Morning report: Markets are waiting for more fundamental data from tomorrow’s WASDE reports. Plus – what’s new in the fertilizer markets. (Comments are updated by 7:30 a.m. Central Time.)
*Prices as of 6:50 am CST.
Inputs
It’s been a minute since I wrote about the happenings in the fertilizer market, and you all know I hate to miss out on a good time (which is obviously to be had in the fertilizer markets). So here is a quick wrap up of all the latest news from the fertilizer market over the past week!
More European production comes back online: Last week, Europe’s top phosphate fertilizer plant resumed operations after suspending production in September 2022 due to high energy prices. Lifosa AB in Lithuania, which is owned by Swiss fertilizer magnate EuroChem Group AG, has restarted at a limited capacity in the short run, though strong demand global demand could coax expansion.
Russian fertilizer movement picks up following Black Sea Grains Initiative extension: Also happening last week – the first U.N.-sanctioned Russian fertilizer shipment departed the port of Terneuzen in the Netherlands for Malawi. The Dutch government had ground the cargo after Russia invaded Ukraine last February, when an individual targeted by Western banking sanctions was linked to the shipment.
Under the Black Sea Grains Initiative, which was extended a few weeks ago by Russia and Ukraine, 260,000 metric tonnes of Russian fertilizers currently stranded in European ports due to banking sanctions will be donated to African nations to “prevent catastrophic crop loss in Africa, where it is currently planting season,” according to a U.N. spokesperson.
As of the middle of last week, another U.N.-brokered deal to resume Russian ammonia exports through a pipeline system that runs across Ukraine into a Black Sea terminal was in the works. In fact, this deal was believed by many diplomatic officials to be “hugely important, almost more important than grain,” according to U.N. aid chief Martin Griffiths.
The pipeline has been shut down since Russia invaded Ukraine in February. Griffiths hoped that an agreement to restart the pipeline would be reached over the past week, though no further information has been published on the matter.
Russia’s stalled fertilizer exports have not only deprived the world of available and affordable input supplies, but it has also led to reduced government income for Russia as the war in Ukraine continues. Planting season is in full swing in the Southern Hemisphere, so unfettered access to Russian fertilizer supplies will be critical to global production prospects in the coming weeks.
China targets 10% pesticide cut:China’s farm ministry is trying to cut down chemicals in the food chain and a recent initiative announced late last week could help ease demand pressure on global pesticide supplies.
China’s farm ministry is now aiming to reduce pesticide volumes on rice, wheat, and corn crops by 5% over the next three years. Pesticide cuts to fruit, vegetable, and tea production over the next three years are expected to be much higher.
“There is an urgent need to improve the efficiency and scientific use of pesticides and fertilizers when promoting the reduction of chemical pesticides,” the ministry of agriculture and rural affairs said on its website.
China’s arable lands account for 7% of the world’s total. But due to smaller operations and over-farmed lands, fertilizer consumption in China accounts for a third of the global total. China Energy News found that per unit fertilizer use in China is 2.7 times higher than the global average rate.
Mosaic temporarily halts potash production: Florida-based Mosaic announced on Tuesday that potash mining at its Colonsay, Saskatchewan mine has been temporarily suspended as demand forecasts have not panned out as expected. The Colonsay mine had been idled for two years before Mosaic reopened it in August 2021 to meet rising global potash demand.
The lower demand rates are likely due to plentiful supplies, as the company noted that its current inventories are plentiful enough to meet current demand. Global potash prices have come down from previous peaks recorded this year as a result. CEO Joc O’Rourke noted that long-term fertilizer demand across the globe remains strong, suggesting that this production contraction is likely to be a short-term decision.
“Colonsay was producing at a rate of 1.3 million tonnes annually, and plans an expansion to raise output to between 1.8 million and 2 million tonnes by late next year,” Rod Nickel explained in the Reuters report.
Brazilian farmers delay fertilizer purchases for 2nd crop corn: A Reuters report published early last week found that Brazilian corn growers who are preparing for the country’s second corn crop, which is planted following soybean harvest in February-March and accounts for the largest volume (75%) of Brazilian corn production in a given year, are not in a rush to scoop up fertilizer supplies.
That marks a stark contrast from the current planting season, prior to which Brazilian government officials scrambled to source adequate fertilizer volumes in the wake of Russia’s invasion into Ukraine to ensure supplies for ongoing sowing activities. However, calming global markets and growing stockpiles are driving down global fertilizer prices and Brazilian farmers aren’t keen on overpaying for high-priced fertilizer, especially amid high commodity prices.
