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Morning Market Review for January 14, 2022

scyther5/Thinkstock Markets-122316-scyther5-ThinkstockPhotos-2000
Corn sees weather boost, soy falls on shrinking Chinese demand. (Comments are updated by 7:30 a.m. Central Time.)

Wheat falls on continued USDA fallout. Plus – an updated look at inputs

  • Corn up 1-2 cents
  • Soybeans down 1-6 cents; Soymeal up $2.70/ton; Soyoil down $0.27/lb
  • Chicago wheat down 2-3 cents; Kansas City wheat down 7-9 cents; Minneapolis wheat down 11-13 cents

*Prices as of 6:55am CST.

Good morning! Markets will be closed on Monday in observance of the Martin Luther King, Jr. Memorial holiday. There will be no Farm Futures newsletters that day – this analyst will be sleeping in!

Inputs (U.S.)

Some days I get to report good news for farmers. I really like those days. Today is one of those days, friends!

Earlier this week, Farm Futures contributing analyst Bryce Knorr observed that recent activity in the urea market hinted that cooling fertilizer prices were on the horizon. India had issued a tender to purchase fewer urea stocks than anticipated and the worldwide seasonal cooldown in fertilizer applications has allowed inventories to rebuild.

Wholesale urea prices at the U.S. Gulf are trading at $694.46/ton this morning, down a staggering $147.71/ton or 18% over the past three weeks. Knorr pointed out the rapid selloff is certainly a sign that fertilizer producers and wholesale suppliers can afford to accept the lower prices – a sign some growers may interpret as profiteering from high grain prices.

So when yesterday’s latest bi-weekly production costs report was released from Illinois’ USDA, it was a breath of fresh air to see nitrogen fertilizer and MAP prices finally backing off December 2021 record highs. Most notably, urea costs fell 1.8% over the past two weeks to $895.67/ton. MAP prices also tumbled nearly 5% lower to $863.75.

IL biweekly production costs

Anhydrous ammonia slightly eased back from the brink of the $1,500/ton benchmark, notching an average quote of $1,486.11/ton, down $8.33/ton over the past two weeks. UAN prices also dipped $5.07/ton to $574.72/ton as of January 13.

Production costs remain high, but there was some lessening in yesterday’s report. Between $0.44-$5.12/acre of costs were returned back to farmers looking to grow 200 bushel per acre (bpa) corn with the price decreases in yesterday’s report. Per acre corn costs for growers looking to yield 200 bpa are now projected between $213-$236/acre in Illinois.

From a marketing perspective, that only accounts for $0.01-$0.02/bushel of recent corn futures price declines which is not the most optimistic budget analysis, especially with corn dipping below the $6/bushel benchmark over the past few days.

To be sure, there is an unprecedented volume of additional factors driving high input prices. But it is no secret that high fertilizer prices are often correlated (and slightly lagged behind) higher corn prices. A new year means new demand planning schedules for countries that underestimated energy consumption last year, leading to fertilizer plant shutdowns across Europe and Asia.

But the seasonal lull in fertilizer demand will give the market a chance to restock. Barring any production issues in the coming months (i.e. another cold snap in the U.S. Gulf), the fertilizer market may finally have a chance to cool off with spring planting season on the horizon.

Corn: Even with rains forecasted in Brazil and Argentina this weekend, the heat damage inflicted on crops in the South American region over the past few weeks may be more severe than USDA’s production estimates earlier this week alluded.

Corn futures inched $0.01-$0.02/bushel higher on the prospect as old crop contracts continue to linger near the $5.90/bushel benchmark.

Soybeans

Much of the weather optimism enjoyed by the corn market this morning was offset by lower Chinese soybean demand in the soy markets. Soybean futures slipped $0.01-$0.06/bushel lower on the slowing Chinese soybean buying paces in 2021.

Updated customs data released from China overnight show lower 2021 soybean imports compared to a year prior. It was the first time since 2018’s African swine flu (ASF) event that China imported fewer soybeans. China is the world’s largest soybean buyer.

China only imported 3.55 billion bushels of soybeans during the 2021 calendar year, own 3.8% from 2020 volumes. Low hog prices and increased wheat feedings continue to pressure Chinese soy crush margins into the red.

"Domestic hog prices plunged, pushing down hog margins and downstream demand for soymeal. The practice of using wheat to replace some corn in feed also cut demand for soymeal," Zou Honglin, an analyst with the agriculture division of Mysteel, a China-based commodities consultancy, told Reuters this morning.

But there was good news, especially for U.S. soy growers. China imported 18% more soybeans in December 2021 compared to December 2020. December 2021 soy imports were also higher than the previous month. China purchased and took delivery of 325.9 million bushels of soybeans in December 2021.

