Morning report: Plus – what is going on in the global fertilizer markets? (Comments are updated by 7:30 a.m. Central Time.)
Corn up 4-9 cents
Soybeans up 9-25 cents; Soymeal up $4.60/ton; Soyoil up $0.34/lb
Chicago wheat up 9-10 cents; Kansas City wheat up 13-20 cents; Minneapolis wheat up 10-15 cents
*Prices as of 6:50am CDT.
Feedback from the Field updates! How does your farm’s crop conditions stack up against other farms around the country? Click this link to take the survey and share updates about your farm’s crop development. 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 update column was published to our site yesterday. Farmer sentiments about yields in 2022 remain mixed across the country and drought pressure continues to linger high on everyone’s minds. Here are a few of my favorite farmer insights from the past week:
An eastern Michigan corn grower voiced high hopes for the 2022 corn crop. “Crop was planted in excellent conditions and [we] have had timely rains to be on pace for another record crop.”
A grower in Eastern Nebraska noted corn crops in good condition, though irrigation made a significant difference during the summer’s heat wave. “Irrigated corn looks very good because we caught a couple of rains in July and August,” the farmer shared. “Dryland corn still looks tough even with those rains we caught.”
The slow start to the 2022 growing season hasn’t held soybean conditions back in Northwestern Ohio this year thanks to well-timed precipitation events. “Drug out planting season due to weather, timely rains so far in August,” shared a local producer.
There was even some optimism from the Plains, with one Eastern Nebraska grower reporting excellent soybean condition ratings late last week. “Most beans in my area look good except some poor dry land corners,” the farmer said. “Even good dry land ground beans look decent.”
Of course, dry weather across pockets of the country continues to hinder hopes for above-trendline yields this year. “Drought stress has affected our soybeans much more than our corn this year,” reported one soybean producer in North Carolina.
“Pastures are no longer usable and [feed] supplements are needed,” echoed a cattle and row crop producer in Western Kansas. “[We] have already sold half of our stockers because of extreme drought.”
Inputs
Energy costs will continue to be a significant factor that will impact fertilizer production and pricing through the end of the year. On Tuesday, top Chinese fertilizer producer Sinofert Holdings announced that government-mandated power rationing in Southern China necessary to offset higher residential energy consumption during China’s ongoing heatwaves this summer would require the company to scale back its production targets for the year.
“Compared with last year’s situation where thermal power was limited due to coal supply issues, the impact on power consumption this year is relatively mild,” Sinofert’s CFO Gao Jian told Reuters. “In particular, it will have some impact on our nitrogen and phosphate fertiliser production. Currently, the impact is under control.”
To be sure, China is rationing power at a much lower rate than it did last year, when state planners did not account for such a quick economic revival after COVID-19 vaccines were first issued. This year, a 60-year heatwave has left hydropower sources (river) drying up while energy demand to cool Chinese citizens has skyrocketed.
China issued an export ban on phosphate and urea shipments a year ago and is not likely to lift restrictions in 2022, especially if this ongoing heat wave persists into the early fall.
More inputs
Earlier this week, Poland’s largest fertilizer producer, Grupa Azoty, announced that chemical production would be scaled back to minimum volumes, equating to 43% of the company’s production capacity, amid the “extraordinary and unprecedented” surge in gas prices in Europe.
The company is temporarily halting nitrogen fertilizer production and will reduce ammonia output to only 10% of its capacity.
“The current situation in the natural gas market, which determines the profitability of production, is exceptional, completely independent of the company and impossible to foresee,” the company said in a regulatory filing on Monday.
Grupa Azoty is not the first European fertilizer producer to scale back production in the wake of Europe’s energy crisis following its ongoing debate to wean off energy supplies from Russia after the onset of the Black Sea conflict in Ukraine. Norwegian fertilizer behemoth Yara announced in July that it would reduce its ammonia production due to the high gas prices. German chemical giant BASF also announced cutbacks to its ammonia production targets in late July.
That translates to tighter global supply outlooks for ammonia fertilizers going forward, which is likely to keep a floor under nitrogen prices in the U.S. despite recent price drops at the retail level. Fertilizer sales are typically low enough in the third quarter that any new production plans are likely to be delayed until the end of the year.
