Political statements from India to ban exports of wheat were followed by comments about lifting the ban. And once again, comments today show no intention to lift the ban. This news caused traders to buy, then sell, then only to buy again attributed to wheat market volatility.
Corn and wheat traders also started selling hard on early day Russian statements that they will start Black Sea exports of food (mainly corn and wheat), which caught the markets off guard. However, this was followed by mid-morning clarification that Russian exports would resume out of Ukraine only if sanctions were lifted. (That ain’t gonna happen!)
Again, the selloff quickly started to reverse as buyers sought value. News also came out of Ukraine of damage assessments suggesting export terminals may be out of commission for some time.
Another story started with the announcement by President Biden to support the Indo-Pacific Economic Framework plan that would include 15 trading partners and replace the all-but-defunct Trans-Pacific Partnership. This announcement was followed by China announcing an agreement with Brazil on pseudo sanitary quality export agreements and a phase one pact including 12 commodities including corn.
This pressured markets, however, the Brazilian Chinese agreement would not likely result in any major changes in exports in the next six months. Further analysis also suggests even if China did buy corn from Brazil, total world consumption would not change, and it would just shift other buyers to the U.S. Once the firestorm of selling relinquished, buyers came to the table helping firm the market into the close.
Finally, traders are dealing with the reality check of a messy corn planting season with USDA's intended acres. If the current forecast pans out, the likelihood of 1.5 million acres of corn in North Dakota and Minnesota seems unrealistic. Traders will now go on the hunt to find out if farmers in other states increased corn acres.
A simple query of a few co-ops and their fertilizer sales suggests most producers stuck to the intended rotation. The significance of this is huge. In USDA's supply and demand table, they made three major assumptions:
- Demand would 370 million bushels in a year that Grain Consuming Animal Units are higher.
- The U.S. will produce a record yield.
- ALL of the intended acres will be planted.
None of these assumptions seem likely at this point in time.
End-users seem well bought out for 30 days but any decline in December futures below $7.00 may offer a value point for end users to lock in fall price protection. Fund traders are also likely to maintain a sizable ownership position until summer weather is better known.
Overall, producers should expect a sideways market while travelers text pictures of growing cornfields to their trading friends and statisticians analyze demand, yield potential and total planted acres.
Financial decisions at this point should be based on locking in price on enough bushels to make sure farm operations remain profitable regardless of what happens to yield or price. Thus, it is wise to maintain flexibility of price and delivery. Our weekly video discusses strategy and is available by signing up at Agmarket.Net.
Reach Bill Biedermann at 815-893-7443 or firstname.lastname@example.org.
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