Soy markets cool after yesterday’s 8-month high. (Comments are updated by 7:30 a.m. Central Time.)
Corn continues to cool after Monday’s 7-month high
Corn down 5-7 cents
Soybeans down 7-15 cents; Soymeal down $1.00/ton; Soyoil down $0.74/lb
Chicago wheat down 7-8 cents; Kansas City wheat down 7-8 cents; Minneapolis wheat down 3-4 cents
*Prices as of 7:00am CST.
Good morning! Live cattle futures contracts closed at a five-year high in yesterday’s trading session. Cattle supply dynamics in both the U.S. and Canada are facing headwinds, especially in Canada. I provide all the insights and more on these issues in my latest E-corn-omics column, but here is a quick preview in this morning’s column. Have a great day! – JH
High feed costs and scarce feed supplies has made feeding cattle in the U.S. a challenge. The underlying price dynamics have left the U.S. cattle herd down 2% over the past year at 91.1 million head of cattle and calves as of January 1, according to USDA’s National Agricultural Statistics Service’s (NASS).
Tighter margins are making livestock production more challenging, even as futures prices soar to multi-year heights. To be sure, $6/bushel corn doesn’t exactly send expansion signals to cattle producers, especially with the Plains and West battling an ongoing drought and limited hay supplies.
Plus, the recent COVID-19 surge and ongoing labor shortages has slowed slaughtering speeds at meat processing facilities. Luckily, rising boxed beef prices could provide enough economic incentive to prevent a repeat of 2020 backlogs.
A shrinking cattle herd is not exactly a new development. Cattle inventory levels have drifted lower over the past four years, with the January 1 inventory reading marking the lowest cattle inventory in the country since 2015.
Corn usage for livestock feed and residual use in 2021/22 will account for 37% of 2021 corn production volumes – a metric that will hit a four-year low as ethanol and exports rebound in the pandemic economy.
But the shrinking cattle herd has other price effects, largely on the live cattle market. Live cattle futures contracts have largely traded within a $5-$6/cwt range since late November 2021, with the February 2022 contract hovering between $134.50 – $139.78/cwt during the period from Thanksgiving 2021 to this past Tuesday.
The recent rally in the corn market has helped nearby live cattle futures break through the price resistance at the $140/cwt level in the past few days. At last glance, February 2022 futures prices for live cattle rested at $141.125/cwt on the rising feed costs.
Live prices of $141/cwt are certainly nothing to shrug at. In fact, yesterday’s prices closed at a five-year high. But the rising production costs from increasingly scarce feed stocks after last summer’s drought in the West and Northern Plains create financial challenges for feedlot managers who need to maintain profit margins.
Frigid temperatures in the Upper Midwest are not helping matters any. Cold weather increases net energy and production requirements for what cattle remain. Simply put, the further the temperature drops, the higher volume of protein and roughage feedstuffs are required by the feedlots to maintain economical growth prospects for animals.
With old crop corn futures sitting between $6.17-$6.22/bushel in yesterday’s trading session and nearby soymeal futures well over $425/ton, cattle farmers are becoming increasingly squeezed at the margins to continue feeding their stock without any further price support from cattle markets or processors.
$6/bushel corn may be good for grain growers, but as the grain market has bought back more acres of soybeans over the past week, it is becoming clear that it is not a sustainable price level for livestock herds – corn’s top domestic consumer.
Corn
Corn futures fell $0.05-$0.07/bushel overnight as ethanol stocks continue to grow after a robust growth phase for the U.S. ethanol industry that has largely waned in recent weeks as fuel demand slips amid cold weather.
Old crop corn prices remain steadily above $6.10/bushel at press time but are facing upward resistance as growers evaluate 2022 crop decisions amid soaring input costs and competing soybean prices. Demand may also be under pressure as cattle and export buyers evaluate the profitability of high-priced corn.
Soybeans
Profit takers swooped into soy markets overnight to take the top off yesterday’s eight-month high was notched in the nearby Chicago soybean futures markets. Clear weather in Brazil paved the way for favorable harvest progress, sending Chicago futures $0.06-$0.15/bushel lower. But South American yield concerns continued to prevent further losses.
Rising vegetable oil costs are driving up food prices across the world, according to the United Nation’s Food and Agriculture Organization (FAO). The FAO’s monthly food price index rose 1% from December 2021 to 135.7 points – the highest average pricing for food in nearly 10 years.
FAO’s vegetable index paved the way for the largest month-over-month gains, rising 4.2% in January 2022 as tightening global supplies, reduced production forecasts, and potential military conflict in Ukraine cause prices to rally to unprecedented levels.
“There is a concern the impacts of these constraints will not ease quickly,” Boubaker Ben-Belhassen, head of FAO’s Markets and Trade Division, said in a statement.