“Fertiliser companies are likely to wait for gas prices on the market to fall, or for fertiliser prices to rise. With current gas and fertiliser prices in Europe, margins on production of selected fertilisers are negative,” Jakub Szkopek, a fertilizer analyst with the Erste Group, told Reuters overnight.
Corn
Corn prices rose $0.04-$0.09/bushel overnight, boosted in part by rallying energy markets as well as observed crop damage and potential yield shortfalls expected from ongoing crop tours across the U.S.
I’ve been closely watching cattle reports lately to try to decipher when the ongoing liquidation cycle in the cattle markets will eventually erode demand prospects for U.S. corn. While I have no new official news/data to report on this morning, I did stumble across this great Reuters article about how Texas cattle producers are withstanding the drought.
Spoiler alert: it doesn’t look good for the cows, cattle producers, or corn growers.
Soybeans
China’s ongoing drought is creating optimism that its plans earlier this year to increase soybean production could face stiff headwinds that could result in export sales increases for U.S. soybean producers. That sentiment, paired with higher energy prices and concerning crop conditions observed on crop tours, pushed soybean futures $0.08-$0.25/bushel higher this morning.
“China’s demand for all grains and oilseeds might improve if the heatwave and drought across the central China causes significant damage to their crops,” research firm Hightower Report said in a note, as reported by Reuters.
Markets are growing anxious about planting prospects for Brazil’s 2022/23 soybean crop. Barring any additional impacts from La Ni?a weather patterns, USDA is forecasting the South American country will harvest a record-shattering 5.47 billion bushels in the coming months. Last year, Brazil harvested 4.63 billion bushels after a La Ni?a-induced drought wiped out production prospects in the country’s southern regions.
As global input prices remain high and international conflicts constrict supply availability, there has been much speculation about Brazilian yield potential over the coming months as many Brazilian farmers consider cutting fertilizer applications.
While Brazilian agribusiness consultancy Agroconsult does no believe this to be the case, it still represents a significant probability for increased soybean market volatility in the coming months. Agroconsult’s director Andre Pessoa noted that Brazil has imported plentiful enough fertilizer volumes to keep farmers well-stocked through the planting season, though storage and distribution bottlenecks are more likely closer to the farmgate.
“Even in the face of an expected fall in fertilizer deliveries, farmers will have enough to produce a spectacular crop,” Pessoa said.
USDA forecasters have cited fertilizer supply chain issues as a potential reason for lower 2022 yields for South American soybean and wheat production. Time will tell if fertilizer applications – or lack thereof – will cause significant yields or shortfalls for South American crops.
Wheat
Wheat prices ignored the strengthening dollar to post a $0.10-$0.21/bushel gain during the overnight trading session. Drought damage concerns in China and a big wheat purchase by top global importer Egypt earlier this week helped to add strength to wheat prices this morning. Gains are likely to be limited in today’s trading session by accelerated shipping paces from Russian and Ukrainian exporters.
Weather
Temperatures across the Heartland are likely to trend warmer today relative to last week’s moderate mercury readings, according to NOAA’s short-range forecasts. The Plains will see temperatures rise into the 90s-100s while the Mississippi River Valley and the area east of it is more likely to experience temperatures in the 80s-90s today.
Scattered showers will linger over the Northern Plains today and tomorrow. The system will push moisture into the Upper Midwest by this evening. The region is expected to see mostly light accumulation, though Wisconsin has the best chance to see up to an inch of precipitation over the next 24 hours.
Above average heat is beginning to move out of the Corn Belt in the 8-14 day NOAA outlook. Dry conditions will likely persist in the Upper Midwest during that time, though the Southern Plains and Eastern Corn Belt could have a good chance at showers.
The 6-10-day NOAA outlook forecasts the last heat wave of the summer for the Northern Plains and Upper Midwest through the end of August. Chances for showers for the Central and Southern Plains and Eastern Corn Belt are above average during that time, which bodes favorably for winter wheat seeding.
Financials
S&P 500 futures wobbled this morning, though traded 0.20% higher at last glance to $4,138.75. Stock futures have tumbled this week on weak manufacturing and service data and concerns about Federal Reserve interest rate hikes that could push the U.S. economy into a recession.
