Weekly Crop Commentary - 2/10/2023
Feb 10, 2023
Wes Bahan
Vice President, Grain Division
Good afternoon. This week brought the monthly supply and demand report from the USDA. They made only a few small changes to the US numbers. First and foremost was the 25-million-bushel reduction in ethanol grind. This is confirming the rumors that ethanol plants west of the Mississippi River are experiencing negative margins, and one firm reduced production by 10%. For soybeans, we saw a reduction in crush, and you may ask why would we reduce crush when margins are good? Getting rid of the meal seems to be the big issue that is going to limit soybean crush. Railroads are still struggling on the operations front, and this is the main transportation into the southeast feed market. On the world stage, the Argentina corn crop was once again reduced due to the drought conditions hurting yield and likely causing a bit more abandonment. One tidbit that I found interesting is that Brazil is set to pass the US in corn exports. As we look at the world numbers on soybeans, another reduction for production in Argentina was revealed. Not a surprise with the reduction in corn also. The Brazil crop still seems to be rather large, and they look to be the exporter of an additional 1MMT, taking the total to 92MMT, right around 1.3 billion bushels above the US for exports. There is starting to be some talk on the planted acreage front. Crop insurance is in its price discovery period right now, and who knows what the April/May weather will look like. So, there will be some back and forth for the next 6 weeks or so. Thanks, and have a great weekend.
Haylee VanScoy
Director of Grain Purchasing
The grain markets are making a decent recovery here for the end of the week. There’s been talk that Russia is escalating the war in Ukraine with 71 missiles fired into Ukraine today, which makes me wonder what will happen over the next couple of weeks as we approach the 1-year anniversary of the invasion on February 24th. Corn and beans have followed along with the wheat rally today as well. Wheat is up 25 cents at 7.82 WH, corn up 8 cents at 6.79 CH, and beans up 18 cents at 15.30 SK. Note that we have rolled our February and March bean bids from the March (SH) to the May (SK) futures today and appears that other elevators have been following suit this week. CH23 consistently sitting in this 6.50-6.90 range since the start of the year with the lack of a market moving story and behind pace export sales. SK23 beans have remained relatively strong as we entered in February with futures find support at 15.00 and trading up near the 15.40 mark on the highs. Continue to connect with your local merchandiser and discuss your marketing plans for this year before you get busy in the field this spring. Hope you all have a wonderful Valentine’s Day next week!
Lou Baughman
Grain Merchandiser, Kenton (Region 1)
The war between Russia and Ukraine is anticipated to escalate in the spring, as Ukraine adds tanks, fighter jets, and long-range missiles to their fight. This war is not going away anytime soon which will increase the risk of both countries’ production and shipping of commodities.
Brazil is harvesting a large bean crop which should offset the short Argentine crop. They are now focused on switching to the safrinha corn crop, which is getting a later start because of the rain-delayed bean harvest with more rain forecasted for the weekend. With the volatile market it would be wise to put target orders in for old and new crop grain. Enjoy your weekend.
Will Gase
Grain Merchandiser, Upper Sandusky (Region 2)
We have recovered from our early losses today for corn and beans and are up a couple of pennies for corn and about a nickel for beans since last Friday. Wheat has jumped more than 25 cents today over new fears in the Russian-Ukrainian War.
I did a little study earlier in the week on Upper Sandusky price difference. I took the February 15th and May 15th contract price for the harvest time futures and compared the two of them with the spot cash price for harvest on October 15th. I did this for 2013-2022 and the results were interesting. On average over ten years for corn, a person could make an extra 30 cents per bushel if they contracted in May rather than cash price in October, and an extra 13 cents if they contracted in February instead of October. For beans, someone could make an extra 42 cents on average for contracting in May and an extra 21 cents in February. This shows that contracting in May is a smart financial decision if done every year. It also shows us that we might be headed for a downturn in the market with current futures price for harvest time at 5.60 and 13.33 (Upper pricing). While none of us like the lower prices, it might make sense to lock in some bushels at these levels as the past has indicated a lower price at harvest than where the futures are at currently.
