Morning report: Plus – why the Brazilian elections have been such a big deal. (Comments are updated by 7:30 a.m. Central Time.)
Corn down 6-14 cents
Soybeans down 6-10 cents; Soymeal down $4.10/ton; Soyoil up $0.31/lb
Chicago wheat down 47-52 cents; Kansas City wheat down 39-43 cents; Minneapolis wheat down 32-33 cents
*Prices as of 7:25am CDT.
Feedback from the Field updates – last weeks of the season! How is harvest progressing on your farm this fall?! Click this link to take the survey and share updates about your farm’s harvest progress. I review and upload results daily to the FFTF Google MyMap, so farmers can see others’ responses from across the country – or even across the county!
My latest FFTF column is live on our site! Soybean harvest is rapidly coming to a close across the country and more and more FFTF respondents are reporting corn harvest as complete.
Responses are starting to slow as many growers are wrapping up for the year, so our time together in FFTF this growing season will also come to an end in the upcoming weeks. So be sure to drop any insights you’d like to share with us from the 2022 season at this link and I will share them on our map as well as in my columns as harvest season winds down. Thanks! -JH
Brazil
We are kicking off today’s newsletter with a recap of Brazil’s election drama. Outgoing President Jair Bolsonaro agreed to transition power yesterday to election runoff winner Lula da Silva, who previously served as Brazil’s president from 2003-2011. But first, we need to cover a few financial fundamentals to understand the significance of what is going on in Brazil.
For the last several months, I have explained how a stronger U.S. dollar represented a safe haven asset for global investors during periods of high global economic uncertainty. During that time, stock and equity index prices have fallen as investors have sought to pool their money into less risky assets, like Treasury bonds.
But not everyone is searching for a safe haven. For investors who have been looking for higher returns, the Brazilian currency, the real, has provided profit opportunities this year. The Brazilian real has rapidly appreciated against the dollar this year because Brazil’s central bank was quicker to raise interest rates in response to pandemic-induced inflation than the U.S. Federal Reserve.
These rate hikes are not an apples-to-apples comparison: by volume, the U.S. has a larger trade market than Brazil, which exposes Brazil to higher chances of domestic price increases. Which is just a fancy way of saying Brazil already had inflation issues before the pandemic.
But Brazil’s timely rate hikes have already proven to be effective – inflation has decreased over the past three months. Brazil’s booming renewable energy sector, as well as its domestic oil production, has shielded the country from global energy price increases, which are currently fueling inflationary pressures in the European Union (and to a lesser extent, the U.S.).
The higher interest rates have also increased yields on Brazilian bonds relative to U.S. T-bonds, which has helped the Brazilian real soar to record heights this year. Brazil’s stock index, Ibovespa, is up nearly 14% on the year.
The S&P 500? Down nearly 20% as of the closing bell yesterday.
It’s not all wine and roses – Lula heavily leveraged debt to fuel economic expansion during his first presidential term and will walk into office with less budget flexibility than at that time. That could limit Brazil’s economic growth going forward.
Bolsonaro grew fossil fuel development (dropped diesel fuel prices, which is a key reason why Brazilian truckers have been protesting Bolsonaro’s loss) and expanded corn and soybean acreages, all of which benefited Brazilian farmers.
But Lula is less likely to keep the interest of large Brazilian farmers at the top of his agenda, which could throw into doubt more acreage expansion in Brazil. In his victory speech on Sunday night, Lula proclaimed that Brazil is “not interested in the role of an eternal commodity exporter.”
Those aren’t the words buyers in these tight grain and oilseed markets needed to hear, especially as high prices are (literally) begging the market to bring more acres into production after several key global food producers have suffered weather-related crop shortfalls over the last couple years, in conjunction with the Black Sea conflict that has further constricted global food supplies.
The Brazilian election uncertainty as well as the added ambiguity with which Lula will step into office sent the Brazilian real and stock market tumbling over the last couple days. Brazil’s soybean and other ag exports are not an insignificant contributor to the country’s GDP – USDA’s Economic Research Service estimates that the food and ag industries comprise 29% of Brazil’s GDP.