Data from Agrinvest Commodities, a Brazilian commodities broker, found that only 75% of crop inputs for Brazilian corn growers have been purchased so far, down from the five-year average of 83%.
“Growers have noticed a sharp drop in farm input prices and delayed purchases to try and raise production margins,” Agrinvest analyst Jeferson Souza said in a report.
Analyst comments: It’s been a busy week, to say the least!
Globally, the news that more European production is coming back online and that Russian fertilizer supplies are beginning to flow more freely are all good signs for lower fertilizer prices in the U.S. China’s plan to reduce chemical usage will also free up some global supplies and should add some long-term bearish pressure to input prices.
It is peak planting season in the Southern Hemisphere. There was a lot of concern about fertilizer availability leading up to this point following Russia’s invasion of Ukraine last February, though it appears that between proactive planning (especially by Brazil’s farm ministers), back-alley fertilizer shipments, and recently released Russian supplies, Southern Hemisphere farmers appear to have enough fertilizer supplies to sustain the 2022/23 growing season.
I was not entirely surprised by Mosaic’s plans to halt potash mining in Colonsay. Mine expansion is a massive and lengthy expense for fertilizer companies and there aren’t a lot of investors on Wall Street right now who have an appetite to wait very long for an incremental payout. And as financing costs (interest rates) go up, I expect more companies to hesitate to pull the trigger on expansion plans that may have looked favorable even six months ago.
Wholesale fertilizer prices for phosphate and urea have dropped significantly over the past three months as global supplies begin to stockpile. Q4 is a big usage time for the Southern Hemisphere, though not as significant as Q1 and Q2 in the Northern Hemisphere, so these price drops aren’t surprising as the world reevaluates fertilizer inventory management strategies in the wake of the past year’s market upheaval.
Will these price drops last until spring planting season? Seasonal demand usually drives a price uptick during the spring, so I doubt low prices will last. But provided that Russia continues to play nice(ish) with other global players, I don’t expect prices will rise as high this spring as they did last year.
Wholesale UAN prices are my best indicator of that prediction – especially since UAN is likely to be one of the top products used by farmers in the U.S. this spring. But those prices haven’t come down as dramatically as UAN and DAP products in recent months, which justifies my hunch.
Bonus charts feature some of these wholesale fertilizer price changes, but they are only available to viewers of our email newsletter. Subscribe to the morning report at FarmFutures.com to peep those!
Corn
Corn prices were mixed this morning, with old crop futures contracts edging $0.01/bushel higher while new crop futures fell $0.01/lower as corn markets await further fundamental news from tomorrow’s WASDE reports.
Soybeans
Soybean futures were mixed again this morning as well as markets tried to balance prospects for South American crops against hopes for renewed Chinese demand following the lifting of COVID restrictions throughout China. Old crop futures rose $0.01-$0.05/bushel while new crop futures shed $0.01-$0.04/bushel.
Brazil’s food and statistics agency, Conab, released updated projections for 2022/23 soybean output ahead of tomorrow’s WASDE reports. Conab’s soybean forecasts are now projected at 5.639 billion bushels, which is a 2.2-million-bushel reduction from its previous estimates.
USDA’s current forecast for 2022/23 Brazilian soybean production is currently at 5.584 billion bushels, though based on current weather prospects, it could revise that figure in tomorrow’s reports.
Conab also issued new corn production targets, projecting Brazil’s 2022/23 corn crop at 4.954 billion bushels, down 22 million bushels from its past forecast. USDA currently projects Brazil’s crop at 4.961 billion bushels – very similar to the latest Conab figures.
No comment was made on why the downward revisions were enacted, though I suspect it could be due to weather concerns.
Argentine soybean sales have surged to 74.2% of last year’s harvest through last week, after preferential currency exchange rates were implemented to encourage more farmer sales. During the week of November 24-30, producer sales soared to 20.4 million bushels – the highest weekly farmer sale volume in months following the “soy dollar’s” implementation.
Argentine soybean export sales are an important source of government revenue. But so far, this year’s sales lag behind the 76.9% benchmark held as of last season as soaring inflation is driving farmers to hold onto their crops as a hedge against rising prices.
Wheat
The dollar strengthened overnight, but that did not seem to deter wheat prices this morning as they inched up by $0.01-$0.03/bushel. Export prospects for U.S. wheat improved this week, even though massive Russian and Australian crops continue to dominate the export market.
