Afternoon report: Fertilizer production capacity is expanding. But will it be enough to lower prices?
Good afternoon!It was a mostly quiet day in the markets, with little new news about potential demand prospects to keep rallies going. I gleaned a few interesting insights from fertilizer company earnings calls and ongoing developments from Ukraine that I think growers will find interesting. Have a good afternoon!
Feedback from the Field is back! Our Feedback from the Field series is live for the 2022 season! 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 MyMap, so farmers can see others’ responses from across the country – or even across the county!
Inputs
The world’s largest fertilizer producer is weighing its decision to ramp up potash production capacity in response to sanctions levied against other major global producers Russia and Belarus.
Nutrien’s interim CEO Ken Zeitz announced earlier today that the Canadian fertilizer production company continues to monitor the situation in Ukraine and is not yet convinced that the war’s potential longevity will substantially alter trade flows enough to justify further capital investments.
Nutrien had already announced back in March that it would be increasing its total annual potash production to 15 million metric tonnes (MMT), up 1 MMT from its previous forecasts. At that time, Nutrien’s production increases were expected to account for 70% of the total increases in world potash production for the year.
The company has the option to produce up to 18 MMT of potash from its Saskatchewan mines. “Though larger expenditures would be needed to reach 18 million to 23 million tonnes,” Seitz said in an interview with Reuters. “We intend to grow our volumes, but just not stop at 18 million tonnes.”
That’s good news for farmers because larger supplies will allow for better nutrient availability for soil fertility needs. Global supplies remain tight enough that price breaks may not be in order just yet for the fertilizer market.
Nutrien’s plans hinge largely on how the Russian war in Ukraine plays out over the next few years. The economic sanctions against Russian and Belarusian fertilizer producers in the war’s wake have restricted global availability to the fertilizer market. If Nutrien grows too fast too soon, it risks losses if the sanctions are lifted from the Eastern European supplies.
Nutrien estimates that Russia has the capacity to produce 15 MMT of potash per year, though it will likely only generate 6 MMT. Similarly, Belarus is believed to be able to produce 13 MMT of potash annually but will likely only mine 8 MMT amid the economic sanctions.
U.S.-based fertilizer producer Mosaic is also eyeing expansion plans with caution. In a conference call today, the company expects tight agricultural markets to persist beyond the end of this year. “We don’t see how Belarus potash sanctions will be resolved by mid-year as previously expected,” a company spokesperson said.
Mosaic expects that the current deficits in the potash market will take between two and four years to remedy, which means that farmers can expect to see steep costs well into the 2025 planning and growing cycle.
On the buyer side of the equation, Brazilian politicians will be earning their passport stamps this week as they scavenge the world for fertilizer supplies before planting season begins in the fall.
Brazil’s newly appointed agriculture minister Marcos Montes announced plans today to travel to Jordan, Egypt, and Morocco this week to procure fertilizer supplies for Brazilian crop producers. The South American country relies on imports for 85% of its total fertilizer supplies.
“It’s a pilgrimage that we are calling fertilizer diplomacy,” Montes said in an interview with Reuters late last night. “We are going to open doors.”
Ukraine
Corn prices rose $0.02-$0.04/bushel this morning on continued planting delays and another week of cool and wet weather across the Corn Belt this week.
In the Black Sea, Ukraine has completed nearly a third (31%) of its expected 2022 spring crop planting. The Ukrainian grain traders union UGA announced today that over 11.6 million acres have been planted so far this spring.
UGA expects up to 28.3 million acres of Ukrainian farm ground will be planted this spring, which is down between 8.6 million – 9.9 million acres from last year due to the Russian war and land mines that Russian troops have planted in Ukrainian fields.
Corn acreage could rise to 9.6 million acres this year, though most Ukrainian growers are focused on planting smaller grains for food this spring, especially since corn is increasingly difficult to transport to market amidst a warzone.
Ukraine’s grain and oilseed storage facilities are increasingly coming under pressure as slowed export paces struggle to empty grain bins around the country. Ag consultancy APK-Inform expects that only 45.5 MMT of last year’s record-breaking 86 MMT grains and oilseeds harvest will be exported this year, growing Ukraine’s stock volumes to “4.2 times higher than in the previous season and will not allow to release a significant share of storing capacities for the new harvest,” the consultancy said in a note.
