Morning report: Plus – what Russian energy market activity could mean for U.S. farmers. (Comments are updated by 7:30 a.m. Central Time.)
Corn up 2-5 cents
Soybeans up 8-13 cents; Soymeal up $4.10/ton; Soyoil up $0.83/lb
Chicago wheat up 13-15 cents; Kansas City wheat up 19-20 cents; Minneapolis wheat up 11-13 cents
*Prices as of 6:55am CDT.
Feedback from the Field updates! Corn planting progress may be slowing down in the Heartland, but growers in the Upper Midwest are weighing prevent plant options, according to responses from growers in our latest Feedback from the Field column.
“No corn this year,” shared a Minnesota producer. “We are too far behind the calendar, in my opinion, for the crop to complete maturity.”
“Time for prevent plant,” echoed a Wisconsin corn grower.
Want to see how your farm’s progress stacks 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 MyMap, so farmers can see others’ responses from across the country – or even across the county!
Inputs
Russia lifted export quotas on some of its fertilizers overnight, according to the Russian business news outlet, Interfax.
Russia’s Ministry of Industry and Trade granted exemptions for DAP, sodium nitrate, and calcium nitrate and ammonium nitrate mixtures from the non-tariff quotas, noting that low domestic demand was a primary factor.
Russia had previously announced on Tuesday that it would cap fertilizer exports between July – December 2022 to ensure domestic supply. Quota limits for nitrogen fertilizers have been set at 8.3 million metric tonnes (MMT). Fertilizers containing nitrogen blends will see a limit of 5.9MMT through the rest of the 2022 calendar year.
Russia produces 13% of global nitrogen, phosphate, and potash fertilizers. This measure will likely allow Russia to continue selling its fertilizer products to Asian allies and Latin American buyers at a higher cost due to sanctions, while still limiting trade access to the Western countries who imposed the sanctions on Russia.
Corn
Corn prices edged $0.01-$0.04/bushel higher this morning on hopes that the Biden administration will retroactively increase 2021 ethanol blending mandates. Demand forces continue to power corn prices higher, especially as the supply outlook tightens in U.S. and Brazil, where drought continues to threaten the safrinha corn crop.
Similar to soybean crush volumes, corn volumes consumed for ethanol during April 2022 began to show some resistance to upward price pressures according to USDA released yesterday. Through the month of April 2022, U.S. ethanol producers consumed over 414.7 million bushels of corn for fuel alcohol production.
That volume fell 8.5% lower than March 2022 volumes and was likely reflective of easing consumer gas demand as fuel prices skyrocketed in the aftermath of Russia’s invasion of Ukraine. High corn prices also limited ethanol production expansion during that time, though a bit of a production rebound can be expected for May 2022 as peak summer travel season approaches.
Notably, daily corn consumption rates for fuel alcohol fell to the second lowest point of the marketing year in April 2022. For the month, daily rates were estimated at 13.8 million bushels of corn processed for ethanol production per day, down 5.5% from March 2022 daily rates and just a hair ahead of the marketing year low of 13.6 million bushels per day set in September 2021.
But there is still room for optimism in the corn and ethanol markets. E15 blends will be allowed into production this summer to help offset surging gas prices. The larger blend volume should help increase ethanol output in the coming months. Plus, marketing year-to-date corn consumption volumes for ethanol are 8.5% higher than a year ago as the U.S. continues its emergence from the COVID-19 pandemic.
Soybeans
Soybean prices rose $0.08-$0.13/bushel this morning, with July 2022 futures breaking past the $17/bushel benchmark. Sluggish palm oil production outlooks in top producer Indonesia sent prices in the global edible oil markets rising overnight, which powered the lift in soybean prices.
Yesterday’s USDA release of April 2022 soybean crush volumes had few surprises for markets, coming in just ahead of projected trade guesses at 180.9 million bushels. The pre-report trade estimate had ranged between 178.5 million – 182.0 million bushels with an average guess of 180.5 million bushels.
The average daily crush rate for the month calculated out to 6.0 million bushels per day, which was the second smallest average daily crush of the 2021/22 marketing year since September 2021’s 5.5 million-bushel-per-day crush rate.
Monthly crush rates fell nearly 12.0 million bushels from March 2022 volumes. While April crush rates trend historically lower than March, production slowdowns were widely noted during April 2022. Plant maintenance scheduled during April slowed crush production rates for the month, conveniently for plants who otherwise would’ve been forced to bid higher cash prices for supplies that were likely diverted to Chinese export markets.
Marketing year-to-date crush volumes are now 1.5% higher than the same time a year ago as crushers continue to compete with exporters for available supplies, especially amid unseasonably high demand from China this spring as Brazilian supplies fell short due to drought earlier this year.
