Weekly Crop Commentary - 2/11/2022

Ed Nienaber
Vice President, Grain Division
The USDA released its latest round of supply/demand estimates on Wednesday and made only minor changes. The only major adjustment was to the anticipated Brazilian bean crop production estimate, and they dropped it 5.0MMT to 134.0. This is down an additional 5.0 from the December figure, however, it is still the second-largest bean crop on record for Brazil. On Thursday, CONOB, which is the equivalent to our USDA in Brazil, released their update at 125.5MMT. The market continues to trade higher despite concerns over how the balance of the southern hemisphere crop develops with the most southern and northern areas continuing to deal with drought conditions. Soybeans are up 70 cents on the week and corn is being pulled along and is showing some 40-cent improvement since last Friday’s close. As we continue to set life of contract highs, soybean crush margin is particularly good, however, the ethanol sector is not fairing so well. The local basis remains steady as the market continues to buy just-in-time bushels; however, we are seeing reduced hours at some processors getting full. The market continues to have transportation issues moving products to the end-user. We will now move to anticipated planted acres in the US and just how long the La Nina effect will continue. It has already created issues in the southern hemisphere, and we will see soon what lingering effect it may have on our growing season in North America. Have a great week, continue to be safe, and GO BENGALS!
 
Wes Bahan
Director of Grain Purchasing
Good afternoon, it’s hard to believe we are at the end of another week, but here we are.  We did get the monthly supply and demand report from the USDA this week. They did make some significant changes in the South American soybean production numbers, reducing the size of their crops as the drought has taken a toll there.  This caused some fireworks in the grain markets and took soybean prices to levels comparable to last year.  This in turn gave the US farmer a nice opportunity to continue to market beans at a very attractive price, and they did just that.  It has been a very busy last couple of days of contracting both old crop and new crop beans.  There is one question that has come up several times in the last couple of days, and that is how high can this market go??  That is a great question that is hard to answer.  We have seen confirmations this week on more and more Chinese purchases as their crushing margins are good, and our domestic crushing margins are also good.  The people that are using beans are still making money, so we have not found a level to ration demand.  This tells me that the markets still have work to do, but we still need to stay the course and keep taking advantage of these great prices.  The transportation sector continues to have struggles with low water, river ice, personnel, and available equipment.  We need to keep a close eye on the markets as any news could send a shock wave in either direction.  One last note is that we are in the February price discovery period for crop insurance and as of Thursday night the Dec corn average price is 5.75 and the Nov bean average price is 14.03.  Have a great weekend and be safe. 
 
Lou Baughman
Grain Origination, Kenton (Region 1)
Markets have seen high volatility this week, yesterday in particular.  Today South America reported a massive cut in their soybean production. 
If they only receive scattered rainfall the remainder of February look for more cuts in their production.  

The troubling signs between Russia and Ukraine will impact corn and wheat futures. Going into the weekend fund managers are trying to decide if they want to be short or long, with the military conflict picking up.

Contact your local elevator to put in target orders for old and new crop grain.  

Lisa Warne
Grain Origination, Mechanicsburg (Region 3)
Good afternoon! The USDA’s WASDE report on Wednesday only seemed to be a splash in the pond that didn’t leave too many ripples. They did lower U.S. and World soybean carryout numbers, but not as much as traders expected. The market briefly dipped post-report, but the traders went back to trading their own numbers, disregarding USDA’s, continuing the rally.

On Thursday morning the market digested news from Brazil’s agricultural and food supply agency, CONAB, who drastically cut their soybean production estimate 15 million metric tonnes from 140 mmt to 125 mmt, compared to Wednesday’s USDA number of 134 mmt. The resulting giant rally on global supply concerns stirred quite a bit of farmer selling. Thursday afternoon, we saw a turnaround as money managers did some profit-taking, while market fundamental analysts criticized the poor export numbers versus last year.

Locally, we saw a lot of customers locking in profitable levels for new crop. Here at Mechanicsburg, we saw a high of $14.30 for fall-delivered soybeans and $5.58 for fall corn. Farmers who had target offers in place for levels once regarded as distant were hit before the market set back. If you have price goals in mind, even if they seem unreachable, it doesn’t hurt to give us those offers in case they come and go quickly. I hope you have a great weekend. This Bengals fan since birth will be cheering WHO DEY!

