Grain markets have continued to fall after the USDA’s Agricultural Outlook Forum last week. Other headlines of note include weather in the United States and South America, the Black Sea Export Agreement, the Cattle On Feed report, and the current economy.
Overall export demand is significantly higher than it was in 2019/2020, but demand from each of our top export markets is either at a previous demand level or going lower into the growing season. This does make sense considering the higher prices this year.
Corn has broken out of its wedge pattern and looks as though the May contract could try to challenge its recent lows in the $6.35 area this week. If it breaks through, the next level of support is around $6.00. There is a battle for acres between corn and soybeans, so it would probably be difficult for the market to move below the $6.00 level on old crop corn and $5.60 on new crop, but stranger things have happened.
The deficit in export commitments has expanded to 18.9 million metric tons from last year. China alone is behind by 7.7 mmt, and they had a decent sized cancellation announced last week as well. Planted acres will be a big thing to watch going forward. Prospective Plantings will be reported on March 31st.
The wheat market has lost a lot of ground in the last week or so. Russian wheat continues to be the cheapest offer in the export market. Exports are lagging last year by 1.1 mmt and we remain uncompetitive in the world market. Ukraine is pushing for a one-year extension on the export deal and the current rhetoric is that Russia will likely grant that extension.
Scattered rains over the weekend in Kansas, Oklahoma and the Texas Panhandle are further pressuring Kansas City Hard Red Winter Wheat. There is support for Kansas City around $8.00 and Chicago around $7.00. The Minneapolis contracts could be supported as it will need to buy acres from corn and beans.
Europe is facing some dry weather which could lead to problems down the road. There is a lack of snow in the Alps–normally that runoff provides river water for the barge shipping system, so that could be impacted later this year. India is also amidst a dry pattern, but harvest is starting there so the weather data won’t be as important as yield data.
Weather in South America continues to be the main story in the soybean complex. Argentina’s Good/Excellent rating was updated to 3% which is the season’s, and possibly all-time, low. The Buenos Aires Grain Exchange also cut their production estimates and we are looking at 15 to 30 year lows in production and yield. Brazil’s crop is in good shape, but there is still the question of whether or not they will be able to make up for the losses in Argentina. U.S. export sales are moving lower, as expected with the seasonal trends, and China is proceeding with their normal decline in purchases.
The Cattle On Feed Report came out on Friday and shows an increasingly smaller herd. On Feed numbers were 95.9% of a year ago (96.5% estimate), Placements were 96.4% (97.1% estimate), and Marketings were 104.2% (103.9% estimate)–all three categories were better than expected. This is pretty bullish for cattle which is good news, but bearish for the corn market as there are fewer cattle to feed.
Weather in the U.S. is looking better. Areas East of the Mississippi River will go into spring with a good moisture profile, and maybe even too wet. Some drought persists West of the Mississippi, but there have been improvements. California may be in the best shape in a decade going into spring this year.
Farm income for 2023 is currently forecasted to be the third or fourth best year on record after a record high in 2022. However, the current new crop marketing prices are significantly better right now than the figures the USDA is using to make that estimate, so this could be something to consider while marketing your new crop bushels.
The Core Personal Consumption Expenditure was released on Friday, which is the Fed’s favorite gauge of inflation. It was expected to be 1.4% but popped to 1.8%, which indicates that the Fed will need to continue raising interest rates in order to stop inflation.