Ukrainian farmers continue to brave Russian aggressions to plant 2022 crops, with a renewed focus on products which can be consumed domestically. But Ukraine’s total grain and oilseed storage capacity is only 75 MMT.
If it cannot sell its products quickly enough, Ukraine’s 2022 harvest could be at risk of quality damage if enough storage is not available by the fall.
Ukraine formally closed four of its port facilities on the Black Sea and Azov Sea. Russian forces have recently captured ports at Mariupol, Berdiansk and Skadovsk in the Azov Sea and the Kherson port in the Black Sea.
These are not significant loading facilities for Ukraine’s corn exports, so the news did not significantly alter grain pricing yesterday. But it solidifies Russian President Vladimir Putin’s strategy of taking Ukraine’s Black Sea access which the country relies on heavily to fuel its economy.
“Russia does not let ships come in or go out, it is controlling the Black Sea,” Ukrainian President Volodymyr Zelenskiy said in a televised interview yesterday. “Russia wants to completely block our country’s economy.”
Russia’s ultimate goal is to capture the Ukrainian Black Sea port city of Odessa. Most of Ukraine’s corn exports flow through Odessa, so watch for more corn market fluctuations as Russian troops advance closer to the region.
Corn
May 2022 futures prices hovered on the edge of the $8/bushel benchmark at last glance after the Chicago corn futures complex gave up $0.07-$0.13/bushel in losses during today’s trading session. Corn’s bullish morning run over continued planting delays eased today as forecasts predict clear skies this weekend and through the next week, which will likely help boost planting progress.
Plus, there were no new demand revelations in today’s trade that would have further supported bullish price action.
“We couldn’t hold the gains after the opening. That sends a message to the trade, that this is much bigger than the supply side,” Mike Zuzolo, president at Global Commodity Analytics, told Rueters.
“I think overall, I think it’s just some profit taking on the notion of better plantings next week,” Brian Basting, commodity research analyst at Advance Trading, surmised.
Cash prices held mostly steady across the Corn Belt today as futures prices edged down. Basis widened by $0.03/bushel at an ethanol processing facility in Union City, Indiana though dealers noted that slow planting progress kept new farmer sales at a slow pace.
Soybeans
Soybean futures fell $0.10-$0.15/bushel today as potential corn planting delays lead more market participants to believe that even more soybeans could be planted this spring than the 91 million acres USDA forecasted on March 31.
Plus, losses in the energy complex also spilled over into soybeans today.
Cash bids for soybeans across the Midwest were mostly unchanged today. A merchandiser in Iowa noted that farmer sales were slow this morning. Other dealers echoed the observation, noting that many growers are uncomfortable booking more deals for their 2022 crops when they have faced such a slow start to the 2022 planting season.
Cash soymeal prices weakened alongside its futures counterpart today due in large part to slowing export demand at the U.S. Gulf of Mexico. Countryside demand was light as many livestock and poultry feeders have already stocked regular supply levels.
A soy crush plant closure in Mankato, Minnesota is closed for week due to maintenance. It could stretch supplies thin in the region by the weekend, but the closure likely isn’t large enough to trigger a rally in the soymeal market.
Wheat
Wheat prices fell $0.03-$0.12/bushel as markets evaluated recent rains in the Plains. About 43% of the U.S. winter wheat crop is in poor to very poor condition, a 4% increase from last week’s ratings. Losses in today’s trading session were largely capped by potential yield shortfalls for the U.S. wheat crop this summer due to drought damage for winter wheat as well as planting delays for spring wheat crops.
“You had a 4 point increase in ‘very poor’ and ‘poor’ conditions, this late in the year, after rains. I can’t remember a time when I’ve seen that happen,” worried Mike Zuzolo.
Cash prices for hard red winter wheat in the Southern Plains were largely flat today as futures prices drifted lower. Showers on the Plains over the past couple days have helped ease dry soil moisture conditions and futures price rallies, though yield shortfalls are still a concern for growers as harvest approaches.
Weather
Beneficial rains in the Southern and Central Plains yesterday shifted into the Corn Belt in the night and will likely linger in the region through the rest of the day, according to NOAA’s short-range forecasts.
