Closing Prices
Grain markets finished a little higher today with most traders unwilling to want to be short ahead of a two day weekend and uncertainty with Russia and Ukraine
Weekly Price Summary:
Grain Market News
Argentine Corn Crop Rating
This chart courtesy of Ag Resource Company shows Argentina’s corn crop rating over the past 4 years and does show the corn crop rating has hit a new low, even lower than late January and this is just one indication crops are under stress and estimates are likely to decline further. Its also worth noting the current crop estimate is just 19% g/e and next weeks crops rating could fall even further.
Observed Surface High Temps
Yesterday’s high temperatures continue to show a pretty large area of 90s and even low 100s so it’s a combination of not just dryness but temps as well creating crop stress.
South America Feb 1 to Feb 21
A couple of maps of South America that I pulled up are for February 1-21 so data the last 18 days and then includes expected weather over the weekend. If the forecast is close to being actuate the first 3 weeks of Feb which would be equivalent to the first 3 weeks of Aug in the US would show way below normal precip in Argentina, Uruguay, Eastern Paraguay and much of SW Brazil.
On the right is the temp anomaly and you can see the same area that is dry also well above normal temps. The same producing region experiencing heat and dryness.
Combined Russian & Ukrainian Share of World Trade
This is another interesting chart from ARC. It shows Russia and Ukraine combined the share of world trade. In corn shown in the green Ukraine and Russia combine for 19% of global trade. Sun seed, barley and wheat Russia and Ukraine account for 30% of global trade. If there were to be a war to break out and it would limit exports that is a significant area of grain supply to the world and that is why the market is concerned it would cause grains to explode to the upside.
Grain Market News
US Corn Supply & Demand
We are going to take a look what the USDA might be seeing and reporting in next weeks balance sheet. The blue column is this months Feb S&D and pink is what we may see coming from the outlook forum. I will make one note is that we believe the USDA outlook forum will use acres similar to last year. We believe last years acres were maxed out because of profitability that encouraged planting and weather that allowed planting. We believe every available acre was planted and USDA is likely to use similar totals to what they used last year.
With that in mind we believe USDA will project corn acres may decline by 2 million while soybeans and wheat will each increase by 1 million. With that in mind we project corn acres might decline down to 91.3, a trend line yield of 181 bu/acre which would result in production of 15.13 billion bu. Add to that beginning stocks from the Feb crop report of 1540 and gives us a total supply in the new crop position of 16.695 billion bu. We will leave food and industrial unchanged, ethanol unchanged, leave feed unchanged but will raise exports by 350 million bu due to massive losses in South America. Under this scenario ending stocks would end up at 1.51 billion bu similar to slightly smaller than now. You may say that doesn’t seem bullish but keep in mind it is using USDA’s ending stocks of 1.54, if that number comes in at 1.2, next year will coming in at 1.2 as well so we do have a friendly outlooking coming into the corn S&D position.
US Soybean S&D
Our assumption is USDA could lower corn acres by 2 million raise soybeans and wheat each by 1. If soybeans were raised by 1 and we get a trendline yield of 52 that would give us production of 4.54 billion bu. Add to that USD’’s current ending stocks for this year at 325 it gives us a total supply of 4.88 billion bu. On the demand side if we leave crush unchanged at 2.215 and that is conservative given the fact Argentina is the largest exporter of oil and meal our crush could be higher. We are going to raise exports by 300 million bu by next year due to the crop losses of 1.2 billion in SA this year. We believe its conservative and that would result in ending stocks of 198 million bu. Keep in mind this years ending stocks at 325 could snick significantly so beginning stocks could slip lower as well which could take this 198 and create a tighter balance sheet next year and this is why soybeans have been leaning to the upside recently.
US Wheat S&D
We increased acres by 1 million and plugging in a trendline yield of 51.5 but if we don’t get better rains that will be difficult to achieve and our harvest % could slip lower as well. Under average harvested % and a trendline yield we could achieve a crop of 1.99 billion bu, add this years ending stocks of 648 and you get a supply of 2.758. We increased imports to 120 assuming Canada may have a better crop. On the demand we raised food and seed slightly, left feed usage low due to tight stocks at 110 and raised exports slightly from this years disappointing number. Under this scenario ending wheat stocks would increase to 795 which is up slightly but still a tight US stock number for wheat.
March Corn Chart
Corn prices fell sharply early in the week but rebounded since then and we are getting back to the highs a week ago at 6.62. South American weather, and Russia Ukraine developments will likely be primary factors next week with overhead resistance in the 6.62-6.70 range with chart support in the 6.25-6.35 range
March Soybean Chart
Soybean prices similar to corn that we fell earlier in the week and rebounded late in the week. Overhead resistance at 16.43 last weeks highs which chart support at 15.42 this weeks lows. Anything in this range appears to be fair game depending on news that comes into the market place Monday night into Tuesday.
March KC Wheat Chart
Wheat prices like corn and beans fell early in the week and now rallied late in the week. Wheat posted a new high for this move at 8.50 before settling back to close at 8.35. Wheat prices held support where moving averages converged early in the week. Both the chart and technical indicators look good at this time.
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