Wheat
Despite forecasts for a third consecutive Australian bumper wheat crop that is expected to ease global supply tightness, U.S. wheat futures traded $0.10-$0.18/bushel higher overnight. Markets continue to be uneasy about a potential deal with Russia to allow free passage of Ukrainian grain vessels in the Black Sea.
Infrastructure damage at Black Sea ports is a limiting factor in freeing these grain supplies, regardless of the Russian naval blockade’s willingness to let the grain pass freely into international channels. “Hopes are high, but reality is harsh,” a China-based trader told Reuters overnight.
But global demand for wheat remains hot, as evidenced by a 3.3-million-bushel tender issued by Algeria overnight. An easing dollar also increased the attractiveness of U.S. wheat on the global market overnight.
Bonus – 3 ways Russian oil producers are evading sanctions
I don’t have any new ag market news here, but ag I did stumble across a great article in the Wall Street Journal yesterday (can’t recommend enough) that looks at the different tactics countries are using to circumvent banking sanctions on Russian oil and formulated some deep thoughts on what it means for U.S. farmers.
The U.S. long ago (in March 2022) embargoed Russian crude oil, petroleum products, liquefied-natural gas, and coal, while the European Union recently tightened measures on Russian oil purchases earlier this week. But as of Tuesday, Russian oil was trading at a $34.50/barrel discount to Brent crude. Someone has to be taking advantage of that deal, right?
Right. And here’s a few ways it might be happening.
Trade law loopholes
The U.S. did NOT embargo blended fuel products from Russia. The WSJ article quotes the U.S. Office of Foreign Assets Control’s (OFAC) stipulation that “origin” is defined as containing 25% or more of a product from a specific region. OFAC issues exclusions for final products that use raw materials from a potentially banned country, but trade lawyers dispute the clarity of this measure.
That loophole allowed alleged Russian fuel products to be unloaded in New York and New Jersey in May 2022.
India’s bargain buys
India has found another loophole. Daily volumes for Indian crude oil imports are now 800,000 barrels a day – 26.7 times higher than prior to the war’s onset. India is, of course, taking advantage of the heavy discounts on Russian oil which help to offset the additional purchase costs incurred by the Russian banking sanctions.
Again, some of this oil has found its way to U.S. shores. Indian refined oil-product exports to the U.S. are up 43% from the previous quarter. E.U. purchases of Indian oil are a third higher in the same time period.
“What likely happened was Reliance (an Indian refinery company) took on a discounted cargo of Russian crude, refined it and then sold the product on the short-term market where it found a U.S. buyer,” Lauri Myllyvirta, lead analyst at the Centre for Research on Energy and Clean Air where Russian energy shipments are being tracked, told the WSJ.
“It does look like there’s a trade where Russian crude is refined in India and then some of it is sold to the U.S.”
Pirates of the…Black Oil Market?
Russian cargo vessels carrying oil shipments are increasingly turning off GPS equipment to avoid detection and route tracking. The WSJ article also cites a Russian oil tanker unloading 2 million barrels of oil in the Atlantic Ocean off West Africa likely onto another ship destined for China.
The sanctions on Russia don’t every country in the world from trading with it, but the volume of insurers and shipping companies that have followed Western measures means that prices to ship Russian oil are between three and five times higher than prior to the war’s onset.
More of these transactions – where smaller Russian ships load into larger tankers destined for other countries – are likely to continue as buyers explore options to access the cheap Russian oil reserves. Expect China to continue to find ways like this to minimize the transport costs.
What does it mean for farmers?
I think this is relevant to farmers because it shows how Russia could sell its bumper wheat crop this summer if economic sanctions from the West remain in place. In theory, Russia could ship wheat to India where it could possibly be blended with Indian wheat and resold on the global market.
There is also a pricing dynamic here – if petroleum costs remain high for consumers in the U.S., it seems likely that more of us will become willing to turn a blind eye to the extra supply availability regardless of where it originates (especially when the Kroger fuel points run out for the month).
I expect this dynamic would carry over into the food markets, especially if some sort of resolution cannot be met between Russia and the West before Russia’s wheat crop is harvested this summer. India and China are important allies for Russia and the relationships will be a key factor in determining Russia’s economic fate in the Black Sea conflict era.
My forecasts might be a stretch. But that bumper Russian wheat crop is going to make it into global channels – one way or the other. Which way it chooses will have implications for grain markets.
Weather
Temperatures are expected to warm across the Heartland again today, according to NOAA’s short-range forecasts. Light showers will continue to linger in the Eastern Corn Belt but should shift out of the region by this evening.