Food and ag in the U.S. only makes up 5% of our GDP by comparison.
Lula faces a lot of economic headwinds as he enters office. As Naomi Blohm wrote in a recent Ag Marketing IQ column, it will also be interesting to see if Brazil becomes more “vocal regarding Russia’s war in Ukraine” though Blohm notes that Brazil’s strategic alliances with China could dampen any sort of pro-Ukraine stance Lula may look to make.
But it will be more interesting to see if – and how – crop acreage and export volumes will grow in Brazil during Lula’s term in office. Ag Resource’s Dan Basse has frequently been quoted over the last year calling for another 25 million soybean acres to be brought into production to meet growing global edible oil and biofuel demand.
Markets are relying heavily on South America will need to fill that order, as acreage in the U.S. and China is largely tapped out and Ukraine and Russia are…well, you can fill that one in and I’m running out of time to finish this article. But Lula’s presidency poses risks to global soybean expansion and that is reflected in recent rallies in the soybean market, as well as downturns in the Brazilian real and stock markets.
It will be well worth U.S. farmers’ time to follow these developments more closely in the coming months.
Corn
Russia’s defense ministry released a written agreement that its military would not attack vessels on the Black Sea overnight. Corn prices fell $0.07-$0.14/bushel as markets breathed a sigh of relief that Ukrainian grain shipping corridors would remain open.
In other news, does anyone care to tell me if I can expense my prescription heartburn medication to Russia??? I’ve been popping those things like Tic-Tacs since this weekend. Sheesh.
POET LLC – the country’s largest ethanol producer – has begun testing for vomitoxin in corn being delivered to several Ohio and Indiana ethanol plants as a wet harvest season has increased the occurrence of the fungus in harvested supplies. It also poses risks for corn and DDGS sold for animal feed as it can cause illness in livestock.
More quality testing is leading to longer wait times for Ohio and Indiana growers who are selling to these facilities this fall. And if the vomitoxin is highly prevalent throughout Eastern Corn Belt grain supplies, the resulting losses could further tighten already tight corn stocks in the region.
Soybeans
Soybean prices only fell $0.06-$0.10/bushel in response to Russia’s sudden reversal in the Black Sea, though much of its losses were offset by higher soyoil prices. Global edible oil prices climbed overnight after South American trucker strikes and palm oil production worries added bullish pressure to the complex.
Wheat
Wheat gave up most of Monday’s gains overnight, falling 6% or $0.31-$0.51/bushel as Russia did a sudden U-turn overnight and decided to continue allowing Ukrainian grain cargoes safe passage through the Black Sea (as indicated before, I. Can’t. Even.).
“These latest announcements remove part of the risk premium for exporters, so we are losing what we had gained over the past days in wheat,” Arthur Portier of consultancy Agritel told Reuters. “However, we still don’t know whether the deal will be extended later this month, so uncertainty remains.”
Weather
Warmer temps are forecast across the country today, according to NOAA’s short-term forecasts. Skies are expected to remain clear across the Heartland today, which will pave the way for favorable harvest progress for anyone with crops remaining in the field.
NOAA’s 6-10-day forecasts are now trending warmer for the Midwest and Plains and wetter for the western half of the country (plus Illinois and Wisconsin). Chances for rain are highest in the Pacific Northwest and Upper Midwest, though the Plains could see some moisture relief as well.
Those trends will begin to shift slightly in the 8-10-day outlook. Forecasts during that time are now trending warmer for the Midwest and Plains and wetter for the western half of the country (plus the Upper Midwest and Northern Plains). Chances for rain are highest in the Pacific Northwest and Upper Midwest, though the Central Plains could see some moisture relief as well.
Financials
It’s interest rate hike day, folks. The S&P 500 is up slightly – 0.07% to $3,868.75 as the market braces for another 0.75% hike at the conclusion of today’s Federal Open Market Committee meeting.