Another rain system developing in the Central Rockies could push more showers into the Central and Southern Plains tomorrow. That system will shift east into the Corn Belt by Thursday afternoon. The combination of the two precipitation systems are likely to keep planters out of fields until the weekend.
Financials
Wall Street is growing increasingly anxious to hear the results of the Federal Reserve’s Federal Open Market Committee (FOMC) meeting being held today and tomorrow. An interest rate hike of 0.5% is expected to result from the meetings, which is a more aggressive hike than the Fed had previously alluded.
But soaring inflation – especially in the food and energy sectors – has driven the Fed to adopt a more hawkish tone on interest rate hikes. The Fed previously implemented its first hike of 0.25% in March. The upcoming hike will likely leave interest rates at 0.75% until the next set of FOMC meetings.
“Because the market has priced in a 50-basis-point rate hike at the Federal Reserve’s May meeting, the focus will immediately shift to just how many half-point hikes the Fed expects to initiate over the balance of 2022,” Danielle DiMartino Booth, chief executive officer of Quill Intelligence in Dallas, told Bloomberg this afternoon. “Powell’s greatest folly would be to insist that the economy is very strong in the face of overwhelming evidence that it is slowing and slowing fast.”
S&P 500 futures grasped at some final gains before the Fed makes its interest rate announcement tomorrow, rising 17.25 points (0.42%) to $4,168.25 in today’s trading session. The gains came despite lower performance from tech companies.
Also worth a read on our website, FarmFutures.com:
Bryce Knorr previews next week’s WASDE reports, which will provide the first look at 2022/23 marketing year estimates.
The White House has earmarked $500 million from the most recent $33 billion aid package to Ukraine for U.S. farmers to increase access to farm loans and crop insurance incentives to farmers to help offset pain from the war in Ukraine.
Roger Wright shares the benefits of hedging with puts to avoid margin calls.
AgMarket.Net’s Betsy Jibben shares the latest on planting progress in Ukraine, where even though planting activity continues, growers face countless challenges including storage safety, fuel and finance availability, and access to export markets.
My first Feedback from the Field column of the season! Spoiler alert – little to no planting progress has been made in the Corn Belt and winter wheat is looking rough.
Market Close – Ag Commodity Prices – 5/3/2022
Contract
Units
High
Low
Last
Net Change
% Change
MAY ’22 CORN
$ / BSH
8.22
7.9975
8
-0.13
-1.60%
JUL ’22 CORN
$ / BSH
8.1375
7.92
7.9325
-0.1025
-1.28%
SEP ’22 CORN
$ / BSH
7.655
7.455
7.4975
-0.08
-1.06%
DEC ’22 CORN
$ / BSH
7.49
7.3075
7.3475
-0.075
-1.01%
MAR ’23 CORN
$ / BSH
7.5225
7.3475
7.385
-0.075
-1.01%
MAY ’23 CORN
$ / BSH
7.5325
7.3625
7.3975
-0.075
-1.00%
JUL ’23 CORN
$ / BSH
