Morning report: Plus – unpacking yesterday’s Federal Reserve interest rate hike (Comments are updated by 7:30 a.m. Central Time.)
*Prices as of 6:50 am CST.
Inputs
The U.N. has been working to broker a deal to free trapped Russian fertilizer cargoes across numerous European ports and overnight, it appears a breakthrough has been made on the matter. As I mentioned in my latest E-corn-omics column, this deal has been a major priority for U.N. officials hoping to smooth out the global impacts of the Russian invasion of Ukraine.
While no official deal has yet to be announced, U.N. senior official Rebeca Grynspan told reporters overnight that, “I am cautiously optimistic that we can have important progress soon.” U.N. officials have been negotiating with Ukrainian and Russian officials to reopen a Russian ammonia pipeline that crosses through Ukraine to Black Sea export terminals.
It is expected that Russia will be able to restart its ammonia pipeline if a large prisoner swap of both Russian and Ukrainian detainees is agreed upon by both nations.
Russia’s fertilizer shipments were frozen in place at European ports after its invasion of Ukraine in February 2022. Western banking sanctions on the Russian fertilizer companies’ owners prohibited European countries’ ability to process the fertilizer shipments, leaving them stranded as the sanctions remain in place.
Russian President Vladimir Putin announced early this morning that Russia had exported 25 million metric tonnes of mineral fertilizers so far in the 2022 calendar year. According to the Fertilizer Institute, Russia exports 23% of the world’s ammonia exports, 14% of global urea exports, 10% of the world’s phosphate exports, and 21% of global potash exports, making it the largest fertilizer exporter in the world.
India has become a major beneficiary of discounted Russian fertilizer supplies due to the Western banking sanctions, locking in discounts as high as $70/tonne on Russian supplies.
Corn
Corn futures were mixed this morning. The nearby contracts for 2022 crops traded flat to $0.01/bushel lower while new crop futures gained $0.01-$0.02/bushel. The losses tracked similarly lower gasoline and diesel futures prices this morning.
The European Union is expecting to harvest larger cereal crops next year, with a 26% increase expected for E.U. corn production in 2023. High prices and the smallest crop harvested in 15 years this past fall (just shy of 2 billion bushels) will likely trigger a corn expansion in the E.U. next year as E.U. consultancy Strategie Grains is now forecasting the E.U.’s 2023 corn production at 2.5 billion bushels.
“The year-on-year production growth that we forecast for 2023 is based on better weather conditions than those of 2022, which reduced harvest levels and were catastrophic for maize,” Strategie Grains said in a monthly cereal report, published overnight and reported by Reuters.
“However, our production forecasts err on the side of caution because of higher production costs, notably for fertilisers, which could force some farmers to review their crop management.”
Strategie Grains is also forecasting a slight uptick in E.U.’s wheat production in 2023, up 2.5% from this year’s harvest to 4.7 billion bushels. The added acreage is likely to come from improving weather prospects and smaller rapeseed sowings.
Soybeans
Soybean prices also wavered this morning as markets were optimistic about strong Chinese demand but remained uncertain as to when the shipments would sail. Markets are uncertain how quickly Chinese demand will recover from COVID restrictions;,especially as surging cases leave many Chinese citizens homebound amid voluntary quarantines.
Nearby futures for the 2022 crop gained $0.01/bushel while deferred contract months remained flat to $0.01-$0.02/bushel lower.
Wheat
Several international wheat purchases booked overnight showed a revival of international demand in the wheat markets after Japan, Algeria, and Tunisia all released details regarding recent tenders. Plus, Argentina issued further production cuts to its drought-plagued wheat crop, dropping forecasts by 3% to 423 million bushels.
Wheat prices rose $0.01-$0.03/bushel higher on the flurry of buying activity and news of tighter stocks this morning. Gains were capped by a stronger dollar and a slight increase in expected E.U. soft wheat acreage to be harvested next year, as reported by Strategie Grains.
Weather
Snow will continue to accumulate across the Northern Plains and Upper Midwest today and tomorrow, according to NOAA’s short-term forecasts. Yesterday’s rain showers in the Great Lakes Region are likely to switch to snow today, so please be careful out there!
NOAA’s 6-10-day forecasts are trending much cooler than usual for most of the continental U.S. through late next week. Chances for precipitation during that time are leaning above average for the Plains and Upper Midwest.
The temperature trends in the 8-10-day outlook will continue even cooler across the country during the upcoming Christmas holiday. Chances for moisture are likely to remain slightly above to near normal for the Northern and Central Plains as well as the Upper Midwest during that time while the Eastern Corn Belt could see below average chances for precipitation.
Financials
S&P 500 futures fell 0.96% to $3,992.25 at last glance this morning, as yesterday’s selloff following the Federal Reserve’s latest interest rate hike continued overnight.