Wheat
A rising dollar sank wheat futures for another day. Moisture in the U.S. Plains sent Chicago and Kansas City futures $0.05-$0.08/bushel lower. Minneapolis futures shed $0.03-$0.04/bushel. Losses were capped by ongoing tensions with Russia at Ukraine’s border.
Inputs
As traditional fertilizer costs continue to soar and on-farm revenue outlooks remain largely profitable, growers are looking to new ways to boost soil fertility and ultimately, yields. Biostimulants, such as microbes, are becoming a hot-ticket item on farmers’ shopping lists this year as growers look to boost returns from high-priced input investments.
According to a Reuters report released overnight, Rabobank expects the biostimulants industry to grow 12%-15% per year for the next five years from its current state of $3 billion. And while application of biostimulants, including nourishing fungi and viruses that improve nitrogen fixing in the soil, can be challenging, farmers are willing to take the risk.
“I was skeptical that there was a biological product that would help the crop,” Iowa farmer Jeff Taylor told Reuters of an investment into Pivot Bio’s microbe products. “This is one that I personally feel is working for me.”
The concept has been widely practiced in Europe prior to arriving in the U.S. Microbes are also an effective way of increasing efforts to reduce carbon emissions and a great way to appease consumer desires for more green farming practices.
“It had bad connotations of being snake oil. (Now) it’s like the stars are aligned.” James Maude, senior vice president for biostimulant company Acadian, told Reuters.
Weather
Snow, rain, ice and cold temperatures are still in the forecast for the Heartland today, according to NOAA’s short-range forecasts. Snow will continue to fall across the Southern Plains today, as the system wraps east into the Eastern Corn Belt through this evening.
Ice will likely fall on the southern edge of the system, falling in the Southern Plains and into parts of East Texas through Ohio. Rainfall will douse regions even further south as a mixed pressure system soaks the southeast with rain today.
The system will likely dissipate into the East Coast late tomorrow night.
Financials
Meta (the company formally known as Facebook…which is really only a phrase that is worthy of Prince, in my purely professional opinion) lost nearly $200 billion overnight after its quarterly earnings report pointed to fewer user interactions with its more lucrative service options. Shares fell 18% in afterhours trading immediately following the company’s earnings release yesterday evening.
So if you woke up on the wrong side of the bed today, remember – at least you aren’t Mark Zuckerberg!
Unfortunately, Zuck’s problems are impacting my 401(k) today. S&P 500 futures are trading 40 points (0.87%) lower to $4,537.25 as the tech rout from January renews itself on Facebook/Meta’s woes.
Facebook is literally the worst.
Also worth a read on our website, FarmFutures.com
Bryce Knorr compares 2022 to the 2012 drought era to justify a bull market may or may not continue.
Crop insurance tools can be a great supplement to a good grain marketing plan. Ben Potter has tips to set both your insurance and marketing advisors up for a successful relationship.
Check out Case IH’s newest planting equipment!
A “Right to Repair” bill has been proposed by Senator Jon Tester to help farmers take back control of their own equipment.
