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Ukraine planting disruption could push corn past $8

Nearly all of Ukraine’s corn production is exported to other countries.

Josh Green

March 1, 2022

4 Min Read
field of young corn
Getty/iStockphoto

USDA released its annual outlook numbers last week on the same day Russia attacked its neighbor Ukraine. USDA’s forecast, if it becomes a reality, would have the potential to push new crop corn into the $4 - $4.50 this harvest. In order to achieve the nearly 2-billion-bushel carryout the agency predicts, both the Brazilian Safrinha (second) crop and the U.S. crop will need to grow near-record production. 

On the other hand, the war in Ukraine and the growing potential for supply disruptions in the region could push corn well over $8.

What Ukraine produces

This year Ukraine produced nearly 1.6 billion bushels of corn. Of the 1.6 billion bushels, nearly 1.3 billion are exported to China, the EU and other global buyers. As the war continues, the risk of production disruptions in the coming months could dramatically reduce the country’s corn and wheat stocks.

As for corn, the Ukraine planting season corresponds closely to the United States crop calendar. Planting typically begins in early May with harvest beginning mid-September. The risk for delays of crucial inputs and labor to plant the crop has the potential to put those exports in jeopardy.

If the Ukrainian crop is reduced by 25%, that could lead to an additional 400 million bushels of export business that the U.S. and South America would likely gain. This extra demand could put the U.S. carryout for the 22/23 corn crop similar to our current old crop stocks where nearby futures are trading over $7.

That’s with decent weather. Any weather concerns could easily put the U.S. balance sheet back to a scenario where we are talking about pipeline stocks which would require the market to ration demand and send prices over the $8 per bushel mark.

The soybean market situation laid out by the USDA Outlook Forum showed a little more support with tightening stocks year-on-year. USDA’s acreage predictions along with trend yields would still see the U.S. carryout shrinking 20 million bushels versus 21/22.

China has been ramping up its new crop soybean purchases. Many experts expect 22/23 exports to creep higher during the new marketing year. It wouldn’t take much of a production hiccup to send soybean ending stocks back to pipeline levels as well.

Last year a pipeline carryout pushed nearby soybeans well over $17. The market is going to have to continue to stay aggressive in order to keep acreage balanced, but we can’t rule out a lower market come harvest. If the U.S. can pull extra acres into soybean production this spring along with above trend line yield, we could see soybeans fall back into the $10 - $12 range come this fall.

What to do now

With all this being said, I always keep in mind that the futures market has the task of pricing in what is expected to happen in the “future.” This concept is important to remember since the market is likely already trading a different carryout than the USDA’s Outlook Forum released last week.

The past couple days we have really seen how much money flow from investors can quickly move commodity markets to obtain exposure to inflation or the possibility of a shortage. This can be frustrating as a hedger as investment buyers can take prices beyond our expectations, but sellers can also cause corrections that we may never see coming.

To help mitigate these volatile times formulate a plan that will allow you to confidently establish floors and make sales while maintaining upside to capture additional margin for your operation.

Contact Advance Trading at (800) 664-2321 or go to www.advance-trading.com.

Information provided may include opinions of the author and is subject to the following disclosures:

The risk of trading futures and options can be substantial. All information, publications, and material used and distributed by Advance Trading Inc. shall be construed as a solicitation. ATI does not maintain an independent research department as defined in CFTC Regulation 1.71. Information obtained from third-party sources is believed to be reliable, but its accuracy is not guaranteed by Advance Trading Inc. Past performance is not necessarily indicative of future results.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress.

About the Author

Josh Green

Josh joined Advance Trading in August of 2021 as an Agriculture Risk Management Advisor out of the Sullivan, IL branch office focusing on the Midwest geographical area.  Before joining ATI, Josh managed multiple facilities and was a merchandiser for Tate & Lyle.  In addition to his sixteen years of grain industry experience, he holds a Bachelor’s Degree in Agronomy and Crop Science from the University of Illinois.  Josh currently resides in Sullivan, IL with his wife and three daughters and in his free time, he enjoys water sports and traveling with his family. 

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