 A better-than-expected corn harvest in China could help to ease wheat rations in hog diets and lessen pressure on soy crush margins in the coming months. But with Brazil’s record large soybean crop in the process of being harvested, it is not clear how soon U.S. soy exporters will be able to benefit from that shifting dynamic.

Wheat

A stronger dollar and rising supply forecasts issued by USDA earlier this week thwarted gains in the wheat complex overnight. Wheat prices are on track for a third consecutive week of losses this morning.

Favorable harvest forecasts in Argentina and Australia sent Minneapolis wheat futures falling $0.10-$0.13/bushel. Rising soft wheat planting forecasts in the U.S. dropped Chicago futures $0.02-$0.03/bushel while some weekend precipitation in parts of the U.S. Plains led Kansas City futures $0.07-$0.09/bushel lower this morning.

Weather

A snow system will shift out of the Northern Plains this morning into the Upper Mississippi River Valley by this afternoon, according to NOAA’s short-range forecasts. The storm system will travel down the river through the weekend, with snow turning to rain showers as the system hits the South.

With final 2021 production estimates now out of the market’s focus following this week’s USDA reports, expect an increasing market focus to turn to 2022 acreage intentions in the coming weeks. As such, drought monitor activity could begin to influence prices more.

Yesterday’s updated drought monitor shows dry and drought conditions across the U.S. holding steady at 71.82% for a second straight week. The additional snow cover thanks to cross country systems over the past couple weeks has helped keep drought conditions from further rising, though the volume of U.S. acreage in concerningly dry condition remains alarming.

Drought Monitor Map

Drought conditions increased by nearly 1% week over week in the High Plains. As of Tuesday, 88.13% of acreage in the Plains are in abnormally dry (D0) to exceptional drought (D4) condition. Ratings in the West edged nearly 0.2% lower on the week, but over 95% of land in the region is in the D0-D4 drought classification, with 21.39% of Western lands experiencing exceptional drought.

Conditions in the Midwest rose slightly, with 36.93% of Midwestern acreage in dry to extreme drought condition. While ratings in the Midwest are significantly less severe than those in the Plains and West, the persistent dryness raises concerns about farmers’ ability to produce profitable yields off of fields west of the Mississippi River in the coming months.

More moisture is needed over the next two months in the Plains to ensure farmers have a good shot at a productive 2022 growing season. With a La Niña weather pattern in place for a second straight year limiting the precipitation in the Plains, it may be a stretch to hope for more moisture ahead of spring planting.

Keep an eye on this dynamic. Paired with higher fertilizer costs, the persistent could easily shift 2022 acreage allocations in the eight or so weeks leading up to planting kick off. And that in turn will have significant price impacts farmers will need

Financials

S&P 500 futures fell 12.5 points (-0.27%) to $4,639.50 this morning with investors growing nervous that the latest uptick in inflation means that gains in the upcoming corporate earnings season could be muted.

Also worth a read on our website, FarmFutures.com:

