Afternoon report: Wheat takes a heavy hit today on de-escalating Black Sea concerns & bearish Wall Street pressures
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Corn
Corn: The weekend forecast bodes favorably for corn harvest progress across the Midwest, which lent to corn futures prices weakening by $0.05-$0.08/bushel during today’s trading session. Pressure from a strengthening dollar weighed on export prospects and lower energy prices dimmed demand optimism for ethanol output.
Russia roiled markets by threatening to end its agreement to allow safe passage of Ukrainian grains yesterday. But frantic overnight negotiations between Russia, the U.N., and Turkey, calmed markets today and sent corn and wheat prices lower in relief.
Regardless of the past few days of market turmoil, corn prices are still slated to end the week 1% higher amid Ukrainian supply worries and a smaller than expected U.S. corn harvest. If realized, it marks the third consecutive week of price gains for the corn complex.
Food processors and ethanol plants are about the only locations around the Midwest offering any hopes of premium basis offerings for freshly harvested corn today. And even that isn’t a guarantee of a strong cash bid – basis weakened at an Indiana ethanol plant and on the Mississippi River at Davenport today.
While a Cedar Rapids, Iowa food processor raised its cash offering by $0.25/bushel to now offer a $0.12/bushel premium to December 2022 corn futures, it was one of the few end users across the Eastern Corn Belt offering a strong cash bid as backlogs on the Mississippi River during peak harvest season increases corn supply and demand mismatches across the region.
As a result, grain originators reported few new cash sales booked by farmers, who are currently focusing on delivering previously agreed upon corn and soybean contracts as they wait for the blocked supplies to trickle through the demand pipeline.
Soybeans
Soybeans: Soybean futures fell $0.08-$0.14/bushel today amid ongoing harvest progress across the Midwest, weaker energy prices, and bearish pressure from Wall Street. Even three consecutive days of large flash export sales announced by USDA could not reverse today’s losses in the soybean market.
Regardless, USDA’s larger-than-expected cuts to 2022 U.S. soybean yields still propped up the soybean complex for a 1.2% price gain on the week.
Cash soybean prices in the Eastern Corn Belt continue to trade at a steep discount to November 2022 futures prices as grain flows to the U.S. Gulf remained backlogged amid low river volumes on the Mississippi. The discounts grew at soybean crush and river terminal locations today as harvest volumes continue to pile up across the Midwest.
As previously mentioned with corn cash sales, today’s soybean sales were slow as farmers deliver previously booked contracts and await more profitable pricing opportunities.
Cash soymeal prices held steady today across much of the country. End user demand is strengthening as peak poultry production season approaches, as evidenced by an uptick in cash bids at an Alabama rail location. Truck and rail terminals in most of the country outside Iowa and Southern Minnesota are trading at a premium to futures, further reflecting strong end user demand as fall temperatures settle across the country.
Soybean shipping volumes inched up last week, according to this morning’s Weekly Export Sales report from USDA. But as I dig into the volumes in my latest E-corn-omics column, I find that it is a pyrrhic victory – and not dissimilar to last night’s Chicago Bears – Washington Commanders NFL game.
Here’s a quick preview of the article, now live on our site. It features more insights about both the Bears game as well as the impacts of low Mississippi River levels on grain shipping paces. Check it out if you need to lighten up the conversations in your weekend fantasy football group chats because you’re a Chicago Bears fan like me and have little else to contribute to the convo!
With approx. 32.6 million bushels of U.S. soybeans shipped to international buyers last week, soybean shipping volumes notched a new 2022/23 record high weekly volume as more harvested supplies reach export terminals.
But even after Hurricane Sandy slowed shipping volumes a year ago, this morning’s marketing-year-to-date soybean shipping paces are still a significant 24% lower than last year. What’s more concerning is that this year’s cumulative soybean export volumes are a staggering 70% lower than the same paces in 2020/21.
China was the top destination for U.S. soybeans last week (22.3M bu.), though volumes trailed year-ago shipments (47.2M bu.) by more than double the amount. But on a good note, Khalil Herbert was as impressive last night as Mexico and Egypt upping their weekly soybean purchases from the U.S. by 34% and 16% more than the same time last year.
So there is some optimism in the smaller and closer markets, like the Bears’ run game. But there are still a lot of issues to be addressed on the logistic front before we can count any upward shipping trends in the soybean market as a win.
Wheat
Wheat: U.S. wheat prices tumbled a staggering $0.20-$0.29/bushel lower today as the dollar strengthened and economic fears deepened following lackluster bank earnings on Wall Street.
Yes – you read that right. Wall Street – and the overall global economic hellscape – is largely to blame for today’s losses in the wheat market.
Additional bearish price pressure came from markets’ disbelief that Russia will end the Grain Initiative despite yesterday’s comments from Moscow. The U.N. and Turkey are working to broker a deal to keep the corridor open.