What else I’m reading this morning on our website, FarmFutures.com:
A great Bloomberg piece on the significance of Russia pulling out of the Ukrainian grain export deal.
Our latest special edition Farm Futures print issue features a series on farmer mental health. It is one of the pieces I am most proud of during my time here, so I cannot recommend checking it out enough!
Commstock Investment’s Matthew Kruse reports that planting season is in full swing in Brazil.
Roger Wright explains how to interpret today’s Export Inspections report from USDA.
Another rail strike threatens the ag industry at a time when barge and trucking companies are already stretched thin.
Naomi Blohm’s technical analysis shows soybeans could still rise $2.50/bushel but fundamental forces will likely be the key driver of higher – or lower – soybean prices.
Morning Ag Commodity Prices – 11/2/2022
Contract
Units
High
Low
Last
Net Change
% Change
DEC ’22 CORN
$ / BSH
6.9725
6.8
6.845
-0.1325
-1.90%
MAR ’23 CORN
$ / BSH
7.02
6.8525
6.895
-0.13
-1.85%
MAY ’23 CORN
$ / BSH
7.01
6.8525
6.8925
-0.125
-1.78%
JUL ’23 CORN
$ / BSH
6.9475
6.7925
6.835
-0.1175
-1.69%
SEP ’23 CORN
$ / BSH
6.4425
6.335
6.365
-0.0825
-1.28%
DEC ’23 CORN
$ / BSH
6.2925
6.2025
6.235
-0.06
-0.95%
AR2 ’24 CORN
$ / BSH
6.3525
6.2775
6.3
-0.0625
-0.98%
AY2 ’24 CORN
$ / BSH
6.37
#N/A
6.38
0
0.00%
JUL ’24 CORN
$ / BSH
6.3325
#N/A
6.34
0
0.00%
NOV ’22 SOYBEANS
$ / BSH
14.45
14.2125
14.255
-0.1025
-0.71%
JAN ’23 SOYBEANS
$ / BSH
14.5775
14.31
14.3875
-0.09
-0.62%
MAR ’23 SOYBEANS
$ / BSH
14.65
14.39
14.465
-0.0775
-0.53%
MAY ’23 SOYBEANS
$ / BSH
14.7125
14.465
14.535
-0.075
-0.51%
JUL ’23 SOYBEANS
$ / BSH
14.7375
14.5
14.565
-0.07
-0.48%
AUG ’23 SOYBEANS
$ / BSH
14.5225
14.325
14.3825
-0.06
-0.42%
SEP ’23 SOYBEANS
$ / BSH
14.16
13.99
13.99
-0.085
-0.60%
NOV ’23 SOYBEANS
$ / BSH
13.9775
13.81
13.8475
-0.0725
-0.52%
AN2 ’24 SOYBEANS
$ / BSH
14
13.8875
13.8875
-0.06
-0.43%
AR2 ’24 SOYBEANS
$ / BSH
13.905
#N/A
13.865
0
0.00%
AY2 ’24 SOYBEANS
$ / BSH
13.795
13.79
13.79
-0.035
-0.25%
DEC ’22 SOYBEAN OIL
$ / LB
74.67
72.55
73.73
0.36
0.49%
JAN ’23 SOYBEAN OIL
$ / LB
72.48
70.34
71.51
0.45
0.63%
DEC ’22 SOY MEAL
$ / TON
425.7
420.1
420.9
-3.9
-0.92%
JAN ’23 SOY MEAL
$ / TON
418.2
413.2
413.7
-4.1
-0.98%
MAR ’23 SOY MEAL
$ / TON
410.2
405.3
405.7
-4.3
-1.05%
MAY ’23 SOY MEAL
$ / TON
406.5