Weather
A mix of snow, rain and ice will work its way through the Central Plains and Southeast today, according to NOAA’s short-term forecasts. The mixed precipitation system is expected to move into the Upper Midwest by tomorrow, where any accumulation (up to a half inch) is expected to be heavier than in the Plains (up to a quarter inch).
NOAA’s 6-10-day forecasts are trending cooler than usual for the portion of the continental U.S. west of the Rocky Mountains through early next week. During that time, the Plains and Midwest will likely see warmer than average temperatures. Luckily, the precipitation forecasts are calling for above average chances for precipitation across virtually all of the major growing regions in the U.S. – except the Pacific Northwest – with the highest chances centered over the Great Lakes region.
The temperature trends in the 8-10-day outlook will cool across the country by later next week, while the Northern Crescent region is likely to see warmer than average temperatures. Chances for moisture are likely to remain slightly above to near normal for most of the Plains during that time while the Eastern Corn Belt could see below average chances for precipitation.
Financials
S&P 500 futures edged 0.25% higher overnight to $3,946.25 on what is believed to be a round of bargain buying after recording five consecutive days of losses. Markets remain spooked by the prospect of more interest rate hikes by the Federal Reserve and a potential economic downturn that could accompany the rate increases.
What else I’m reading this morning on our website, FarmFutures.com:
My latest E-corn-omics column reviews recent U.S. Census Bureau data results for exports – and the bullish results for soybean producers.
AgMarket.Net’s Jim McCormick reminds growers that the market doesn’t owe you a profit.
Advance Trading’s Brian Basting reviews futures levels, marketing strategies, and crop insurance periods to help farmers define their marketing plans headed into the new year.
Purdue University’s Ag Barometer finds that input costs and interest rates are at the top of farmers’ lists of concerns.
Bryce Knorr advises farmers to employ smart tax management strategies by locking in fuel expenses for next year.
Morning Ag Commodity Prices – 12/8/2022
Contract
Units
High
Low
Last
Net Change
% Change
DEC ’22 CORN
$ / BSH
6.3
6.2775
6.29
0.0125
0.20%
MAR ’23 CORN
$ / BSH
6.44
6.41
6.4175
0.005
0.08%
MAY ’23 CORN
$ / BSH
6.455
6.43
6.43
0.0025
0.04%
JUL ’23 CORN
$ / BSH
6.4225
6.395
6.3975
0
0.00%
SEP ’23 CORN
$ / BSH
6.09
6.0725
6.0725
0
0.00%
DEC ’23 CORN
$ / BSH
5.9725
5.955
5.955
-0.0075
-0.13%
AR2 ’24 CORN
$ / BSH
6.0475
6.035
6.035
-0.005
-0.08%
AY2 ’24 CORN
$ / BSH
6.0775
6.07
6.07
-0.0025
-0.04%
JUL ’24 CORN
$ / BSH
6.065
#N/A
6.06
0
0.00%
JAN ’23 SOYBEANS
$ / BSH
14.8075
14.68
14.735
0.015
0.10%
MAR ’23 SOYBEANS
$ / BSH
14.8575
14.73
14.79
0.0175
0.12%
MAY ’23 SOYBEANS
$ / BSH
14.9175
14.8025
14.855
0.0125
0.08%
JUL ’23 SOYBEANS
$ / BSH
14.96
14.8525
14.9025
0.0125
0.08%