7.4975
7.325
7.3675
-0.0775
-1.04%
MAY ’22 SOYBEANS
$ / BSH
16.88
16.595
16.59
-0.15
-0.79%
JUL ’22 SOYBEANS
$ / BSH
16.6275
16.29
16.31
-0.1425
-0.87%
AUG ’22 SOYBEANS
$ / BSH
16.1475
15.8375
15.85
-0.15
-0.94%
SEP ’22 SOYBEANS
$ / BSH
15.4175
15.125
15.1375
-0.1475
-0.96%
NOV ’22 SOYBEANS
$ / BSH
15.0325
14.7625
14.775
-0.13
-0.87%
JAN ’23 SOYBEANS
$ / BSH
15.055
14.8
14.8125
-0.1175
-0.79%
MAR ’23 SOYBEANS
$ / BSH
14.9125
14.665
14.6775
-0.1125
-0.76%
MAY ’23 SOYBEANS
$ / BSH
14.91
14.6675
14.685
-0.1
-0.68%
JUL ’23 SOYBEANS
$ / BSH
14.9125
14.68
14.6975
-0.095
-0.64%
MAY ’22 SOYBEAN OIL
$ / LB
84.5
82.23
84.25
1.55
1.87%
JUL ’22 SOYBEAN OIL
$ / LB
82.46
79.25
80.11
0.02
0.02%
MAY ’22 SOY MEAL
$ / TON
445.1
435.9
436.4
-6.5
-1.47%
JUL ’22 SOY MEAL
$ / TON
435.3
423.2
424.6
-6.3
-1.46%
AUG ’22 SOY MEAL
$ / TON
428.3
416.8
417.9
-5.8
-1.37%
SEP ’22 SOY MEAL
$ / TON
419.5
409.2
410.3
-3.8
-0.92%
OCT ’22 SOY MEAL
$ / TON
407.5
400
401.4
-2.7
-0.67%
MAY ’22 Chicago SRW
$ / BSH
10.56
10.395
10.3375
-0.0975
-0.38%
JUL ’22 Chicago SRW
$ / BSH
10.6875
10.44
10.47
-0.085
-0.81%
SEP ’22 Chicago SRW
$ / BSH
10.71
10.475
10.5025
-0.08
-0.76%
DEC ’22 Chicago SRW
$ / BSH
10.72
10.5
10.5375
-0.0625
-0.59%
MAR ’23 Chicago SRW
$ / BSH
10.72
10.505
10.5525
-0.055
-0.52%
MAY ’22 Kansas City HRW
$ / BSH
10.9525
10.79
10.795
-0.0725
-0.67%
JUL ’22 Kansas City HRW
$ / BSH
11.1475
10.89
10.945
-0.035
-0.32%
SEP ’22 Kansas City HRW
$ / BSH
11.185
10.9275
10.9775
-0.0375
-0.34%
DEC ’22 Kansas City HRW
$ / BSH
11.22
10.965
11.03
-0.0175
-0.16%
MAR ’23 Kansas City HRW
$ / BSH
11.185
10.945
11.0175
-0.015
-0.14%
MAY ’22 MLPS Spring Wheat
$ / BSH
0
#N/A
11.6325
0
0.00%
JUL ’22 MLPS Spring Wheat
$ / BSH
11.805
11.5425
11.56
-0.1175
-1.01%
SEP ’22 MLPS Spring Wheat
$ / BSH
11.7
11.4725
11.48
-0.085
-0.73%
DEC ’22 MLPS Spring Wheat
$ / BSH
11.6675
11.445
11.47
-0.055
-0.48%
MAR ’23 MLPS Spring Wheat
$ / BSH
11.6275
11.4275
11.4375
-0.0375
-0.33%
JUN ’21 ICE Dollar Index
$
103.7
103.06
103.515
-0.251
-0.24%
JU ’21 Light Crude
$ / BBL
105.8
102.1
102.85
-2.32
-2.21%
JU ’21 Light Crude
$ / BBL
104.06
100.58
101.35
-2.07
-2.00%
JUN ’22 ULS Diesel
$ /U GAL
4.265
4.029
4.0756
-0.1293
-3.07%
JUL ’22 ULS Diesel
$ /U GAL
3.8701
3.6947
3.7405
-0.0909
-2.37%
JUN ’22 Gasoline
$ /U GAL
3.5445
3.4412
3.5057
-0.0044
-0.13%
JUL ’22 Gasoline
$ /U GAL
3.4598
3.3653
3.4228
-0.0063
-0.18%
MAY ’22 Feeder Cattle
$ / CWT
162.625
160.45
162.55
1.125
0.70%
AUG ’22 Feeder Cattle
$ / CWT
176.45
172.425
176.25
2.175
1.25%
JU ’21 Live Cattle
$ / CWT
136.275
134.8
135.25
0.05
0.04%
AU ’21 Live Cattle
$ / CWT
137.825
136.6
137.325
0.275
0.20%
MAY ’22 Live Hogs
$ / CWT
101.275
99
99.9
0.025
0.03%
JUN ’22 Live Hogs
$ / CWT
106.5
101.875
102.45
-2.525
-2.41%
APR ’22 Class III Milk
$ / CWT
24.38
24.37
24.38
-0.01
-0.04%
MAY ’22 Class III Milk
$ / CWT
24.25
24.01
24.23
0
0.00%
JUN ’22 Class III Milk
$ / CWT
24.09
23.57
23.9
-0.34
-1.40%
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