401.5
401.7
-4.5
-1.11%
JUL ’23 SOY MEAL
$ / TON
405.2
400.5
400.8
-4.4
-1.09%
DEC ’22 Chicago SRW
$ / BSH
9.02
8.43
8.51
-0.515
-5.71%
MAR ’23 Chicago SRW
$ / BSH
9.1975
8.6225
8.685
-0.505
-5.50%
MAY ’23 Chicago SRW
$ / BSH
9.2575
8.72
8.775
-0.4725
-5.11%
JUL ’23 Chicago SRW
$ / BSH
9.21
8.725
8.78
-0.415
-4.51%
SEP ’23 Chicago SRW
$ / BSH
9.23
8.7775
8.82
-0.395
-4.29%
DEC ’23 Chicago SRW
$ / BSH
9.285
8.8575
8.8975
-0.37
-3.99%
AR2 ’24 Chicago SRW
$ / BSH
9.185
8.8825
8.9225
-0.3225
-3.49%
DEC ’22 Kansas City HRW
$ / BSH
9.9025
9.4225
9.4775
-0.4225
-4.27%
MAR ’23 Kansas City HRW
$ / BSH
9.8625
9.4
9.4525
-0.4125
-4.18%
MAY ’23 Kansas City HRW
$ / BSH
9.8275
9.3975
9.435
-0.395
-4.02%
JUL ’23 Kansas City HRW
$ / BSH
9.7225
9.3
9.3525
-0.375
-3.86%
SEP ’23 Kansas City HRW
$ / BSH
9.6475
9.2925
9.345
-0.345
-3.56%
DEC ’23 Kansas City HRW
$ / BSH
9.65
9.3375
9.3375
-0.3675
-3.79%
AR2 ’24 Kansas City HRW
$ / BSH
0
#N/A
9.6125
0
0.00%
DEC ’22 MLPS Spring Wheat
$ / BSH
9.9325
9.51
9.56
-0.3375
-3.41%
MAR ’23 MLPS Spring Wheat
$ / BSH
10.0275
9.6075
9.665
-0.3275
-3.28%
MAY ’23 MLPS Spring Wheat
$ / BSH
10.0525
9.6675
9.7325
-0.31
-3.09%
JUL ’23 MLPS Spring Wheat
$ / BSH
10
9.6525
9.6525
-0.345
-3.45%
SEP ’23 MLPS Spring Wheat
$ / BSH
9.67
9.375
9.41
-0.2625
-2.71%
DEC ’23 MLPS Spring Wheat
$ / BSH
9.6375
#N/A
9.665
0
0.00%
AR2 ’24 MLPS Spring Wheat
$ / BSH
0
#N/A
9.675
0
0.00%
DEC ’21 ICE Dollar Index
$
111.405
111.02
111.14
-0.219
-0.20%
DE ’21 Light Crude
$ / BBL
89.76
87.72
88.51
0.14
0.16%
JA ’21 Light Crude
$ / BBL
88.56
86.6
87.38
0.19
0.22%
DEC ’22 ULS Diesel
$ /U GAL
3.6585
3.5696
3.6033
-0.0178
-0.49%
JAN ’23 ULS Diesel
$ /U GAL
3.4983
3.4182
3.4572
-0.0119
-0.34%
DEC ’22 Gasoline
$ /U GAL
2.6271
2.5813
2.6059
0.0114
0.44%
JAN ’23 Gasoline
$ /U GAL
2.555
2.5124
2.5352
0.0103
0.41%
NOV ’22 Feeder Cattle
$ / CWT
0
#N/A
176.925
0
0.00%
JAN ’23 Feeder Cattle
$ / CWT
0
#N/A
178.2
0
0.00%
DE ’21 Live Cattle
$ / CWT
0
#N/A
151.95
0
0.00%
FE ’21 Live Cattle
$ / CWT
0
#N/A
155.25
0
0.00%
DEC ’22 Live Hogs
$ / CWT
0
#N/A
85.2
0
0.00%
FEB ’23 Live Hogs
$ / CWT
0
#N/A
88.45
0
0.00%
NOV ’22 Class III Milk
$ / CWT
20.63
20.51
20.63
0.04
0.19%
DEC ’22 Class III Milk
$ / CWT
19.19
18.97
18.97
-0.13
-0.68%
JAN ’23 Class III Milk
$ / CWT
18.81
18.74
18.74
-0.08
-0.43%
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