Afternoon report: Soy complex also hit by a round of profit-taking, waning exports
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(TM) MyMap, so farmers can see others’ responses from across the country – or even across the county!
Russian president Vladimir Putin gave a nationally televised interview in Russia this afternoon and addressed issues of food security surrounding the Russian war in Ukraine. Putin called reports of Russia not allowing Ukrainian grain exports safe passage through the Black Sea “a bluff” and that “there are no problems with shipping grain out of Ukraine.”
Ukrainian ports in the Black Sea have been mined during the ongoing Russian conflict in Ukraine, making safe passage for grain cargoes especially risky. Both Ukraine and Russia dispute which country’s forces placed the mines, though Russian forces have been documented placing mines in Ukrainian wheat and corn fields in regions where they have been forced to retreat. Putin called on Ukraine to remove the mines in his interview.
It is also important to keep in mind that Ukrainian grain shipments in the Black Sea cannot just simply restart. Extensive damage from Russian missile strikes has been incurred at port loading facilities. Plus, shipping insurance risk premiums are likely to remain high enough to deter shipments while harbors remain mined and the Russian naval blockade remains in place.
Putin guaranteed safety for Ukrainian grain exports in the Black Sea and Azov Sea, encouraging shipments out of key Ukrainian export hub, Odessa. Odessa has long been viewed as a strategic target for Putin’s troops to acquire.
Putin also suggested alternative exporting measures for Ukrainian grain, including by railway through countries neighboring Ukraine, including Russia’s key ally Belarus, as well as Romania and Poland, estimating Ukraine could potentially ship 184 million bushels of wheat and 276 million bushels of corn currently locked into storage.
“If someone wants to solve the problem of exporting Ukrainian grain – please, the easiest way is through Belarus. No one is stopping it,” Putin said. “But for this you have to lift sanctions from Belarus.”
But remember – rail systems in Ukraine use Soviet-era construction and require extra time and cost for railcars to be transferred to the wider European rail systems past the Ukrainian border. Russian missile strikes have also targeted Ukrainian infrastructure, so this is not the simplistic solution Putin implies.
Putin may be beginning to worry about his political goodwill with his country’s farmers. He increased Russian grain export forecasts to 50 million metric tonnes (MMT) ahead of the largest Russian wheat crop expected to be harvested since the fall of the Soviet Union.
My morning column yesterday took a deep dive into how Russian oil companies are circumventing Western banking sanctions to continue selling energy products – albeit at a higher cost and increased logistic patterns – to global buyers, primarily China and India. That should be a key indicator to global grain markets that Russian wheat is going to get onto the market one way or the other.
“The situation will worsen, because the British and Americans have imposed sanctions on our fertilizers,” Putin said in the interview, noting that higher global fertilizer prices are not correlated with Russia’s ongoing military occupation in Ukraine and calling for Western sanctions against neighboring Belarus to also be lifted.
As I’ve explained in numerous other columns, this is not true. Russia accounts for some 13% of global fertilizer production so the impacts of Western banking sanctions levied against Russian financial institutions has indeed had a profound upwards impact on global fertilizer pricing, which is most apparent for South American crop producers currently.
“We are now seeing attempts to shift the responsibility for what is happening on the world food market, the emerging problems in this market, onto Russia. This is an attempt, as our people say, to shift these problems from a sick head to a healthy one,” Putin said.
Macky Sall, president of the West African country of Senegal, praised Putin’s comments for offering hope to African nations suffering from soaring food costs and growing scarcity. “President #Putin has expressed to us his willingness to facilitate the export of Ukrainian cereals,” Sall, who is also the chairman of the African Union, wrote on Twitter.
I caution readers to digest Putin’s words with caution. The interview was likely a propaganda piece to steady morale for the war across the country. Russian troops currently occupy a fifth of Ukraine, though troop morale has been low, especially as Ukraine receives more advance defense technology from Western allies (check out this fascinating New York Times’ Daily podcast episode to learn more about the interworking of the Russian military).
But the interview also suggests that Putin is not yet ready to back down from playing the aggressor role in Ukraine. Wheat and corn prices may be trading lower following Putin’s comments, but they could rise just as rapidly if the market begins to suspect Putin will not follow through on these claims.
More Russian shenanigans: Ukraine Envoy Says Turkey Among Destinations of Grain Stolen by Russia
Corn: Corn prices ended today’s trading session $0.03-$0.04/bushel lower on optimism that Russia will release Ukrainian corn supplies. Favorable weekend rains are likely to encourage crop development which also weighed bearishly on prices.
The U.S. EPA also released blending targets just after the market close. Biofuel blending targets for 2022 are forecast at 20.63 billion gallons, below the proposed volume. Retroactive adjustments for 2021 blending were above market expectations while 2020 volumes went unchanged.