“Growth is falling quite precipitously everywhere. We’ve had a pretty big signal of weakening economic conditions,” said Fahad Kamal, chief investment officer of Kleinwort Hambros, told the Wall Street Journal. “But I think we’ll see Powell stick to his hawkish tone, he has to keep talking tough on inflation. That means more volatility for markets and more questions about the depth of the recession.”
Prices traded higher in the energy markets overnight as buyers scramble to find available energy supplies ahead of peak winter heating season. U.S. natural gas futures hit 14-year highs earlier this week, which will continue to impact global fertilizer production, as I mentioned above.
What else I’m reading this morning on our website, FarmFutures.com:
Bryce Knorr announces the results from the annual Farm Futures study evaluating grain storage strategies.
Darren Frye knows that farmers can improve marketing skills by focusing on what management factors they can control and has tips to help farmers narrow that focus.
Advance Trading’s Josh Green encourages farmers to stop outguessing yield estimates and focus on controllable elements, making sales, and ensuring upside price potential.
USDA is providing $300 million for current or transitioning organic farmers through a multi-agency partnership.
Are call options a money pit or a profit protector? Bryce Knorr investigates.
My latest E-corn-omics column explains why soybean exports are looking so much better than corn exports in the upcoming 2022/23 marketing year.
Morning Ag Commodity Prices – 8/24/2022
Contract
Units
High
Low
Last
Net Change
% Change
SEP ’22 CORN
$ / BSH
6.7125
6.5975
6.68
0.08
1.21%
DEC ’22 CORN
$ / BSH
6.6675
6.5525
6.6325
0.08
1.22%
MAR ’23 CORN
$ / BSH
6.7175
6.61
6.685
0.07
1.06%
MAY ’23 CORN
$ / BSH
6.72
6.6225
6.6875
0.0625
0.94%
JUL ’23 CORN
$ / BSH
6.67
6.58
6.64
0.055
0.84%
SEP ’23 CORN
$ / BSH
6.2625
6.2
6.25
0.035
0.56%
DEC ’23 CORN
$ / BSH
6.175
6.105
6.16
0.0425
0.69%
AR2 ’24 CORN
$ / BSH
6.245
6.1825
6.245
0.055
0.89%
MAY ’24 CORN
$ / BSH
6.2675
6.255
6.2675
0.045
0.72%
SEP ’22 SOYBEANS
$ / BSH
15.9525
15.65
15.8625
0.195
1.24%
NOV ’22 SOYBEANS
$ / BSH
14.8025
14.5825
14.74
0.13
0.89%
JAN ’23 SOYBEANS
$ / BSH
14.8425
14.645
14.78
0.1125
0.77%
MAR ’23 SOYBEANS
$ / BSH
14.8225
14.6625
14.7575
0.0725
0.49%
MAY ’23 SOYBEANS
$ / BSH
14.8125
14.675
14.76
0.065
0.44%
JUL ’23 SOYBEANS
$ / BSH
14.785
14.66
14.72
0.0525
0.36%
AUG ’23 SOYBEANS
$ / BSH
14.57
#N/A
14.47
0
0.00%
SEP ’23 SOYBEANS
$ / BSH
14.1275
#N/A
14.055
0
0.00%
NOV ’23 SOYBEANS
$ / BSH
13.9725
13.88
13.93
0.04
0.29%
AN2 ’24 SOYBEANS
$ / BSH