Clear skies are ahead for the Heartland over the next two days, which should allow soybean planting to progress favorably across the country – and especially in the Northern Plains where spring wheat and corn sowing hopes have largely been thwarted by cold, wet weather.
The Central and Southern Plains will see a chance of rain and thunderstorms by Friday evening. The system appears to be bypassing the Northern Plains at the moment, which could buy growers in North Dakota and Minnesota more time to plow forward with planting.
NOAA’s 6- to 10-day forecasts updated yesterday are trending cool and wet for the Upper Midwest while the 8- to 14-day forecast is beginning to show somewhat dryer – but still cool – conditions for the region.
Financials
Energy markets took a downturn overnight ahead of today’s OPEC+ meeting, but that pushed S&P 500 futures 0.56% higher to $4,122.00 at last glance as inflationary pressures eased slightly this morning.
President Biden is expected to meet with Saudi Arabian leaders in the coming weeks to discuss oil production targets in the wake of Russia’s ongoing occupation of Ukraine. Market watchers expect that Saudi Arabia is ready to increase crude oil production to help ease tight global supplies.
The news built economic optimism after favorable manufacturing and job openings data was released yesterday in the U.S. Overnight gains were capped by looming concerns about an impending recession as the Federal Reserve continues its interest rate hikes.
What else I’m reading this morning on our website, FarmFutures.com:
Senior editor Ben Potter makes the case for driverless tractors.
Advance Trading’s Brian Basting observes the changes in ag markets over the past nine months and offers profitability tips for marketing success in this new market environment.
South American Crop watch columnist Julio Bravo reviews drought damage in Brazil this year and issues caution for impending safrinha corn crop shortfalls.
Bryce Knorr previews post-Memorial Day market trading. Knorr’s top insights? New crop price rallies may not quite match post-Ukrainian invasion highs, but there is still room for upward price appreciation.
Farm family conflict does not mean failure. K Coe Ipsom’s Davon Cook has valuable insights to constructively navigate family squabbles on the farm.
The upcoming Farm Progress 365 virtual sessions this month are geared towards crop scouting, pest management, and other seasonal marketing insights – sign up now!
Black Swan in the Black Sea series: Our May/June 2022 print edition cover story was about the ongoing crisis in the Black Sea. Our online series, Black Swan in the Black Sea, was published to our website last week and features an in-depth look at market fallout from Russia’s invasion of Ukraine earlier this year, as well as where the markets and global trade relationships could be headed in the future.
The first article in the series examines the war’s impacts to the corn market.
Part two examined how wheat trade flows have shifted – and could further shift – due to the Black Sea conflict.
Part three examined the impact of the Black Sea conflict on global fertilizer markets and addressed who will first feel the pain of tight global fertilizer supplies.
The final installment shows how edible oil trades could foreshadow future trading relations in the Black Sea conflict era. The outlook for global grain and oilseed markets remains murky and likely quite volatile for the foreseeable future.
I was also a featured guest on the Around Farm Progress podcast, where I further discussed my takeaways from writing this cover story series and how I expect global trade dynamics to shape out in the future. Check it out here if you want to learn more!
The four-part Black Swan in the Black Sea series concluded last Friday. We hope it helps you to better understand the new dynamics shaping agriculture, energy, and fertilizer markets!