AUG ’23 SOYBEANS
$ / BSH
14.765
14.69
14.7075
0.0075
0.05%
SEP ’23 SOYBEANS
$ / BSH
14.285
14.2125
14.2275
-0.01
-0.07%
NOV ’23 SOYBEANS
$ / BSH
14.0225
13.9575
13.9675
-0.02
-0.14%
AN2 ’24 SOYBEANS
$ / BSH
14.0325
13.9825
13.9875
-0.0225
-0.16%
AR2 ’24 SOYBEANS
$ / BSH
13.905
13.905
13.905
-0.0375
-0.27%
AY2 ’24 SOYBEANS
$ / BSH
13.93
#N/A
13.92
0
0.00%
UL2 ’24 SOYBEANS
$ / BSH
13.9475
13.94
13.9475
0.005
0.04%
DEC ’22 SOYBEAN OIL
$ / LB
63.76
#N/A
63.15
0
0.00%
JAN ’23 SOYBEAN OIL
$ / LB
61.72
60.91
61.63
0.67
1.10%
DEC ’22 SOY MEAL
$ / TON
410
#N/A
462.2
0
0.00%
JAN ’23 SOY MEAL
$ / TON
462.9
456.3
458.3
-0.7
-0.15%
MAR ’23 SOY MEAL
$ / TON
459.7
454.2
455.3
-1.7
-0.37%
MAY ’23 SOY MEAL
$ / TON
455.7
450.7
451.3
-2.6
-0.57%
JUL ’23 SOY MEAL
$ / TON
453.5
448.3
449.3
-2.9
-0.64%
DEC ’22 Chicago SRW
$ / BSH
0
#N/A
7.27
0
0.00%
MAR ’23 Chicago SRW
$ / BSH
7.545
7.4425
7.515
0.02
0.27%
MAY ’23 Chicago SRW
$ / BSH
7.645
7.5475
7.6175
0.02
0.26%
JUL ’23 Chicago SRW
$ / BSH
7.6875
7.59
7.655
0.0175
0.23%
SEP ’23 Chicago SRW
$ / BSH
7.7575
7.66
7.73
0.0275
0.36%
DEC ’23 Chicago SRW
$ / BSH
7.855
7.7625
7.8375
0.04
0.51%
AR2 ’24 Chicago SRW
$ / BSH
7.9
7.8275
7.8825
0.0425
0.54%
DEC ’22 Kansas City HRW
$ / BSH
0
#N/A
8.645
0
0.00%
MAR ’23 Kansas City HRW
$ / BSH
8.52
8.435
8.49
0.0025
0.03%
MAY ’23 Kansas City HRW
$ / BSH
8.4725
8.3925
8.44
-0.005
-0.06%
JUL ’23 Kansas City HRW
$ / BSH
8.415
8.3475
8.395
0
0.00%
SEP ’23 Kansas City HRW
$ / BSH
8.43
8.42
8.42
0.0025
0.03%
DEC ’23 Kansas City HRW
$ / BSH
8.4875
8.47
8.47
0.01
0.12%
AR2 ’24 Kansas City HRW
$ / BSH
0
#N/A
8.42
0
0.00%
DEC ’22 MLPS Spring Wheat
$ / BSH
0
#N/A
9.1275
0
0.00%
MAR ’23 MLPS Spring Wheat
$ / BSH
9.0475
9
9.03
0.01
0.11%
MAY ’23 MLPS Spring Wheat
$ / BSH
9.0525
9.0025
9.0525
0.03
0.33%
JUL ’23 MLPS Spring Wheat
$ / BSH
9.0475
9.045
9.045
0.0125
0.14%
SEP ’23 MLPS Spring Wheat
$ / BSH
8.9575
8.945
8.9575
0.0225
0.25%
DEC ’23 MLPS Spring Wheat
$ / BSH
8.9725
#N/A
8.9625
0
0.00%
AR2 ’24 MLPS Spring Wheat
$ / BSH
0
#N/A
8.9375
0
0.00%
DEC ’21 ICE Dollar Index
$
105.415
105.02
105.105
0.049
0.05%
JA ’21 Light Crude
$ / BBL
73.94
72.23
73.73
1.72
2.39%
FE ’21 Light Crude
$ / BBL
73.94
72.51
73.79
1.51
2.09%
JAN ’23 ULS Diesel
$ /U GAL
2.8309
2.775
2.8073
0.0268
0.96%
FEB ’23 ULS Diesel
$ /U GAL
2.8181
2.7661
2.797
0.0305
1.10%
JAN ’23 Gasoline
$ /U GAL
2.1106
2.0796
2.1008
0.0236
1.14%
FEB ’23 Gasoline
$ /U GAL
2.1219
2.0938
2.1129
0.0243
1.16%
JAN ’23 Feeder Cattle
$ / CWT
0
#N/A
180.9
0
0.00%
MAR ’23 Feeder Cattle
$ / CWT
0
#N/A
183.25
0
0.00%
DE ’21 Live Cattle
$ / CWT
0
#N/A
151.925
0
0.00%
FE ’21 Live Cattle
$ / CWT
0
#N/A
153.55
0
0.00%
DEC ’22 Live Hogs
$ / CWT
0
#N/A
82.375
0
0.00%
FEB ’23 Live Hogs
$ / CWT
0
#N/A
86.65
0
0.00%
DEC ’22 Class III Milk
$ / CWT
20.4
#N/A
20.39
0
0.00%
JAN ’23 Class III Milk
$ / CWT
19.64
19.52
19.52
-0.1
-0.51%
FEB ’23 Class III Milk
$ / CWT
19.48
19.48
19.48
-0.03
-0.15%
Get our top content delivered right to your inbox. Subscribe to our morning and afternoon newsletters!