The Federal Reserve announced a 0.5% interest rate hike following the conclusion of its Federal Open Market Committee (FOMC) meeting yesterday, pushing the key Federal Funds rate to 4.25%-4.5%. The hike – which aligned with economists’ expectations prior to the end of the FOMC meeting – was the smallest incremental increase in four FOMC meetings, which featured rate increases of 0.75% amid soaring inflation.
The Federal Funds rate is now at its highest price in the past 15 years as the Fed continues to grapple with persistent inflationary pressures. Inflation has matched 40-year highs this year, causing the Fed to increase interest rates at its fastest speed since the 1980s to cool inflation.
But it wasn’t until Fed chairman Jerome Powell’s comments following the FOMC meeting that markets began to nosedive. Powell announced that the Fed is eyeing a 5%-5.5% target for interest rates next year. Prior to yesterday, Powell had led investors to believe the Fed would stop at the 4.6% benchmark based on comments made following the September 2022 FOMC meeting.
The more aggressive outlook comes on the heels of increased economic uncertainty in 2023. Investors are now expected the Fed to hit the 5% benchmark in March 2023 and will likely leave rates unchanged for a period. While the market is hopeful for – and Powell alluded to – rates beginning to ease in 2024, the economic data has not yet shown signs that high interest rates are significantly contributing to business contraction.
“It’s like the new projections didn’t happen, quite honestly. And I’m surprised the market is shrugging it off so confidently,” Lee Ferridge, a senior economic strategist at State Street Global Markets, told the Wall Street Journal. “The expectation is the economic data will be so poor” by the end of the first quarter “that the Fed will stop hiking.”
What else I’m reading this morning on our website, FarmFutures.com:
Farm Futures’ new policy editor, Joshua Baethge, explains why the bipartisan Water Resources Development Act could help improve ag exports.
The 2023 Farm Futures Business Summit is back in Coralville, Iowa and we have a packed speaker lineup – we hope you’ll join us for all the fun!
Check out our December 2023 Farm Progress 365 series to start achieving your 2023 goals a little early.
Advance Trading’s Kent Stutzman explains why your marking plan should include options.
My latest E-corn-omics column takes a deep dive into all the recent happenings in the fertilizer markets.
Glad tidings for corn and soybeans could bring more good cheer for growers during January, writes Bryce Knorr.
Morning Ag Commodity Prices – 12/15/2022
Contract
Units
High
Low
Last
Net Change
% Change
MAR ’23 CORN
$ / BSH
6.5075
6.485
6.5
-0.005
-0.08%
MAY ’23 CORN
$ / BSH
6.515
6.495
6.51
0
0.00%
JUL ’23 CORN
$ / BSH
6.4725
6.4525
6.4625
0
0.00%
SEP ’23 CORN
$ / BSH
6.1075
6.0925
6.095
0.0075
0.12%
DEC ’23 CORN
$ / BSH
5.99
5.97
5.985
0.0225
0.38%
AR2 ’24 CORN
$ / BSH
6.0625
6.045
6.0575
0.02
0.33%
AY2 ’24 CORN
$ / BSH
6.09
6.0875
6.0875
0.02
0.33%
UL2 ’24 CORN
$ / BSH
6.08
6.0725
6.0725
0.015
0.25%
SEP ’24 CORN
$ / BSH
0
#N/A
5.7
0
0.00%