Soft red winter wheat spot prices were unchanged in the Eastern Corn Belt, trading at a $0.30/bushel discount to nearby futures prices. Cash offerings for hard red winter wheat in the Southern Plains were also flat today. Dealers reported light sales through the countryside as growers awaited higher prices that would justify taking crops out of storage.
Inputs: I missed a chance earlier this week to report that Polish fertilizer producer Grupa Azoty resumed nitrogen fertilizer output after halting in August due to prohibitive natural gas prices. That’s good news for farmers as it means more supplies will be returning to the global pipeline in the near future.
Bank of America’s global research unit released a memo today issuing cuts to Nutrien’s profit outlook and gains to CF Industries’ prices ahead of third quarter earnings reports. The bank expects that CF Industries will benefit from its nitrogen fertilizers portfolio as European production wanes due to high natural gas prices.
BofA expects Nutrien will take a hit on slow nitrogen sales this fall – which is unsurprising as warm and dry weather delays – and even prevents – fall fertilizer applications. But the global investor is bullish on Nutrien through next year as global potash demand remains strong and Russian and Belarusian supplies remain hindered by sanctions.
However, BofA analysts are less optimistic about Mosaic’s profit prospects. The investment bank cut its earnings estimate for the Florida-headquartered phosphate and potash producer, citing poor performance for both of the company’s primary business units.
Weather
Weather: The year’s first wintry mix is forecast for the Upper Midwest this weekend, according to NOAA’s short-term forecasts. Precipitation is expected to be light, which should keep harvest delays to a minimum in the region. If anything, the colder temperatures could help to speed up dry down rates for crops along the Northern U.S. border.
But other than that, skies are forecast to be mostly clear this weekend, which should pave the way for steady harvest progress. A band of showers is forecast to stretch along the Southern quarter of the nation by Sunday, which could help improve winter wheat conditions in the Southern Plains.
Yesterday’s U.S. Drought Monitor updates through the week ending October 11 saw dry weather reach a new peak. The monitor found 81.8% of U.S. land was in some sort of abnormally dry to exceptional drought condition as of this past Tuesday, surpassing the previous high of 80.8% recorded in July 2012.
While the dry weather has been largely favorable for harvest progress this fall, it is beginning to create some concerns about 2023 harvest potential – especially for wheat. Top winter wheat producing areas in the Plains have been plagued by drought for over a year now, which lowered yields and increased abandonment during the 2022 growing cycle.
Farmers have largely planted winter wheat this fall for next summer’s harvest in lines with historical speeds, despite battling dry soils. Emergence rates are lagging slightly behind historical paces as the dry dirt limits the volume of nutrients available to the young crop.
But this much is clear – the continental U.S. needs more precipitation in the coming months if 2023 yields are to return back to trendline levels for next year’s growing season. The wheat crop may already be in trouble, but so too will other crops especially if La Ni?a weather patterns that leave the Plains dry persist in the coming months.
Cooler temperatures are finally expected to settle into the Midwest through the end of the month. NOAA’s 6-10-day outlook is showing cooler temperature probabilities for continental region to the east of the Mississippi River, though chances for precipitation will hover below average for much of the Upper Midwest during that time.
However, the 8-14-day outlook is trending warmer for the Heartland through the end of October. The extended forecast also indicates drier than average precipitation patterns, which will benefit harvest progress for late-planted crops.
Financials: Big news overnight in the food world – grocery behemoth Kroger (Payless, City Market, Fred Meyer) will buy its top competitor, Albertsons (Safeway). The consolidation – if the U.S. Department of Justice lets it through without any antitrust concerns – will allow the grocer to compete against Walmart more readily.
This is a development to which I believe livestock producers should be paying extra attention. In economic theory (and somewhat in reality also), retailers set the prices at which meat packers (and other food processors) sell their cuts. This influences the prices at which meat packers are willing to buy livestock from farmers.
A consolidated Kroger and Albertsons organization would shrink the prices retailers offer middlemen, which would inevitably be passed down to farmers in the form of lower buying prices offered to farmers by packers. I’m not an overly political person, but this would be a great topic for farmers to bring up to their elected representatives in the next couple weeks if farmers are concerned that their margins could be impacted.
The markets started this morning optimistic about bank earnings but those hopes quickly faded as JPMorgan Chase, Morgan Stanley, and Wells Fargo reported lackluster third quarter profits. Plus, markets remain jittery about the stability of the U.K. debt market amid government shakeups. As a result, the S&P 500 fell a massive 2.02% today to $3,596.65, taking all my hopes of early retirement down the drain with the losses.
What else I’m reading this morning on our website, FarmFutures.com:
Naomi Blohm dissects eight geopolitical events that could move grain markets in the coming weeks.
Our team’s coverage of the October 2022 WASDE reports!
University of Minnesota ag economist Ed Usset introduces readers to marketing strategies that use call options to capitalize on re-owning crops.
Executive editor Mike Wilson explains how to manage costly nitrogen for high-yielding corn.
Policy editor Jacqui Fatka is leaving our team. Here is her final DC Dialogue column – I highly recommend it!
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