The wait for the new Upper Sandusky grain bin to be up and running is (fingers crossed) almost over. Our hope here in the Upper office is that the new 750,000-bushel bin will be holding corn sometime next week. Call or come in to talk with us about pricing or different contract options for your corn and beans if you still have some bushels at home. We would be happy to help. Enjoy the nice weather this weekend!
Steve Bricher
Grain Operation Manager, Urbana (Region 3)
Ralph Wince
Grain Merchandiser, Canfield (Region 5)
Good afternoon. This week brought us another USDA update and I, like most, thought there was not a lot of anything new in the report. Corn and beans continue to trade in a very narrow trading range. Soybean harvest is about 30% in the Mato Grosso area in Brazil. China is switching to South America to source their soybeans right now and exports are slowing out of the US Gulf. Time will tell if some business switches back to the US if loading becomes a problem.
Wage inflation continues to be a problem here in the US. As the StoneX Chief Economist, Arlan Suderman continues to say, until we can get unemployment up around 5-6% we will have a hard time slowing down the overall inflation numbers. Right now, there is two jobs available for every unemployed person out there. Until we can see unemployment go up and start to see a slowdown, this will continue to have an overall impact on the economy. So, why do I tell you this? This also impacts the overall commodity trade as well. Carryout is not at a bearish level and if we have some unexpected problems show up, prices will be quick to react.
Finally, pay attention to the values being posted out there. With fertilizer prices pulling back some I’m not sure that corn and beans have to move a lot higher to encourage acres to be planted. Give us a call to talk more about the markets in detail. Have a great weekend!
Vice President, Grain Division
Good afternoon. This week brought the monthly supply and demand report from the USDA. They made only a few small changes to the US numbers. First and foremost was the 25-million-bushel reduction in ethanol grind. This is confirming the rumors that ethanol plants west of the Mississippi River are experiencing negative margins, and one firm reduced production by 10%. For soybeans, we saw a reduction in crush, and you may ask why would we reduce crush when margins are good? Getting rid of the meal seems to be the big issue that is going to limit soybean crush. Railroads are still struggling on the operations front, and this is the main transportation into the southeast feed market. On the world stage, the Argentina corn crop was once again reduced due to the drought conditions hurting yield and likely causing a bit more abandonment. One tidbit that I found interesting is that Brazil is set to pass the US in corn exports. As we look at the world numbers on soybeans, another reduction for production in Argentina was revealed. Not a surprise with the reduction in corn also. The Brazil crop still seems to be rather large, and they look to be the exporter of an additional 1MMT, taking the total to 92MMT, right around 1.3 billion bushels above the US for exports. There is starting to be some talk on the planted acreage front. Crop insurance is in its price discovery period right now, and who knows what the April/May weather will look like. So, there will be some back and forth for the next 6 weeks or so. Thanks, and have a great weekend.
Haylee VanScoy
Director of Grain Purchasing
The grain markets are making a decent recovery here for the end of the week. There’s been talk that Russia is escalating the war in Ukraine with 71 missiles fired into Ukraine today, which makes me wonder what will happen over the next couple of weeks as we approach the 1-year anniversary of the invasion on February 24th. Corn and beans have followed along with the wheat rally today as well. Wheat is up 25 cents at 7.82 WH, corn up 8 cents at 6.79 CH, and beans up 18 cents at 15.30 SK. Note that we have rolled our February and March bean bids from the March (SH) to the May (SK) futures today and appears that other elevators have been following suit this week. CH23 consistently sitting in this 6.50-6.90 range since the start of the year with the lack of a market moving story and behind pace export sales. SK23 beans have remained relatively strong as we entered in February with futures find support at 15.00 and trading up near the 15.40 mark on the highs. Continue to connect with your local merchandiser and discuss your marketing plans for this year before you get busy in the field this spring. Hope you all have a wonderful Valentine’s Day next week!
Lou Baughman
Grain Merchandiser, Kenton (Region 1)
The war between Russia and Ukraine is anticipated to escalate in the spring, as Ukraine adds tanks, fighter jets, and long-range missiles to their fight. This war is not going away anytime soon which will increase the risk of both countries’ production and shipping of commodities.
