Market News
Corn, wheat, soybeans extend rally
Soybeans were sharply higher on commercial and technical buying. Beans continued to react to the strength in world vegetable oils, with Ukraine a major exporter of sunflower oil, in addition to canola oil. The sharply higher move in crude oil also played into the gains in vegetable oils. China bought another 264,000 tons of new crop U.S. beans, pushing the running total over the last three business days to 1.139 million tons, 860,000 of that for 2022/23 delivery. The spike in purchases by either China or unknown destinations can be linked to the weather-related decline in production projections for South America. The USDA’s attaché in Argentina has the crop at 41 million tons, 4 million less than the most recent official estimate and 3.5 million below the year ago total. The crush estimate for the world’s biggest exporter of soybean products was steady with the previous projection, but below last year due to those declining crop estimates, slow farmer selling, and a reduction in imports from Paraguay, which has also seen production hit hard by hot, dry weather in some key growing areas. Harvest is reportedly ahead of average in Brazil. Soybean meal and oil followed beans and oil sharply higher. The USDA says the 2021 soybean crush was 64.2 million tons, down 3% from 2020, with crude oil and soybean meal production also below the previous year’s levels. The January 2022 crush of 194 million bushels was a decrease of 4 million from December and 3 million from January 2021.
Corn was sharply higher on commercial and technical buying, with May closing limit up for the second consecutive session. Corn was also watching for signs of the impact the Russian invasion of Ukraine on exports. A lot of previously purchased Ukrainian corn is undelivered, with a large portion of that bought by China. That could be what finally pushes Beijing to make significant purchases of U.S. corn, which hasn’t happened in quite some time. The increased role of Ukraine, and Russia, on the corn export market, higher domestic production, and imports from other nations have largely allowed China to stay out of the U.S. corn market for months. Corn is also watching conditions in South America, especially the planting pace and development weather for Brazil’s critical second crop. The USDA’s next set of production estimates is out March 9th, with CONAB’s updated outlook for Brazil scheduled for March 10th. Additionally, corn, and soybeans, have an eye on acreage signals ahead of the USDA’s Prospective Planting report out at the end of the month. Quarterly grain stocks numbers are also out March 31st. The U.S. Energy Information’s weekly ethanol production and stocks numbers will be released Wednesday. The strength in the energy markets is also playing a role in the support for corn. The USDA says 5.152 billion bushels of corn were used for ethanol consumption in 2021, an increase of 7% from 2020 thanks to improved margins and demand, but still below the 2019 total. January’s corn for ethanol use total was 474.046 million bushels, 1% under the previous month, but 14% above a year ago. Ethanol futures were unchanged.
The wheat complex was sharply higher on commercial and technical selling, with May and July Chicago and most Kansas City contracts gaining the $.50 daily trading limit. Ukraine’s ports on the Black Sea are closed and the sanctions on Russia are severely limiting their ability to do business, including receiving payments for export purchases by the dwindling number of nations will trade with Moscow. Russia and Ukraine combine for about a third of the world’s wheat exports, with Egypt, the world’s biggest buyer of wheat, recently cancelling import tenders due to the lack of availability of Black Sea wheat. If the restrained trade continues, the European Union, especially France, is expected to pick up at least some of that business, with lesser amounts going to the U.S. Still, with all of the uncertainty about Russia’s invasion of its sovereign neighboring nation, from duration to intensity, there are many more unknowns than knowns right now for exports. Stateside, the trade is watching winter wheat development conditions. Dry weather continues to be an issue for most of the U.S. Plains, while parts of the eastern Midwest are reportedly excessive soil moisture levels.