Morning Ag Commodity Prices – 6/2/2022
Contract
Units
High
Low
Last
Net Change
% Change
JUL ’22 CORN
$ / BSH
7.3625
7.2725
7.34
0.0275
0.38%
SEP ’22 CORN
$ / BSH
7.0775
7.005
7.05
0.0125
0.18%
DEC ’22 CORN
$ / BSH
6.9525
6.875
6.9275
0.0125
0.18%
MAR ’23 CORN
$ / BSH
6.9975
6.925
6.9725
0.0075
0.11%
MAY ’23 CORN
$ / BSH
7
6.94
6.9975
0.02
0.29%
JUL ’23 CORN
$ / BSH
6.965
6.9
6.9575
0.015
0.22%
SEP ’23 CORN
$ / BSH
6.445
6.4075
6.4425
0.005
0.08%
JUL ’22 SOYBEANS
$ / BSH
17.02
16.8125
17.0075
0.105
0.62%
AUG ’22 SOYBEANS
$ / BSH
16.36
16.17
16.36
0.11
0.68%
SEP ’22 SOYBEANS
$ / BSH
15.6
15.42
15.595
0.0925
0.60%
NOV ’22 SOYBEANS
$ / BSH
15.23
15.0525
15.225
0.0725
0.48%
JAN ’23 SOYBEANS
$ / BSH
15.275
15.1
15.27
0.07
0.46%
MAR ’23 SOYBEANS
$ / BSH
15.21
15.0625
15.185
0.04
0.26%
MAY ’23 SOYBEANS
$ / BSH
15.195
15.05
15.18
0.0375
0.25%
JUL ’23 SOYBEANS
$ / BSH
15.19
15.035
15.18
0.0575
0.38%
AUG ’23 SOYBEANS
$ / BSH
0
#N/A
14.8725
0
0.00%
JUL ’22 SOYBEAN OIL
$ / LB
78.65
77.57
78.54
0.43
0.55%
AUG ’22 SOYBEAN OIL
$ / LB
77.21
76.24
77.05
0.31
0.40%
JUL ’22 SOY MEAL
$ / TON
417.2
411.3
416.3
3.6
0.87%
AUG ’22 SOY MEAL
$ / TON
411.4
405.9
410.5
3.4
0.84%
SEP ’22 SOY MEAL
$ / TON
405.8
400.6
405.2
3.1
0.77%
OCT ’22 SOY MEAL
$ / TON
400.7
395.3
400.3
3.3
0.83%
DEC ’22 SOY MEAL
$ / TON
402.2
396.4
401.6
3.2
0.80%
JUL ’22 Chicago SRW
$ / BSH
10.575
10.3725
10.5475
0.135
1.30%
SEP ’22 Chicago SRW
$ / BSH
10.685
10.485
10.6475
0.125
1.19%
DEC ’22 Chicago SRW
$ / BSH
10.7875
10.595
10.755
0.1175
1.10%
MAR ’23 Chicago SRW
$ / BSH
10.8425
10.6575
10.81
0.1075
1.00%
MAY ’23 Chicago SRW
$ / BSH
10.785
10.6625
10.7425
0.11
1.03%
JUL ’22 Kansas City HRW
$ / BSH
11.49
11.2775
11.4525
0.17
1.51%
SEP ’22 Kansas City HRW
$ / BSH
11.5575
11.345
11.515
0.1625
1.43%
DEC ’22 Kansas City HRW
$ / BSH
11.645
11.4425
11.6325
0.1825
1.59%
MAR ’23 Kansas City HRW
$ / BSH
11.6675
11.49
11.6675
0.1775
1.54%
MAY ’23 Kansas City HRW
$ / BSH
11.4425
11.4425
11.4425
0.13
1.15%
JUL ’22 MLPS Spring Wheat
$ / BSH
12.13
11.9875
12.1175
0.1475
1.23%
SEP ’22 MLPS Spring Wheat
$ / BSH
12.12
11.98
12.11
0.1375
1.15%
DEC ’22 MLPS Spring Wheat
$ / BSH
12.085
11.97
12.085
0.1225
1.02%
MAR ’23 MLPS Spring Wheat
$ / BSH
11.975
11.9725
11.9725
0.0125
0.10%
MAY ’23 MLPS Spring Wheat
$ / BSH
0
#N/A
11.9125
0
0.00%
JUN ’21 ICE Dollar Index
$
102.645
102.15
102.2
-0.329
-0.32%
JU ’21 Light Crude
$ / BBL
114.98
111.64
112.37
-2.89
-2.51%
AU ’21 Light Crude
$ / BBL
112.43
109.33
110
-2.72
-2.41%
JUL ’22 ULS Diesel
$ /U GAL
4.166
4.0271
4.0881
-0.0552
-1.33%
AUG ’22 ULS Diesel
$ /U GAL
4.0465
3.9225
3.9716
-0.0603
-1.50%
JUL ’22 Gasoline
$ /U GAL
4.0859
3.99
4.0155
-0.0561
-1.38%
AUG ’22 Gasoline
$ /U GAL
3.8727
3.7889
3.81
-0.0612
-1.58%
AUG ’22 Feeder Cattle
$ / CWT
0
#N/A
169.725
0
0.00%
SEP ’22 Feeder Cattle
$ / CWT
0
#N/A
172.4
0
0.00%
JU ’21 Live Cattle
$ / CWT
0
#N/A
132.8
0
0.00%
AU ’21 Live Cattle
$ / CWT
0
#N/A
132.9
0
0.00%
JUN ’22 Live Hogs
$ / CWT
0
#N/A
109.8
0
0.00%
JUL ’22 Live Hogs
$ / CWT
0
#N/A
112.425
0
0.00%
JUN ’22 Class III Milk
$ / CWT
24.56
24.32
24.55
0.1
0.41%
JUL ’22 Class III Milk
$ / CWT
24.96
24.55
24.96
0.26
1.05%
AUG ’22 Class III Milk
$ / CWT
24.68
24.47
24.55
0.1
0.41%
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