Brazil is harvesting a large bean crop which should offset the short Argentine crop. They are now focused on switching to the safrinha corn crop, which is getting a later start because of the rain-delayed bean harvest with more rain forecasted for the weekend. With the volatile market it would be wise to put target orders in for old and new crop grain. Enjoy your weekend.
Will Gase
Grain Merchandiser, Upper Sandusky (Region 2)
We have recovered from our early losses today for corn and beans and are up a couple of pennies for corn and about a nickel for beans since last Friday. Wheat has jumped more than 25 cents today over new fears in the Russian-Ukrainian War.
I did a little study earlier in the week on Upper Sandusky price difference. I took the February 15th and May 15th contract price for the harvest time futures and compared the two of them with the spot cash price for harvest on October 15th. I did this for 2013-2022 and the results were interesting. On average over ten years for corn, a person could make an extra 30 cents per bushel if they contracted in May rather than cash price in October, and an extra 13 cents if they contracted in February instead of October. For beans, someone could make an extra 42 cents on average for contracting in May and an extra 21 cents in February. This shows that contracting in May is a smart financial decision if done every year. It also shows us that we might be headed for a downturn in the market with current futures price for harvest time at 5.60 and 13.33 (Upper pricing). While none of us like the lower prices, it might make sense to lock in some bushels at these levels as the past has indicated a lower price at harvest than where the futures are at currently.
The wait for the new Upper Sandusky grain bin to be up and running is (fingers crossed) almost over. Our hope here in the Upper office is that the new 750,000-bushel bin will be holding corn sometime next week. Call or come in to talk with us about pricing or different contract options for your corn and beans if you still have some bushels at home. We would be happy to help. Enjoy the nice weather this weekend!
Steve Bricher
Grain Operation Manager, Urbana (Region 3)
Well, if you are reading this you did not get blown away by the wind on Thursday. I am glad we just had rain and not snow with that wind. It is Super Bowl weekend and on paper it looks to be one of the better games we have seen in a few years.
The markets are currently just treading water. The crop report on Thursday confirmed what most of the market was thinking. We have enough corn, soybeans, and wheat around the world today to make most consumers comfortable. The farmer has been selling a little as we get these small bumps in the markets.
I have some concerns about the corn market going forward. We saw reduction in exports and ethanol demand from the USDA. If China does not come in and buy US corn and with fertilizer prices dropping, do we see the US farmer increase corn acres? It does not take long and much of a demand reduction or production increase to see carryout on corn approach the 2.0BB number. If that happens, we will see a corn price with a 4 in front of it. We need to keep an eye on exports and how many acres we plant this spring. If exports continue to be poor and we see corn acres 92.0 plus you will need to get some coverage of new crop bushels sooner than later. We have December 23 corn futures today around the 6.00 level that may not be the worst place in the world to get started with some new crop bushels.Ralph Wince
Grain Merchandiser, Canfield (Region 5)
Good afternoon. This week brought us another USDA update and I, like most, thought there was not a lot of anything new in the report. Corn and beans continue to trade in a very narrow trading range. Soybean harvest is about 30% in the Mato Grosso area in Brazil. China is switching to South America to source their soybeans right now and exports are slowing out of the US Gulf. Time will tell if some business switches back to the US if loading becomes a problem.
Wage inflation continues to be a problem here in the US. As the StoneX Chief Economist, Arlan Suderman continues to say, until we can get unemployment up around 5-6% we will have a hard time slowing down the overall inflation numbers. Right now, there is two jobs available for every unemployed person out there. Until we can see unemployment go up and start to see a slowdown, this will continue to have an overall impact on the economy. So, why do I tell you this? This also impacts the overall commodity trade as well. Carryout is not at a bearish level and if we have some unexpected problems show up, prices will be quick to react.
Finally, pay attention to the values being posted out there. With fertilizer prices pulling back some I’m not sure that corn and beans have to move a lot higher to encourage acres to be planted. Give us a call to talk more about the markets in detail. Have a great weekend!