Closing Market Comments February 16, 2022
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Today’s Prices
Corn and soybean prices finished sharply higher today as there continues to be concerns about South American weather and the potential for Russia to invade Ukraine.
Grain Market News
South America 2-Week Precipitation Forecast
One of those uncertainties that we discussed was South American weather and crop.
For another week, into the middle of next week Southern Brazil, Paraguay, Uruguay, Argentina is going to see very little rainfall.
There is good news for South American farmers where southern Brazil much of Paraguay, Uruguay, and Argentina could see some better rain in the second week of the forecast. This would be into the middle of next week.
Now these rains aren’t heavy but the ledger on the right is in millimeters so it’s showing generally about a half inch to an inch and a half in many areas of the dry South America crop region.
Observed Surface High Temps
In addition to the dryness that looks like it will continue for the next week, temperatures are heating up.
Most of Argentina’s growing area in the mid 90’s yesterday, portions of west central Brazil in the mid 90’s, with Paraguay upper 90s and 100s.
This is certainly creating stress for late developing crops in Southern Brazil and Argentina.
Keep in mind in Argentina for many crops, it is similar to about mid-August. We are still in a critical timeframe for yield development
South American Crop Losses
I pulled up a table that shows the potential South American crop losses.
First, in corn, Brazil could lose 8mmt which is 7% of its crop, Argentina could lose 6% which is 11% of its crop, and Paraguay could lose 1mmt which is 33% of its crop.
Some of the worst drought conditions have affected Paraguay’s growing region. Now it’s a much smaller growing area but still results in significant crop loss.
When we total South American crop losses at this point it looks like we could easily see 15mmt in losses. That’s equal to 591 million bushels. Going forward we believe crop losses could still expand in much of South America.
Turning to soybeans, the Brazilian crop could see a 19mmt. That’s consistent amongst the trade with a 13% loss.
A good question would be why a 13% loss in beans and only a 7% loss in corn? The primary reason is that only 25% of Brazil’s corn crop is the first crop and 75% of Brazil’s corn crop is suprema corn that’s planted after the soybean harvest. The suprema corn yield at 75% of their crop is still yet to be determined.
In Argentina 10mmt estimated to be loss with a 20% loss, and in Paraguay 5mmt or a 48% loss of their soybean crop. In Brazil when they have severe drought conditions, a 13% loss is not unusual in Argentina when they have severe drought conditions a 20% is not unusual. Although Paraguay is smaller, they are seeing some of the worse drought conditions in decades which could result in severe losses.
In soybeans total 34mmt could have been loss in south America and that equals a massive 1.249 billion bushel. Its still yet to be determined how much of that will result in US demand. But the bottom line is that the crop has been lost and world stock are still going to be on the decline because USDAs estimates are nowhere near these levels at least not yet.
We are likely, almost certainly, to see further crop losses coming to the USDA’s estimate in the March-May crop reports.
Covid Data
Globally we’ve seen a reduction in Covid over the last 3 weeks, that’s a good sign.
Deaths have held steady over the last week; we would like to see that start to decline as well.
Here in the US, we’ve seen a dramatic drop incases down to just about 1 million cases per week.
4 weeks ago, we were nearly 6 million cases per week. So, a dramatic drop in cases and we are starting now to see a drop in deaths per week. But there is positive news on the covid front.
Grain Market News
U.S Drought Monitor
We mentioned that US crops are not planted yet except for winter wheat.
But we do note that drought conditions have been expanding in the plains states and have been gradually expanding into portions of the far western belt as well.
This needs to be monitored as we head towards the spring planting season
Calculated Soil Moisture anomaly
This shows much of the plains into the western corn belt with much less soil moisture than normal for even this time of year.
Again, this does not have major affect on our yield potential for next year, but it’s a pattern that needs to be monitored closely.
March Corn Chart
Corn prices had an inside day, meaning we did not take out yesterday’s high or low. But we did close higher on the day as the sharp trade back and forth continues over the past week or so.
Overhead resistance currently lies at 6.62 if we get friendly news with chart support and coming in around 6.25 if we would get negative news.
Right now, prices trading in the middle of that price range.
March Soybean Chart
Soybeans have a similar situation; they have gotten choppy over the last week or so.
We did close higher today and that’s good news from a chart signal.
Overhead resistance would be at last weeks high at 16.33, chart support at yesterday’s low at least initially at 15.42. We are in the middle of that range and if you would get barrish news you can’t rule out a pull back towards chart support in the 15.25 range.
March KC Wheat Chart
Wheat has also been very choppy here over the past week or so.
Overhead resistance at 8.44 from the highs posted Monday, near chart support at the lows of the past couple of days which is also where the 10-, 20-, and 40-day moving averages all converge. Further chart support down around the 7.75 level if we would get barrish news, todays close would also be close to the middle of the near-term range.
As we answer some of the uncertainties that have been in the marketplace, that will determine whether the next move is higher or lower.
Keep in mind the long-term trend for corn, beans, and wheat is still a long-term uptrend.
Questions or Comments
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HEARTLAND FARM PARTNERS
5925 N. 28th St. Suite 101
Lincoln, NE 68504877-577-2771