Morning report: Concerns about global wheat supplies keep the rally going for a second straight day. Plus – some WASDE insights. (Comments are updated by 7:30 a.m. Central Time.)
Corn up 1-3 cents
Soybeans up 6-11 cents; Soymeal up $4.20/ton; Soyoil up $0.22/lb
Chicago wheat mixed; Kansas City wheat mixed; Minneapolis wheat up 13-20 cents
*Prices as of 6:55am CDT.
Good morning! There is a lot to unpack from yesterday’s World Agricultural Supply and Demand Estimates (WASDE) report from USDA! I’ll throw in a few highlights here, but I am currently working on finishing an E-corn-omics article and updating graphs to summarize all of my key findings.
Specifically, I will use that article to dive into some of the fertilizer market dynamics that USDA expects to play out in the global markets this year as well as changes to China’s trading patterns. I just didn’t have enough time yesterday afternoon and this morning to fit it all in!
Our team’s coverage of yesterday’s reports is also available online, plus senior editor Ben Potter and I teamed up to do a podcast of USDA’s top findings.
The punchline: grain and oilseed supplies are going to be justifiably tight for at least another year, which will undoubtedly result in high marketing prices for farmers over the next 12-18 months.
There is little room for error this year in crop production, though it seems many farmers across the world are already struggling with turbulent growing cycles. Grain and oilseed demand is unrelenting as a growing world hungers for more food. It’s a bull market, and not likely to change soon.
On Brazilian corn production:
Brazil’s safrinha crop in the Center West is currently maturing. A heavier than usual late winter rainy season ended earlier than usual in the region, which was great for planting progress, but it could potentially lead to more severe drought damage through April.
Rainfall in Southern Brazil has been more bountiful and is keeping nationwide corn ratings stable despite the dryness further north in Brazil. CONAB estimates released prior to the WASDE release indicated larger acreage expansion in Southern Brazil that will help offset drought losses in the North, so the WAOB kept Brazilian corn production estimates unchanged.
Brazil’s safrinha crop accounts for the majority of its annual export sales, so despite a favorable start to the crop’s growing cycle earlier this year, markets could see bullish price action in the corn market if weather conditions in the North begin to deteriorate faster than previously forecasted. Brazil trails the U.S. as the world’s second-largest corn exporter.
Supply and expansion issues
I’ve previously discussed global acreage expansions and the phenomenal acreage growth the world has experienced over the past decade, primarily in South America and the Black Sea. But for the first time since 2019, global harvested acreage for corn, soybeans, and wheat is going to shrink.
Ukraine’s wartime production losses and a smaller U.S. corn crop are the chief contributors here, though lucrative earnings for other crops, especially oilseeds, are also a factor in a shift away from these primary row crops.
About 628,000 fewer acres of corn, soybeans and wheat are going to be harvested around the globe this year. The loss comes after two consecutive years of acreage gains for these three crops, which totaled a staggering 63.5 million acres of new global crop expansion.
That will force some interesting supply dynamics into motion. While global wheat exports are slated to grow 3% next year, due in large part to strong Russian and European Union crops, exportable corn supplies around the world will shrink by 8% on smaller U.S. crop estimates.
Supply pressures are going to continue to squeeze wheat and corn prices higher. At a 27.01% stocks-to-use ratio and only 99 days of carryout, 2022/23 world wheat supplies are likely to be the tightest since the 2014/15 marketing year.
Global corn supplies will be similarly squeezed, with little hopes of breaking out of three consecutive years of tight supplies. The 2022/23 STU ratio for corn came in at 22.42%, which is consistent with supply levels over the past two marketing years. But it also means that global corn liquidity will be significantly less than that of wheat, so growers will likely have multiple opportunities to book record sales throughout the marketing year.
But the big issue underscoring these supply issues extends beyond stock volumes. Global corn usage will contract this year, the first time since 2019/20 U.S. crop shortfalls that has happened in the world. Wheat usage rates are only expected to rise by a measly 0.2%, suggesting that any potential crop shortfalls in the Northern Hemisphere this summer (i.e. the U.S. spring wheat crop) could translate into even higher prices that could drive buyers out of the market.
A reversion to more normal weather patterns in South America and a record U.S. soybean crop will loosen global soybean supplies slightly. But demand growth will rise an astounding 1.06 billion bushels from 2021/22 volumes to 20.11 billion bushels – a 6% annual increase. If realized, it will be the fifth largest annual expansion in the global soybean market on record following 2014, 2009, 2019, & 2016.
Global stocks will loosen slightly as the global soybean STU ratio grows nearly two points to 18.2% in 2022/23. That’s the largest supply availably in the soybean market since 2020/21, which emphasizes just how tight these global oilseed markets have become, especially in the wake of Russia’s occupation of Ukraine.
Feedback from the Field is live! I have received few Feedback from the Field responses over the past few days, which leads me to believe that planting activities are in full swing across the Heartland! Want to see how your farm’s progress tacks up against other growers across the country?
Just click this link to take the survey and share updates about your farm’s spring progress. I review and upload results daily to the FFTF Google(TM) MyMap, so farmers can see others’ responses from across the country – or even across the county!
