There’s a lot of uncertainty in the markets to start the week after the failure of Silicon Valley Bank on Friday, and the additional failure of Signature Bank on Sunday. The fallout from this hit the grain and oilseed markets on Sunday night with a selloff in equity and bond markets and crude oil leading the commodity sector lower. Markets hate uncertainty. Between the banking issues, interest rates, export markets and crop potentials, there isn’t much to be certain about.
Corn
Futures stabilized on Friday after four days of liquidation but are back under pressure to start the week. Weather is once again the main focus as Argentina’s forecast has turned wetter for the next 10 days which will help the production of their crop. Brazil’s forecast is still beneficial for all but the southern 15 percent of the area. The forecast is mixed in the U.S. The western and southwestern corn belts are experiencing a considerable soil moisture deficit. The Dakotas are also dry, but a significant snow pack has NOAA warning about floods in the Upper Plains in the coming months. This is a concern for the planting season. NOAA is comparing its projections for Spring 2023 to 2019. 2019 was the largest loss of corn acreage in history – 11.4 million acres of which South Dakota lost 3 million and North Dakota lost .6 million. This is a potential situation that could have a major impact on the U.S. balance sheet.
The USDA Quarterly Stocks and Perspective Plantings reports will be out on March 31. A zero increase in corn acres results in a sub-1.3 billion bushel carryout and that is figuring a record-ever corn yield of 181.5 bushels per acre. If you decrease the yield to the previous U.S. record without rationing demand, that puts the U.S. at a sub-900 million bushel carryout.
Wheat
A weaker U.S. Dollar helped wheat recover a bit on Friday, but all three classes still had big losses for the week. As of March 13th when I am writing this, Ukraine and Russia have yet to come to an agreement on an extension of the grain corridor agreement. The agreement is currently set to expire on March 18th. Discussions for an extension begin today (March 13th). Russia continues to indicate that changes need to be made. U.S. wheat is still uncompetitive in the world market with FOB values around $350 per ton. Russian and European prices are $280 to $285 per ton.
The Commodity Credit Corporation (CCC) canceled the hard red winter wheat donation tender to Ethiopia late in the day Friday, citing freight issues as their reason, but reissued the tender with offers due this Friday.
Soybeans
The soybean market is also being pressured by the wetter weather in Argentina. As of the end of last week, the recent rally in soybeans while corn futures fell has swapped the advantage on a return per acre basis in the Midwest to soybeans over corn. With Friday’s bids in the Midwest, soybeans had a $25 per acre advantage over corn. Producers have limited time to switch acres, and March surveys have already been registered with the USDA, so any changes will not be reflected in the March 31st report. Instead, they will show up in the June report. However, crop insurance support prices in corn are equal to last year while soybeans are $.60 per bushel less. This is a better payoff if the year would require an insurance claim.
Other News
China’s push to reform and open itself to the West has ended after Chinese President Xi set in motion changes to further emphasize the Communist Party’s leadership over all aspects of governance.