Ralph Wince
Grain Merchandiser, Canfield (Region 5)
Good Afternoon, the grain markets continue to be very explosive right now. There are a lot of moving parts to this rally we are seeing but here are a few of the highlights that we are seeing and to continue to keep your eyes on. First, the size of the soybean crop in South America continues to see private estimates scaling back the size of the bean crop. Just yesterday CONAB slashed the size of the Brazilian crop by 15 million metric tons down to 125.5 mmt. If those numbers are correct that would be a game-changer in the soybean balance sheet. The next 3-5 weeks will determine that story in South America. Also this week we say the European weather model show its prediction as to what the March, April, and May moisture looks like here in the U.S. and it showed that the heart of the corn belt was going to have above-average precipitation during that time frame but I would not give that a great deal of confidence at this time. But it is something to pay attention to. The markets also continue to be concerned about seeing if Russia is going to invade Ukraine. Just today U.S. Secretary of State has warned that a Russian invasion into Ukraine may be imminent. Lastly this week we saw inflation numbers released that we have not seen in over 4 decades here in the United States and the commodity markets continue to see investment money flowing in that direction as a hedge against inflation. Probably one of the most staggering numbers I saw yesterday was how much-used cars had increased from Jan21 to Jan22. That number was a staggering 40.5%. Lots of moving parts going on right now here in the grain markets that could have a huge impact in either direction going forward. I would encourage all of you to have some targets working so that you don’t miss those opportunities going forward. Just to show you how volatile this market can be, yesterday (2/10/22) we saw the March 22 soybean contract move .68 cents in 1 day. It was as much as .40 cents higher at one point only to come back and close down .21 cents. Have a good weekend.

Sarah Harner
Grain Merchandiser, Marysville (Region 4)
What a week with lots of activity from the scales as well as contracting at profitable levels. Weather has held through this week, for the most part, keeping the roads open for deliveries. In the Marysville area, there is a chance for some rainfall in the next day or so and next week looking similar to what we have had this week. Argentina’s hot and dry weather is not changing and continues to be one of the factors in the market hikes. Aside from weather, geopolitical issues focused on Ukraine/Argentina are still in the talk. Prices for fall deliveries are still attractive from yesterday’s highs. If you haven’t done so already, I recommend putting in some risk coverage for the fall while you can. As always, thank you for your business. Have a safe weekend!

Haylee VanScoy
Grain Merchandiser, Upper Sandusky (Region 2)
Happy Friday everyone! Can’t believe we’re already into February. The corn market has been pretty lackluster in comparison to the beans despite both making new highs yesterday. Dec 22 corn tried to push through 6.00 futures but fell short at 5.984 before tumbling lower yesterday afternoon. Ethanol demand and exports have been relatively quiet, and no changes were made to US corn carryout on Wednesday’s WASDE. We did see some catchup sales this week on $5.50+ new crop, but beans remained the star of the show. 

Volatility continues in the bean market this week with Thursday’s highs allowing producers to price dp beans at $16.00+ and add to their new crop sales at $14.00+ before making a sharp reversal in the afternoon knocking off more than 40c. Beans attempted to make a recovery today being up 20c this morning with another new crop bean sale to China, but the market was unable to hold on and continued to slip lower throughout the afternoon.

South American production continues to be the talk of the town and primary market mover as of late. Not only are there concerns with Brazil, but dryness in Argentina, Paraguay, and Uruguay are also adding to the story. There was a lot of data to process this week including the February WASDE report on Wednesday and CONAB’s announcement of their production estimates as well on Thursday. USDA was conservative with their estimates on Brazil beans, dropping them from 139 MMT in Jan to 134 MMT this month. CONAB on the other hand proceeded to give confirmation to recently reported private estimates and dropped their estimate to 125.7 MMT, 15 MMT lower than their estimate last month. We still have quite a bit of time yet though to see how harvest progresses along with the planting of their safrinha corn crop. Add in the Russia/Ukraine tensions and March planting intentions and there’s a lot to digest yet this spring.

Now is the time to re-evaluate and assess your marketing plans! I’m happy to sit down for a farm visit to discuss what opportunities are available to you and your operations and help you figure out the best solutions that meet your needs. I also want to remind customers that our Upper Sandusky Grain Market Outlook Meeting is next week on February 16th at 6 pm! Details are listed below. RSVP to 419-294-2371. Look forward to seeing you all there! Have a wonderful weekend.