High input costs and supply chain snafus were top of mind for farmers in January, according to Purdue University’s latest Ag Economy Barometer.
Morning Ag Commodity Prices – 2/3/2022
Contract
Units
High
Low
Last
Net Change
% Change
MAR ’22 CORN
$ / BSH
6.2425
6.145
6.1575
-0.0675
-1.08%
MAY ’22 CORN
$ / BSH
6.24
6.145
6.155
-0.0675
-1.08%
JUL ’22 CORN
$ / BSH
6.1875
6.1
6.1075
-0.065
-1.05%
SEP ’22 CORN
$ / BSH
5.855
5.775
5.7825
-0.055
-0.94%
DEC ’22 CORN
$ / BSH
5.74
5.665
5.6775
-0.0525
-0.92%
MAR ’23 CORN
$ / BSH
5.81
5.74
5.7475
-0.055
-0.95%
MAY ’23 CORN
$ / BSH
5.8225
5.775
5.775
-0.0525
-0.90%
MAR ’22 SOYBEANS
$ / BSH
15.49
15.3075
15.3125
-0.14
-0.91%
MAY ’22 SOYBEANS
$ / BSH
15.525
15.3475
15.3525
-0.1425
-0.92%
JUL ’22 SOYBEANS
$ / BSH
15.46
15.27
15.28
-0.1475
-0.96%
AUG ’22 SOYBEANS
$ / BSH
15.0475
14.915
14.92
-0.125
-0.83%
SEP ’22 SOYBEANS
$ / BSH
14.3225
14.205
14.225
-0.0925
-0.65%
NOV ’22 SOYBEANS
$ / BSH
13.89
13.8075
13.81
-0.0875
-0.63%
JAN ’23 SOYBEANS
$ / BSH
13.8425
13.7675
13.77
-0.08
-0.58%
MAR ’23 SOYBEANS
$ / BSH
13.5925
13.51
13.555
-0.05
-0.37%
MAY ’23 SOYBEANS
$ / BSH
13.5025
13.47
13.4775
-0.0375
-0.28%
MAR ’22 SOYBEAN OIL
$ / LB
65.99
65.01
65.16
-0.82
-1.24%
MAY ’22 SOYBEAN OIL
$ / LB
65.95
65.08
65.14
-0.81
-1.23%
MAR ’22 SOY MEAL
$ / TON
436.9
432.8
434.8
-0.3
-0.07%
MAY ’22 SOY MEAL
$ / TON
435.1
431.4
432.9
-0.6
-0.14%
JUL ’22 SOY MEAL
$ / TON
432
428.1
429.4
-0.8
-0.19%
AUG ’22 SOY MEAL
$ / TON
420.8
417.2
418.7
-0.7
-0.17%
SEP ’22 SOY MEAL
$ / TON
406.2
402.6
403.3
-1.4
-0.35%
MAR ’22 Chicago SRW
$ / BSH
7.565
7.44
7.47
-0.08
-1.06%
MAY ’22 Chicago SRW
$ / BSH
7.6275
7.5075
7.5325
-0.0775
-1.02%
JUL ’22 Chicago SRW
$ / BSH
7.5775
7.46
7.4725
-0.0775
-1.03%
SEP ’22 Chicago SRW
$ / BSH
7.59
7.4775
7.4975
-0.065
-0.86%
DEC ’22 Chicago SRW
$ / BSH
7.6375
7.52
7.53
-0.08
-1.05%
MAR ’22 Kansas City HRW
$ / BSH
7.695
7.5825
7.615
-0.08
-1.04%
MAY ’22 Kansas City HRW
$ / BSH
7.725
7.63
7.6575
-0.075
-0.97%
JUL ’22 Kansas City HRW
$ / BSH
7.7325
7.645
7.67
-0.075
-0.97%
SEP ’22 Kansas City HRW
$ / BSH
7.77
7.6925
7.735
-0.0525
-0.67%
DEC ’22 Kansas City HRW
$ / BSH
7.835
7.77
7.795
-0.075
-0.95%
MAR ’22 MLPS Spring Wheat
$ / BSH
9.07
9.0175
9.055
-0.025
-0.28%
MAY ’22 MLPS Spring Wheat
$ / BSH
9.0325
8.99
9.0275
-0.025
-0.28%
JUL ’22 MLPS Spring Wheat
$ / BSH
8.96
8.95
8.95
-0.0375
-0.42%
SEP ’22 MLPS Spring Wheat
$ / BSH
8.74
8.74
8.74
-0.0275
-0.31%
DEC ’22 MLPS Spring Wheat
$ / BSH
8.6775
#N/A
8.7
0
0.00%
MAR ’21 ICE Dollar Index
$
96.25
95.97
96.225
0.29
0.30%
MA ’21 Light Crude
$ / BBL
88.14
86.75
87.24
-1.02
-1.16%
AP ’21 Light Crude
$ / BBL
86.58
85.24
85.67
-1.02
-1.18%
MAR ’22 ULS Diesel
$ /U GAL
2.7747
2.7412
2.7554
-0.0135
-0.49%
APR ’22 ULS Diesel
$ /U GAL
2.6753
2.6425
2.6543
-0.0184
-0.69%
MAR ’22 Gasoline
$ /U GAL
2.6142
2.5771
2.5894
-0.0176
-0.68%
APR ’22 Gasoline
$ /U GAL
2.7105
2.6739
2.6851
-0.0188
-0.70%
MAR ’22 Feeder Cattle
$ / CWT
0
#N/A
166.875
0
0.00%
APR ’22 Feeder Cattle
$ / CWT
0
#N/A
171.825
0
0.00%
FE ’21 Live Cattle
$ / CWT
0
#N/A
141.125
0
0.00%
AP ’21 Live Cattle
$ / CWT
0
#N/A
146.9
0
0.00%
FEB ’22 Live Hogs
$ / CWT
0
#N/A
87.35
0
0.00%
APR ’22 Live Hogs
$ / CWT
0
#N/A
99.125
0
0.00%
FEB ’22 Class III Milk
$ / CWT
20.36
20.35
20.36
0.05
0.25%
MAR ’22 Class III Milk
$ / CWT
21.37
#N/A
21.51
0
0.00%
APR ’22 Class III Milk
$ / CWT
21.52
#N/A
21.6
0
0.00%
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