Inputs
President Biden announced $500 million in aid would be funneled to supporting domestic fertilizer production to help ease rising input costs for farmers. The announcement came yesterday at a Northern Illinois farm where the President and Secretary of Agriculture Tom Vilsack spent the afternoon meeting with local growers.
Biden also announced that USDA will be extending “ouble crop insurance coverage to nearly 700 additional counties, to encourage farmers to raise wheat without relying on them to substitute crops or cultivate more ground,” according to Prairie Farmer editor Holly Spangler. “Nearly 2,000 counties will have access to double crop insurance.”
“The soybean association, working with us and other farm groups, have sought to double the number of double crop acres to 30 million by 2030. I hope we can accelerate that with this effort today,” Vilsack said. Currently, only 12 to 15 million acres of U.S. ground is double cropped with wheat and soybeans.
Spangler was live onsite to see the President and Secretary of Agriculture. Her coverage of the announcements can be found here.
Corn
July 2022 corn is knocking on the door of the $8/bushel benchmark this morning following yesterday’s WASDE reports that lifted corn prices. The WASDE saw smaller yield estimates for the U.S. crop and tightening global supplies amid Ukrainian crop contractions amid the Russian war. The sentiments kept corn prices trading $0.01-$0.02/bushel higher than yesterday’s close.
Soybeans
While soybeans saw some supply relief in yesterday’s WASDE reports, the bulls settled back in as China’s soybean import forecast for the 2022/23 marketing year (3.64B bu.) grew to its highest volume since the 2020/21 marketing year (3.67B bu.) as expansion on the country’s hog herd moderates.
Soybean futures prices edged $0.06-$0.11/bushel higher on the news.
The 2022/23 marketing year is expected to see China record its second-largest soybean import volumes on record. Granted, those import gains are likely to come at the expense of smaller corn and wheat imports. But China’s wheat crop is already off to a rough start amid drought and corn acres will decrease to make room for a domestic soybean expansion, so the optimism for other grain imports could grow to match the optimism for soybeans in the coming months.
Wheat
Wheat prices continued to charge higher overnight after yesterday’s WASDE reports saw tightening global supplies and a looming U.S. winter wheat crop shortfall. Futures prices were mixed in Chicago this morning but traded $0.02-$0.03/bushel higher in Kansas City and $0.10-$0.20/bushel higher in Minneapolis as ongoing rain delays continue to severely hinder spring wheat planting progress.
Crop damage due to drought in France, India, and Northern Africa also remains top of mind in the global wheat market as tight supplies continue to plague wheat buyers in the aftermath of Russia’s invasion into Ukraine beginning in February. The overarching dynamics are pushing global wheat supplies to a six-year low.
The report reflected “an increasingly tense context linked to the double effect of climatic hazards and tensions on the Black Sea,” consultancy Agritel told Reuters.
Intensifying drought pressure in France, the European Union’s top wheat producer, sent soft wheat ratings tumbling 9% lower over past two weeks, leaving only 82% of French soft wheat crops in good to excellent condition as of Monday.
“We’re reaching a tipping point for some soil types,” Catherine Cauchard, head of FranceAgriMer’s crop monitoring service told Reuters reporters. “Farmers are hoping for rain so that yield potential can be maintained.”
Weather
Steamy temperatures across the Heartland will continue today (yes, I know it’s early May and I’m sorry to everyone who is enduring 90+ degree temps), according to NOAA’s short-range forecasts. The heat should help soils dry out and keep planting progress advancing at a steady clip.
Showers are forecast in the Mississippi River Valley today. The system will batter the Eastern Corn Belt tomorrow. But the Northern Plains should finally see some clear skies over the next couple days to get planting progress rolling!
Good luck this weekend, everyone!
What else I’m reading this morning on our website, FarmFutures.com:
The Farm Futures team’s coverage of the May 2022 WASDE reports.
Naomi Blohm weighs the odds of a corn market rally amid spring planting delays.
High prices cure high prices, right? Yes, but in the U.S. that implies an acreage expansion that has not happened.
Mike Downey helps growers evaluate the fair market value of a family farm corporation.
Bryce Knorr weighs the odds of $11/bushel corn after looking at options prices ahead of the mid-May benchmark for corn planting progress.
