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Limit Up

By Tori Uhland

July 26, 2023

We have started yet another week with high volatility and a spike in the markets. The conflict in Ukraine has been going on for something like 17 months now, and throughout the duration of the war, we have seen a lot of back and forth on the status of the grain corridor agreement. Russia has threatened to end it several times, the market reacts accordingly, and prices go up because the world gets worried about supply, and then the agreement gets extended so prices and traders can relax. So, when the latest expiration date rolled around last week, I don’t think many people probably expected the outcome we got. In the past when this has happened, the UN was able to renegotiate with Russia to continue exporting Ukraine grain. This time, however, Russia withdrew from the deal and has attacked critical infrastructure at ports over the last week. Russia attacked Odesa last week, and on Sunday night, they attacked grain storage facilities along the Danube River, which will further hinder Ukraine’s export capabilities. Much of the damage will take no less than a year to repair. NATO and Ukraine are working on ideas to keep grain flowing, but Black Sea traffic has already decreased by 35 percent from the previous week.

Between the situation in Ukraine and less than ideal weather conditions in the US, our markets have taken quite a jump. Of course, we want our farmers to be able to sell at high prices, but whoever is buying it wants the lowest price they can get. In a time with already poor demand, it creates an even bigger predicament when prices skyrocket. Cumulative corn exports for this year are down nearly 34 percent from last year and still falling. Cumulative soybean exports are down 5.5 percent from last year, and cumulative wheat exports are down 17 percent from last year. On Monday, Chicago wheat closed limit up (the limit is currently 60 cents for wheat) and Kansas City traded limit up but closed 56 cents higher. The high prices in grains are also causing concern across the globe as fears of hunger in poorer countries are increasing.

Crop conditions on Monday afternoon showed unchanged ratings for corn and mostly unchanged to slightly higher soybean ratings this week. However, we could take a turn back down next week if the current forecast comes to fruition. Most of the pollination is already done, but high temperatures and little rain could further stress the crop. Soybeans are also at risk if extreme heat and dryness return. Historically, August is the most important month for determining soybean yields.

Last week’s Cattle on Feed report showed placements at 102.7 percent of last year versus 98.4 percent estimated. Cattle on feed were 98.8 percent of last year as of July 1, versus 97.7 percent estimated, but it is still the tenth consecutive month of running below year-ago levels. The USDA also released the bi-annual Cattle Inventory report last week. It showed the nation’s total cattle inventory at 95.9 million head. That is down 2.7 percent from last year, the lowest since 2014, and the second lowest in 69 years.

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