watch what Russia does, not what they say. For example, last weekend they bombed a major Ukraine grain export facility. But the news prior to the bombing was focused on the potential of export corridors taking place.

Following the noon report release, corn was up 1 cent, and soybeans down 7 cents.… Continue reading

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Prices drop, basis rallies

By Jon Scheve, Superior Feed Ingredients, LLC

Last Week:

  • July corn closed the week down 50 cents.
  • December corn closed the week down 40 cents and is down 75 cents from the high about one month ago.
  • November soybeans closed the week down only 17 cents from its highest close of the year.
  • July wheat collapsed a $1.17 and is down $2.37 from the high two weeks ago.

 

Soybeans

Soybeans seems to be the only bright spot, as strong bean export demand continues. For the next 8 months, the U.S. will be the only major source of beans for the world to buy from. Plus, weather has favored planting more corn acres throughout most of the U.S. this spring, so there could be fewer bean acres in the June 30 plantings report as well.

 

Ukraine

The corn and wheat markets are being affected by speculation that Russia may let grain in Ukraine be exported for humanitarian purposes. … Continue reading

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Is there more market excitement in store moving into June and July?

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.… Continue reading

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Markets responding to surprises

By Doug Tenney, Leist Mercantile

The May 12 WASDE Report (supply and demand) provided several positive surprises and higher grain prices for producers. First, the U.S. corn yield for 2022 was pegged at 177 bushels. In a rare move, USDA’s first supply and demand tables for the 2022 crop year project the corn yield for this year as different compared to the February Outlook Forum. That report estimated the U.S. 2022 corn yield at 181 bushels. This compares to past years when in consecutive fashion from 2014 to 2021 the May corn yield was the same as the February Outlook Forum. The U.S. corn yield last year was 177 bushels.

For months the market has been filled with various private reports that the U.S. corn yield had to be a record due to the tightness of corn supplies around the world. In addition, some had already suggested that a record U.S.… Continue reading

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Wheat prices holding strong

By Jon Scheve, Superior Feed Ingredients, LLC

Last week:

  • July corn was down about 3 cents
  • December corn was down about 17 cents
  • November soybeans were up over 20 cents
  • July wheat finished the week down only about 10 cents

Planting progress

Farmers appear to be getting a chance at an open planting window this week, which could allow more total acres of corn to get planted. Right now, the price advantage clearly favors planting corn over beans. The market responded this week by pulling back new crop corn prices and pushing soybean prices higher, but the prices still favor corn.

The market is trying to figure out how many corn acres will be planted, especially in the Dakotas and northern Minnesota. With today’s prices, it seems unlikely farmers will take prevent plant over trying to get the crops planted even if it is late.

Soybeans

Increased Chinese bean purchases during a time of year that does not usually see big export numbers likely also contributed to the old crop soybean price bump this past week.… Continue reading

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Do market conditions warrant $8 old crop corn and $7.50 new crop corn?

By Jon Scheve, Superior Feed Ingredients, LLC

After trading closed for the weekend, the Indian government issued a statement saying they would restrict India’s wheat exports. This is partially due to recent hot and dry weather there, and it seems like a way to curtail hoarding by other world buyers. This announcement sparked an increase in U.S. wheat prices when markets opened Sunday night and pulled corn and bean prices higher with it.

However, the Indian government’s wording in the statement suggests they could change the policy at any time for any reason, so this could lead to more volatility in the market moving forward.

USDA report highlights

Last time corn’s planting pace was this slow was 2013. Just like in 2013, the USDA decreased the estimated yield from what the Economic Forum published in February. It seems the market was already trading a perceived 177 yield, so a price premium was already built in going into the report. … Continue reading

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Bullish wheat, bullish corn

By Doug Tenney, Leist Mercantile

Corn is bullish because the yield was lowered 4 bushels for 2022. Wheat is bullish due to world ending stocks down almost 10 million tons.

Batter up! Today is opening day for the 2022-2023 marketing year even though the “season” is from Sept. 1, 2022 to Aug. 31, 2023. USDA today provides its first supply and demand tables (WASDE) for 2022 U.S. crops. It’s a long year when you consider that its first scrutiny begins nearly 4 months before the season ever begins. 

Traders will quickly be drawn to the USDA expected corn yield for 2022. USDA’s February Outlook Forum detailed the U.S. new crop corn yield at 181 bushels. Today the yield was 177 bushels. The May USDA new crop corn yield has used the February Outlook yield each year dating back to 2014. The reality of a reduced yield with this report is low in spite of the slow planting progress to date. … Continue reading

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Are the highs in? War and weather make predictions difficult

By Jon Scheve, Superior Feed Ingredients, LLC

The financial markets have been pulling back the past week. While interest rates moved higher, gold and oil moved lower from their highs a few weeks ago. With one of the top 5 most influential USDA reports being published Thursday, some traders seeing a pullback in outside markets are concerned the information in the upcoming report could be bearish, so they are banking some profits now.

The May Report

Thursday’s USDA report is important, because it will estimate the upcoming marketing year’s supply and demand for the first time. However, it is important to remember these estimates guess what supply and demand will end up being 16 months from now, and there are a lot of variables that can change these values during that time.