The EPA added a 250-million-gallon supplemental standard to the 2022 blend mandates. It also denied 69 petitions for biofuel blending exemptions from refineries but will allow small refineries extra time to fulfill 2020 blending mandates.
Processors upped their cash bids for corn today across the Corn Belt. Farmer sales have been slow in recent weeks, so the move is likely an effort to coax more supply onto the market. An Iowa originator reported light cash sales in the region this morning. Cash bids were mostly flat at elevator, river terminal, and ethanol locations.
Soybeans: U.S. soybean futures closed the day $0.10-$0.30/bushel lower on a round of profit-taking after yesterday’s gains. Chinese export demand began to wane in today’s Weekly Export Sales report from USDA following an unseasonal buying spree thanks to Brazil’s drought shortfalls earlier this spring, which further contributed to today’s selloff.
Cash soybean prices were largely unchanged at processors and river terminals this morning. Basis weakened at elevators across the Heartland as buyers continue to roll cash bids into the August 2022 futures contract.
Cash soymeal prices rose at rail market locations today, boosted by plant shutdowns for scheduled maintenance. Merchandisers reported demand patterns to be routine while USDA’s weekly export report out this morning pointed to a 3% weekly rise in soymeal export volumes.
Wheat: Chicago and Kansas City futures bore the brunt of the Putin interview fallout for the wheat markets today, ending $0.17-$0.20/bushel lower. Minneapolis wheat lost $0.05-$0.08/bushel on the prospect, with some of its losses capped by planting shortfalls in North Dakota and Minnesota.
SovEcon issued an increased Russian wheat export forecast, now projecting 2022/23 Russian wheat exports at 1.55 billion bushels amid favorable growing conditions for the Russian wheat crop. USDA’s current forecast stands at 1.43 billion bushels.
India will keep its current food export policies in place, according to Piyush Goyal, the Minister for Commerce and Industry, Consumer Affairs and Food and Public Distribution. A devastating heat wave this spring has tanked Indian wheat prospects after five years of bumper crops. Private wheat exports from India were banned in mid-May to ensure domestic availability.
India likely shipped a record-setting 367 million bushels of wheat this year, with much of that volume recorded following Russia’s invasion in Ukraine. At the moment, the country is not expected to restrict rice exports.
Cash prices for hard red wheat in the Southern Plains began to narrow as harvest activity ramped up today. Many growers are expected to be making deliveries on previously booked contracts in the coming weeks, which will likely keep cash prices flat to weak. No change in cash prices were reported at U.S. Gulf export terminals.
With 72% of the U.S. winter wheat crop headed as of last Sunday, attention is increasingly turning to harvest of hard red winter wheat crops in the Southern Plains. U.S. Wheat Associate’s weekly Harvest Report finds harvest progress moving slowly in Texas and Oklahoma this week after more widespread rain showers.
The moisture is welcomed, though the timing isn’t great. About 24% of Texas’s crop is harvested while harvest is 14% complete in Oklahoma.
The showers have also delayed heading progress in Kansas, where test cutting remains a week to 10 days out thanks to 9-10 inches of rain over the past week. Temperatures remain on the cool side which is also contributing to maturation delays.
Soft red winter wheat crops are nearly 80% headed across the country. Scattered showers are likely to keep crop development from advancing more quickly. Harvest has already begun in Alabama, where 10% of the state’s crop has been harvested.
Soft white wheat crops in the Pacific Northwest are in good shape, with spring crops faring better than their winter counterparts. Cool and wet weather has slowed crop development for spring planted crops and heading progress for winter crops. Winter crops in Washington (11% headed), Idaho (14%), and Oregon (29%) are beginning to reach peak maturation stages, which means that harvest will be approaching in the next several weeks.
Hard red spring crops in the Northern Plains are looking adequate – if they aren’t in Minnesota or North Dakota. A cool and wet spring has placed sowing rates for spring wheat crops in both states significantly behind the five-year average. Growers who are not opting for prevent plant acreage this spring will have a 10-day window to finishing planting spring wheat crops.
Weather: More rains in the Plains are expected this weekend, according to NOAA’s short-range forecasts. The system will shift into the Upper Midwest by tomorrow and continue to linger over both the Plains and Upper Midwest on Sunday.
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: The May monthly jobs report saw another 390,000 jobs added last month. The unemployment rate remained unchanged at 3.6%. The S&P 500 is slated to close down 68.25 points (1.63%) to $4,107 as the strong unemployment rate raises the odds that the Federal Reserve will double down on its interest rate hikes to curb inflation. Markets continue to be wary of higher interest rates for fear that it may spur a recession.
More market fun:
John Deere is moving its tractor cab production from Waterloo to Mexico
US EPA expected to issue biofuel blending volumes for 2022 below proposed number
What else I’m reading today on our website, FarmFutures.com:
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 last week, 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!
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