11.5
#N/A
13.9175
0
0.00%
AR2 ’24 SOYBEANS
$ / BSH
0
#N/A
13.8425
0
0.00%
SEP ’22 SOYBEAN OIL
$ / LB
70.45
69.27
69.76
0.17
0.24%
OCT ’22 SOYBEAN OIL
$ / LB
68.54
67.39
67.87
0.18
0.27%
SEP ’22 SOY MEAL
$ / TON
473.6
465.9
471.3
2.8
0.60%
OCT ’22 SOY MEAL
$ / TON
437.8
430.3
435.3
3.6
0.83%
DEC ’22 SOY MEAL
$ / TON
433.4
426.3
430.7
3.5
0.82%
JAN ’23 SOY MEAL
$ / TON
427.7
421.2
425.3
3.2
0.76%
MAR ’23 SOY MEAL
$ / TON
417.5
411.9
415.7
3.2
0.78%
SEP ’22 Chicago SRW
$ / BSH
7.9975
7.8225
7.935
0.1075
1.37%
DEC ’22 Chicago SRW
$ / BSH
8.1775
8.0025
8.11
0.105
1.31%
MAR ’23 Chicago SRW
$ / BSH
8.34
8.17
8.2725
0.1
1.22%
MAY ’23 Chicago SRW
$ / BSH
8.435
8.27
8.355
0.08
0.97%
JUL ’23 Chicago SRW
$ / BSH
8.46
8.35
8.3825
0.08
0.96%
SEP ’23 Chicago SRW
$ / BSH
8.5175
8.41
8.4525
0.0875
1.05%
DEC ’23 Chicago SRW
$ / BSH
8.61
8.52
8.555
0.1
1.18%
SEP ’22 Kansas City HRW
$ / BSH
9.05
8.81
9.025
0.2
2.27%
DEC ’22 Kansas City HRW
$ / BSH
8.99
8.78
8.9425
0.1525
1.73%
MAR ’23 Kansas City HRW
$ / BSH
8.965
8.7775
8.915
0.125
1.42%
MAY ’23 Kansas City HRW
$ / BSH
8.9525
8.785
8.8975
0.11
1.25%
JUL ’23 Kansas City HRW
$ / BSH
8.8275
8.71
8.8225
0.12
1.38%
SEP ’23 Kansas City HRW
$ / BSH
8.75
8.7025
8.75
0.065
0.75%
DEC ’23 Kansas City HRW
$ / BSH
8.8775
#N/A
8.725
0
0.00%
SEP ’22 MLPS Spring Wheat
$ / BSH
9.1475
8.9925
9.1025
0.1025
1.14%
DEC ’22 MLPS Spring Wheat
$ / BSH
9.2725
9.105
9.235
0.115
1.26%
MAR ’23 MLPS Spring Wheat
$ / BSH
9.39
9.2475
9.39
0.145
1.57%
MAY ’23 MLPS Spring Wheat
$ / BSH
9.4675
9.3775
9.4675
0.1375
1.47%
JUL ’23 MLPS Spring Wheat
$ / BSH
9.4125
9.4125
9.4125
0.0675
0.72%
SEP ’23 MLPS Spring Wheat
$ / BSH
9.2
9.14
9.2
0.06
0.66%
DEC ’23 MLPS Spring Wheat
$ / BSH
9.205
9.205
9.205
0.02
0.22%
SEP ’21 ICE Dollar Index
$
108.925
108.455
108.85
0.296
0.27%
OC ’21 Light Crude
$ / BBL
95.4
93.34
94.46
0.72
0.77%
NO ’21 Light Crude
$ / BBL
94.82
92.86
93.97
0.72
0.77%
SEP ’22 ULS Diesel
$ /U GAL
3.8783
3.8101
3.8675
0.0256
0.67%
OCT ’22 ULS Diesel
$ /U GAL
3.84
3.7739
3.8315
0.027
0.71%
SEP ’22 Gasoline
$ /U GAL
2.9493
2.9012
2.9236
-0.0094
-0.32%
OCT ’22 Gasoline
$ /U GAL
2.7672
2.7193
2.7442
-0.0021
-0.08%
AUG ’22 Feeder Cattle
$ / CWT
0
#N/A
180.9
0
0.00%
SEP ’22 Feeder Cattle
$ / CWT
0
#N/A
182.45
0
0.00%
AU ’21 Live Cattle
$ / CWT
0
#N/A
141.625
0
0.00%
CT2 ’21 Live Cattle
$ / CWT
0
#N/A
144.6
0
0.00%
OCT ’22 Live Hogs
$ / CWT
0
#N/A
92.9
0
0.00%
DEC ’22 Live Hogs
$ / CWT
0
#N/A
84.225
0
0.00%
AUG ’22 Class III Milk
$ / CWT
20.07
#N/A
20.08
0
0.00%
SEP ’22 Class III Milk
$ / CWT
20.54
20.21
20.23
0.03
0.15%
OCT ’22 Class III Milk
$ / CWT
20.74
20.74
20.74
0.09
0.44%