Morning Ag Commodity Prices – 5/13/2022
Contract
Units
High
Low
Last
Net Change
% Change
MAY ’22 CORN
$ / BSH
8.03
#N/A
8.135
0
0.00%
JUL ’22 CORN
$ / BSH
7.97
7.9
7.9375
0.0225
0.28%
SEP ’22 CORN
$ / BSH
7.685
7.6175
7.65
0.0125
0.16%
DEC ’22 CORN
$ / BSH
7.585
7.5125
7.5525
0.0225
0.30%
MAR ’23 CORN
$ / BSH
7.6125
7.5425
7.585
0.0225
0.30%
MAY ’23 CORN
$ / BSH
7.6
7.535
7.56
0.0075
0.10%
JUL ’23 CORN
$ / BSH
7.5275
7.4675
7.49
0
0.00%
MAY ’22 SOYBEANS
$ / BSH
16.04
#N/A
16.6025
0
0.00%
JUL ’22 SOYBEANS
$ / BSH
16.3775
16.14
16.245
0.1075
0.67%
AUG ’22 SOYBEANS
$ / BSH
15.9025
15.6675
15.785
0.0925
0.59%
SEP ’22 SOYBEANS
$ / BSH
15.28
15.0875
15.19
0.0875
0.58%
NOV ’22 SOYBEANS
$ / BSH
14.95
14.7825
14.88
0.075
0.51%
JAN ’23 SOYBEANS
$ / BSH
14.97
14.815
14.9125
0.085
0.57%
MAR ’23 SOYBEANS
$ / BSH
14.845
14.6825
14.7625
0.08
0.54%
MAY ’23 SOYBEANS
$ / BSH
14.81
14.65
14.73
0.08
0.55%
JUL ’23 SOYBEANS
$ / BSH
14.7775
14.6625
14.6825
0.06
0.41%
MAY ’22 SOYBEAN OIL
$ / LB
0
#N/A
88.52
0
0.00%
JUL ’22 SOYBEAN OIL
$ / LB
83.75
82.48
82.62
0.1
0.12%
MAY ’22 SOY MEAL
$ / TON
0
#N/A
399.4
0
0.00%
JUL ’22 SOY MEAL
$ / TON
400.8
396.2
400.3
4.3
1.09%
AUG ’22 SOY MEAL
$ / TON
397.4
393.4
396.9
4.2
1.07%
SEP ’22 SOY MEAL
$ / TON
394.2
390
393.7
3.7
0.95%
OCT ’22 SOY MEAL
$ / TON
390.4
386.5
390.1
3.6
0.93%
MAY ’22 Chicago SRW
$ / BSH
0
#N/A
11.745
0
0.00%
JUL ’22 Chicago SRW
$ / BSH
11.985
11.71
11.7425
-0.045
-0.38%
SEP ’22 Chicago SRW
$ / BSH
12.0125
11.735
11.7675
-0.05
-0.42%
DEC ’22 Chicago SRW
$ / BSH
12.0575
11.785
11.8125
-0.0525
-0.44%
MAR ’23 Chicago SRW
$ / BSH
12.04
11.77
11.795
-0.0725
-0.61%
MAY ’22 Kansas City HRW
$ / BSH
12.7
12.59
12.7
0.16
1.28%
JUL ’22 Kansas City HRW
$ / BSH
12.92
12.6425
12.6975
-0.0025
-0.02%
SEP ’22 Kansas City HRW
$ / BSH
12.9325
12.66
12.71
-0.005
-0.04%
DEC ’22 Kansas City HRW
$ / BSH
12.945
12.6775
12.735
0
0.00%
MAR ’23 Kansas City HRW
$ / BSH
12.81
12.6475
12.6475
-0.015
-0.12%
MAY ’22 MLPS Spring Wheat
$ / BSH
13
13
13
0.2025
1.58%
JUL ’22 MLPS Spring Wheat
$ / BSH
13.3575
13.105
13.3
0.14
1.06%
SEP ’22 MLPS Spring Wheat
$ / BSH
13.3
13.0525
13.245
0.1275
0.97%
DEC ’22 MLPS Spring Wheat
$ / BSH
13.2175
12.995
13.15
0.1
0.77%
MAR ’23 MLPS Spring Wheat
$ / BSH
13.1475
13.055
13.0625
0.0725
0.56%
JUN ’21 ICE Dollar Index
$
104.905
104.54
104.765
-0.132
-0.13%
JU ’21 Light Crude
$ / BBL
108.46
106.29
107.88
1.75
1.65%
JU ’21 Light Crude
$ / BBL
106.68
104.64
106.17
1.77
1.70%
JUN ’22 ULS Diesel
$ /U GAL
3.9846
3.8938
3.9376
0.0215
0.55%
JUL ’22 ULS Diesel
$ /U GAL
3.7946
3.7184
3.7572
0.0209
0.56%
JUN ’22 Gasoline
$ /U GAL
3.8998
3.797
3.8866
0.0949
2.50%
JUL ’22 Gasoline
$ /U GAL
3.7391
3.6532
3.7243
0.0793
2.18%
MAY ’22 Feeder Cattle
$ / CWT
0
#N/A
156.875
0
0.00%
AUG ’22 Feeder Cattle
$ / CWT
0
#N/A
166.525
0
0.00%
JU ’21 Live Cattle
$ / CWT
0
#N/A
131.65
0
0.00%
AU ’21 Live Cattle
$ / CWT
0
#N/A
132.775
0
0.00%
MAY ’22 Live Hogs
$ / CWT
0
#N/A
100.1
0
0.00%
JUN ’22 Live Hogs
$ / CWT
0
#N/A
97.475
0
0.00%
MAY ’22 Class III Milk
$ / CWT
24.92
#N/A
24.95
0
0.00%
JUN ’22 Class III Milk
$ / CWT
24.03
#N/A
24.1
0
0.00%
JUL ’22 Class III Milk
$ / CWT
23.93
#N/A
24.03
0
0.00%
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