JAN ’23 SOYBEANS
$ / BSH
14.85
14.7475
14.8175
-0.005
-0.03%
MAR ’23 SOYBEANS
$ / BSH
14.88
14.7825
14.855
0.005
0.03%
MAY ’23 SOYBEANS
$ / BSH
14.905
14.82
14.89
0.0075
0.05%
JUL ’23 SOYBEANS
$ / BSH
14.94
14.8475
14.9125
0.0025
0.02%
AUG ’23 SOYBEANS
$ / BSH
14.7025
14.6475
14.7025
0.0075
0.05%
SEP ’23 SOYBEANS
$ / BSH
14.185
14.1225
14.1675
-0.005
-0.04%
NOV ’23 SOYBEANS
$ / BSH
13.9375
13.88
13.9275
-0.005
-0.04%
AN2 ’24 SOYBEANS
$ / BSH
13.9675
13.915
13.9675
0
0.00%
AR2 ’24 SOYBEANS
$ / BSH
13.9025
13.9025
13.9025
-0.005
-0.04%
AY2 ’24 SOYBEANS
$ / BSH
13.88
#N/A
13.885
0
0.00%
UL2 ’24 SOYBEANS
$ / BSH
13.89
#N/A
13.9025
0
0.00%
JAN ’23 SOYBEAN OIL
$ / LB
63.55
62.33
62.7
-0.85
-1.34%
MAR ’23 SOYBEAN OIL
$ / LB
62.85
61.6
61.93
-0.91
-1.45%
JAN ’23 SOY MEAL
$ / TON
464.2
457.6
462.1
2
0.43%
MAR ’23 SOY MEAL
$ / TON
460.5
453.9
458.4
2.2
0.48%
MAY ’23 SOY MEAL
$ / TON
453.8
447.7
452
2
0.44%
JUL ’23 SOY MEAL
$ / TON
449
443.2
447.1
1.7
0.38%
AUG ’23 SOY MEAL
$ / TON
440.9
436.4
438.9
1.4
0.32%
MAR ’23 Chicago SRW
$ / BSH
7.5375
7.47
7.5175
0.025
0.33%
MAY ’23 Chicago SRW
$ / BSH
7.6275
7.565
7.6125
0.025
0.33%
JUL ’23 Chicago SRW
$ / BSH
7.675
7.61
7.665
0.025
0.33%
SEP ’23 Chicago SRW
$ / BSH
7.7425
7.6775
7.735
0.0225
0.29%
DEC ’23 Chicago SRW
$ / BSH
7.8525
7.795
7.8425
0.0125
0.16%
AR2 ’24 Chicago SRW
$ / BSH
7.9175
7.9125
7.9125
0.015
0.19%
AY2 ’24 Chicago SRW
$ / BSH
0
#N/A
7.8975
0
0.00%
MAR ’23 Kansas City HRW
$ / BSH
8.5425
8.47
8.52
0.0175
0.21%
MAY ’23 Kansas City HRW
$ / BSH
8.48
8.425
8.4575
0.0125
0.15%
JUL ’23 Kansas City HRW
$ / BSH
8.41
8.3725
8.405
0.0225
0.27%
SEP ’23 Kansas City HRW
$ / BSH
8.415
8.4025
8.4025
0
0.00%
DEC ’23 Kansas City HRW
$ / BSH
8.465
8.4375
8.465
0.02
0.24%
AR2 ’24 Kansas City HRW
$ / BSH
8.4425
#N/A
8.42
0
0.00%
AY2 ’24 Kansas City HRW
$ / BSH
0
#N/A
8.355
0
0.00%
DEC ’22 MLPS Spring Wheat
$ / BSH
0
#N/A
9.395
0
0.00%
MAR ’23 MLPS Spring Wheat
$ / BSH
9.2
9.1425
9.19
0.0175
0.19%
MAY ’23 MLPS Spring Wheat
$ / BSH
9.155
9.11
9.1525
0.0225
0.25%
JUL ’23 MLPS Spring Wheat
$ / BSH
9.12
9.09
9.12
0.0275
0.30%
SEP ’23 MLPS Spring Wheat
$ / BSH
8.965
8.9475
8.965
0.0175
0.20%
DEC ’23 MLPS Spring Wheat
$ / BSH
8.985
#N/A
8.985
0
0.00%
AR2 ’24 MLPS Spring Wheat
$ / BSH
0
#N/A
8.965
0
0.00%
DEC ’21 ICE Dollar Index
$
104.41
103.605
104.255
0.516
0.50%
JA ’21 Light Crude
$ / BBL
77.77
76.31
77.36
0.08
0.10%
FE ’21 Light Crude
$ / BBL
77.83
76.41
77.45
0.14
0.18%
JAN ’23 ULS Diesel
$ /U GAL
3.2751
3.2304
3.2375
-0.0393
-1.20%
FEB ’23 ULS Diesel
$ /U GAL
3.2294
3.1885
3.1975
-0.0323
-1.00%
JAN ’23 Gasoline
$ /U GAL
2.2496
2.2117
2.2324
-0.012
-0.53%
FEB ’23 Gasoline
$ /U GAL
2.2563
2.2206
2.243
-0.0106
-0.47%
JAN ’23 Feeder Cattle
$ / CWT
0
#N/A
183.6
0
0.00%
MAR ’23 Feeder Cattle
$ / CWT
0
#N/A
185.45
0
0.00%
DE ’21 Live Cattle
$ / CWT
0
#N/A
154.5
0
0.00%
FE ’21 Live Cattle
$ / CWT
0
#N/A
155.7
0
0.00%
FEB ’23 Live Hogs
$ / CWT
0
#N/A
83.4
0
0.00%
APR ’23 Live Hogs
$ / CWT
0
#N/A
90.725
0
0.00%
DEC ’22 Class III Milk
$ / CWT
20.63
20.6
20.63
0.1
0.49%
JAN ’23 Class III Milk
$ / CWT
19.57
19.5
19.5
-0.02
-0.10%
FEB ’23 Class III Milk
$ / CWT
19.23
#N/A
19.18
0
0.00%