  • Inputs: Bryce Knorr predicts relief from higher fertilizer prices and higher soybean prices in the aftermath of today’s USDA reports.
  • The latest on ag supply chain stress with Iowa State’s Bobby Martens.
  • Naomi Blohm isn’t cutting any corners – USDA's January report was a dud. Now what?
  • The Farm Futures team’s coverage of Wednesday’s USDA reports is here.
  • Mike Wilson’s This Business of Farming column is more than a column – it’s a management lifestyle. Want to improve yours? Come to our Farm Futures Ag Business Summit next week in Coralville, Iowa to improve your management acumen!
  • PS – I’ll be speaking about fertilizer markets and providing a first look at 2022 acreage estimates next week. Stop by – you won’t want to miss it!
Morning Ag Commodity Prices - 1/14/2022
Contract Units High Low Last Net Change % Change
MAR '22 CORN $ / BSH  5.9 5.8525 5.8975 0.0225 0.38%
MAY '22 CORN $ / BSH  5.9175 5.8725 5.9125 0.0175 0.30%
JUL '22 CORN $ / BSH  5.895 5.85 5.89 0.0125 0.21%
SEP '22 CORN $ / BSH  5.6975 5.655 5.69 0.0175 0.31%
DEC '22 CORN $ / BSH  5.61 5.5625 5.6025 0.025 0.45%
MAR '23 CORN $ / BSH  5.685 5.6525 5.68 0.0225 0.40%
MAY '23 CORN $ / BSH  5.71 5.71 5.71 0.02 0.35%
JAN '22 SOYBEANS $ / BSH  0 #N/A 13.6525 0 0.00%
MAR '22 SOYBEANS $ / BSH  13.7675 13.6375 13.74 -0.0325 -0.24%
MAY '22 SOYBEANS $ / BSH  13.8675 13.7375 13.835 -0.0375 -0.27%
JUL '22 SOYBEANS $ / BSH  13.94 13.8075 13.91 -0.0375 -0.27%
AUG '22 SOYBEANS $ / BSH  13.72 13.62 13.7075 -0.045 -0.33%
SEP '22 SOYBEANS $ / BSH  13.2525 13.1525 13.23 -0.06 -0.45%
NOV '22 SOYBEANS $ / BSH  13.035 12.9175 12.99 -0.055 -0.42%
JAN '23 SOYBEANS $ / BSH  13.0525 12.94 13 -0.065 -0.50%
MAR '23 SOYBEANS $ / BSH  12.9175 12.86 12.9 -0.055 -0.42%
JAN '22 SOYBEAN OIL  $ / LB 0 #N/A 58.18 0 0.00%
MAR '22 SOYBEAN OIL  $ / LB 58.44 57.6 58.23 -0.21 -0.36%
JAN '22 SOY MEAL $ / TON 0 #N/A 423.7 0 0.00%
MAR '22 SOY MEAL $ / TON 411 405.6 410.6 1.7 0.42%
MAY '22 SOY MEAL $ / TON 407.9 403.3 407.7 0.7 0.17%
JUL '22 SOY MEAL $ / TON 407 402.8 406.7 0.2 0.05%
AUG '22 SOY MEAL $ / TON 401.6 398 401.6 -0.1 -0.02%
MAR '22 Chicago SRW $ / BSH  7.4725 7.3875 7.4375 -0.03 -0.40%
MAY '22 Chicago SRW $ / BSH  7.4925 7.415 7.4625 -0.0275 -0.37%
JUL '22 Chicago SRW $ / BSH  7.43 7.36 7.405 -0.02 -0.27%
SEP '22 Chicago SRW $ / BSH  7.44 7.385 7.425 -0.0225 -0.30%
DEC '22 Chicago SRW $ / BSH  7.4975 7.445 7.4825 -0.0225 -0.30%
MAR '22 Kansas City HRW $ / BSH  7.5975 7.47 7.5125 -0.085 -1.12%
MAY '22 Kansas City HRW $ / BSH  7.62 7.5025 7.5425 -0.08 -1.05%
JUL '22 Kansas City HRW $ / BSH  7.645 7.54 7.5775 -0.07 -0.92%
SEP '22 Kansas City HRW $ / BSH  7.6575 7.585 7.605 -0.08 -1.04%
DEC '22 Kansas City HRW $ / BSH  7.7375 7.665 7.685 -0.07 -0.90%
MAR '22 MLPS Spring Wheat $ / BSH  8.955 8.795 8.83 -0.125 -1.40%
MAY '22 MLPS Spring Wheat $ / BSH  8.9425 8.78 8.8025 -0.14 -1.57%
JUL '22 MLPS Spring Wheat $ / BSH  8.88 8.7575 8.775 -0.15 -1.68%
SEP '22 MLPS Spring Wheat $ / BSH  8.7 8.6175 8.6175 -0.1225 -1.40%
DEC '22 MLPS Spring Wheat $ / BSH  8.62 8.58 8.58 -0.1125 -1.29%
MAR '21 ICE Dollar Index $ 94.88 94.61 94.84 0.065 0.07%
 FE '21 Light Crude $ / BBL  83.35 81.58 82.5 0.38 0.46%
 MA '21 Light Crude $ / BBL  82.82 81.1 82.04 0.42 0.51%
FEB '22 ULS Diesel $ /U GAL 2.6459 2.599 2.6341 0.0256 0.98%
MAR '22 ULS Diesel $ /U GAL 2.5937 2.5478 2.5801 0.0233 0.91%
FEB '22 Gasoline $ /U GAL 2.4214 2.3735 2.4012 0.0171 0.72%
MAR '22 Gasoline $ /U GAL 2.425 2.3781 2.4044 0.0167 0.70%
JAN '22 Feeder Cattle $ / CWT 0 #N/A 162.925 0 0.00%
MAR '22 Feeder Cattle $ / CWT 0 #N/A 166.725 0 0.00%
 FE '21 Live Cattle $ / CWT 0 #N/A 137 0 0.00%
 AP '21 Live Cattle $ / CWT 0 #N/A 140.975 0 0.00%
FEB '22 Live Hogs $ / CWT 0 #N/A 77.85 0 0.00%
APR '22 Live Hogs $ / CWT 0 #N/A 85.325 0 0.00%
JAN '22 Class III Milk $ / CWT 20.3 #N/A 20.32 0 0.00%
FEB '22 Class III Milk $ / CWT 22.2 22.2 22.2 0 0.00%
MAR '22 Class III Milk $ / CWT 22.23 #N/A 22.33 0 0.00%

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