Corn still trending higher

Since the Ukraine invasion on Feb. 24, corn has increased nearly 90 cents (shown in the chart below).… Continue reading

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The case for $10 (or $5) corn

By Jon Scheve, Superior Feed Ingredients, LLC

Last week:

  • July corn is up 3 cents
  • December corn is down around 10 cents
  • November beans are up 3 cents
  • July wheat is down about 30 cents

The corn market seems to be running scared, probably because there are reasons it can go to $10 this summer and also reasons it could be at $5 by fall. 

The case for $10 corn

Ukraine

Ukrainian farmers will likely get a lot of their crop planted this season; however, it is uncertain where they will be able to sell it. The Russian army destroyed a railroad bridge heading to Poland, and it is possible more rail lines heading out of Ukraine could be destroyed if the war continues. If this happens, it will take a lot of time for them to be replaced. Plus, there are no Black Sea ports open under Ukrainian government control. Until these ports are operational again, any grain stored in Ukraine won’t be able to find a buyer, including next year’s crop.… Continue reading

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Bullish or bearish?

By Jon Scheve, Superior Feed Ingredients, LLC

Last week:

• July corn was up over 20 cents

• December corn was up nearly 20 cents

• November beans were up 6 cents

• July wheat was up more than 45 cents

It has been 50 days since the start of the war in Ukraine and during that time:

• July corn is up over a $1 per bushel

• December corn is up nearly $1.25 per bushel

• November soybeans are up only 14 cents

• July wheat is up more than $2.25 per bushel

While beans were already up due to dry conditions in Brazil, concern over Ukraine’s loss of export capacity has shaken the corn and wheat markets causing prices to rally more than 20% in less than 2 months.

Reasons to continue being bullish

Ukraine

Ukraine will likely not get 25% to maybe as much as 40% of their corn crop planted this year.… Continue reading

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Wet in the East, dry in the West: How will planting season pan out?

By Doug Tenney, Leist Mercantile

The March 31 USDA Reports are now behind us. The Prospective Plantings Report served to provide surprises, almost something for everyone. U.S. corn acres were estimated at 89.5 million acres, down from last year’s 93.3 million acres. Trader estimates were 92.0 million acres. It was a huge surprise, as the front number began with “8.” No doubt the ever escalating prices for corn inputs played a huge role in the acres decline. Fertilizer prices last fall were several hundred more dollars per ton compared to those in the fall of 2020. New crop December CBOT in early trading after the noon release was up the 35-cent limit, closing at $6.83 ¾, up 27 ¾ on the March 31 report day. U.S. 2022 soybean acres were pegged at 90.95 million acres, a new record, up from the previous record acres in 2017 when U.S. farmers planted 90.2 million acres.… Continue reading

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In the wake of an uninteresting report…

By Jon Scheve, Superior Feed Ingredients, LLC

Usually, the April USDA supply and demand report is one of the least interesting reports of the year, and this month’s report was no exception. From a few minutes before the March 31 report, until last Friday’s close after the USDA report on April 8:

• July corn is up 40 cents

• December corn is up 57 cents

• November soybeans are up 25 cents

• July wheat is up 28 cents.

Beans

Due to dry January conditions in Southern Brazil, it seems likely Brazil will produce 700 million fewer bushels (20 million metric tons) than was anticipated by the market last October. Now the market is trying to figure out what demand will do with such a large supply shortage and much higher prices. 

Originally, the U.S. was expected to carry over 350 million to 400 million bushels from this marketing year to next year.… Continue reading

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Neutral report from USDA on April 8

By Doug Tenney, Leist Mercantile

After the noon report was released, corn was up 6 cents, soybeans up 22 cents, and wheat up 19  cents. Just before the report, corn was up 8 cents, soybeans up 25 cents, and wheat up 22 cents. 

U.S. corn ending stocks for 2021-2022 were 1.440 billion bushels, last month, 1.440 billion bushels. U.S. soybean ending stocks were 260 million bushels, last month, 285 million bushels. U.S. wheat ending stocks were 678 million bushels, last month, 653 million bushels. 

Trader estimates have U.S. corn ending stocks 1.415 billion bushels, soybean ending stocks 262 million bushels, and wheat ending stocks 656 million bushels. USDA projected China would be importing 91 million tons of world soybeans, last month 94 million tons. 

Brazil soybean production was 125 million tons, last month 127 million tons. Brazil corn production was 116 million tons, last month 114 million tons. Argentina soybean production was 43.5 million tons, last month 43.5 million tons.… Continue reading

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Will corn be worth $7 this fall? Can beans remain above $14?

By Jon Scheve, Superior Feed Ingredients, LLC

In their spring plantings intention report, the USDA surprised the market with 2.5 million fewer corn acres and 2.5 million more bean acres than the market had anticipated. However, the total 180.44 million combined acres estimate between the two crops was very close to market expectations. 

It seems higher fertilizer prices and the potential future growth of soybean biofuels may have incentivized some farmers to adjust their rotations to plant more beans than usual. 

Now many market participants are left wondering if farmers will actually plant that many more bean acres at the expense of corn. It seems likely after this report, and the subsequent corn futures price rally and bean price pullback, that some planned bean acres could switch back to corn. Unfortunately, we will have to wait until the June 30 report to know how many acres that will be.

Looking Forward

The market will now turn its attention back to the war in Ukraine and whether the corn and wheat trapped in storage there can find its way to end users needing product throughout the world.… Continue reading

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