The following marketing analysis is for the week ending September 9th.
CORN — There was little news for traders returning from the Labor Day holiday. The US dollar hit new 20-year highs, the soybean complex tumbled, and corn and wheat struggled to hold their initial gains.
Corn extended its gains until September 6 after Russian President Putin announced he wanted to renegotiate the safe corridor agreement for grain to be shipped through the Black Sea. He thinks Russia was misled about where the grain was going. Russia says the grain is not being directed to the “poorest” countries for which the deal was intended to supply to avert starvation. President Putin also said the sanctions were hampering his grain and fertilizer exports. The statement propelled wheat and corn prices higher, followed by soybeans. President Putin and the Turkish President are due to meet next week to discuss the situation. This casts doubt on the continuation of the Security Corridor, but it could be used by Russia to push for reductions in the sanctions imposed on it during the invasion of Ukraine.
December corn continued to tease its 100-day MA technical resistance throughout the week before posting a strong technical close over the weekend.
The US Department of Agriculture said it will include a review of acreage for corn, soybeans and other crops in the September report. All updates are generally saved for the October report on global agricultural supply and demand estimates; but this year the USDA said it has “sufficiently complete” data to update the numbers in September. September’s WASDE report is the first objective yield sample of the year for corn and soybeans.
Average trade estimates for the September 12 WASDE report include: yield of 172.5 bushels per acre, production of 14.088 billion bushels and harvested area of 81.686 million acres. U.S. ending stocks for 2021-22 are forecast to be 1.547 billion bushels and for 2022-23 ending stocks are estimated at 1.217 billion bushels. Closing stocks of 1.217 billion bushels would be the lowest in 10 years. Global maize stocks at the end of 2022-23 are estimated at 302.29 million metric tons. Conab cut its Brazilian corn production estimate this week to 113.3mmt from 114.7mmt and from USDA’s August estimate of 116mmt. The USDA corn yield in September has not fallen below the trade estimate since 2011.
Higher U.S. fertilizer prices should help support delayed corn prices. Soaring natural gas prices have cut ammonia production in Europe by two-thirds. Despite higher fertilizer prices, Brazil’s corn production this coming year is expected to climb 13% to its highest level in seven years, and soybean production by 24% to nearly 154 mmt.
Gazprom has cut off natural gas supplies through the Nord Stream pipeline to the EU until the West eases Russian sanctions and/or fixes a leak that Gazprom says Siemens Energy must fix. For some reason energy costs in Europe are skyrocketing and consumers are trying to find a way to absorb the extreme costs.
The National Mediation Council has ordered the railways and unions to return to the bargaining table to avoid a possible strike on September 16. Only seven of the 12 unions have voluntary agreements with the railways. With harvest upon us, the additional disruption to rail movement is not what we need or want.
In recent crop years (and it looks like we will be in that category this year), the December/March corn carry tends to trade at its highest in early September. If it trades wider in October, it is only a few cents. If you intend to haul covered corn, you may want to consider moving your short hedges around March 6 to 8 cents. The United States Climate Prediction Center gives the possibility of La Niña persisting from January to March at 54%. This could set up a less than ideal growing season for South America.
The weekly ethanol report showed production up 19,000 barrels per day to 989,000 bpd and 7% higher than a year ago. Inventories fell 400,000 barrels to 23.1 million barrels and the biggest one-week drop since June. Net margins fell 15 cents to 6 cents per gallon.
The USDA said it would update four weeks of export data on September 15 after technical issues banned publication of the weekly export report since August 25. 1 and 8 on another report.
Outlook: Corn closed higher for the third straight week. The December contract closed the week at its highest level since June. It was up 19.25 cents for the week at $6.85 and March corn gained 18 cents this week at $6.89.25 a bushel. We’ll have to wait and see if the USDA sends us any curveballs on the 12th. Outside of the macro markets, the US harvest and South American planting weather will be the focus going forward; but with plenty of empty storage to fill and dwindling end stocks, the downside may be limited.
The Chicago Mercantile Exchange is changing trading hours for mini-contracts effective October 2. The new mini-contract closing time will be 1:20 p.m. (Central Time) from the current closing time of 1:45 p.m.
SOY – The big news in the soybean complex to start the shortened holiday week was the new ‘soybean dollar’ exchange rate in Argentina. In its effort to increase hard currency reserves, farmers will be offered an exchange rate of AR$200 until September 30 against the official rate of AR$140. This is intended to make soybean sales more attractive to growers. Through August, Argentine farmers are estimated to have sold just 52% of this year’s soybean production. The new rate did what it was supposed to do. Argentine farmers sold 114 million bushels of soybeans in the first three days following the announcement, about five times the sales of the previous week. China was there to reap the windfall, buying soybeans at a supposed 45 cent discount to US soybeans.
And to add to Argentina’s farmers’ push to sell, their central bank announced that farmers of a certain size who own more than 5% of their production will be subject to higher financing costs of 120% of the latest rate of monetary policy. The current rate is 69.3%, so the penalty rate would start at 83.4%. Both programs aim to increase government revenue through the collection of export taxes.
Average trade estimates for the 2022-23 balance sheet include 51.5 bushels/acre, 4.496 billion bushels of production and harvested acres at 87.288 million acres. U.S. ending stocks for 2021-22 are estimated at 236 million bushels and 247 million bushels for 2022-23. World closing stocks are set at 101.19 mmt. Conab raised its estimate for Brazil’s soybean crop by 124 mmt to 125.6 mmt and from the USDA to 126 mmt.
More and more Covid lockdowns in China have challenged demand. After the Labor Day weekend, 65 Chinese cities covering 300 million people were estimated to be in partial or full lockdown. Chinese soybean imports from January to August were 67.1 mmt, down 8.6% from the same period last year.
The cost of shipping soybeans from Iowa or Mato Grosso, Brazil to China is now about equal, according to the USDA. Brazil’s investment in its infrastructure is paying off. This, combined with a strong US dollar, hurts our competitive edge even during harvest.
Outlook: If we are heading for a record soybean crop for the second consecutive year and negative seasons for the end of September, recoveries may be limited in the short term. For the week, November soybeans were down 8.25 cents at $14.12.25 and the January contract fell 7.75 cents at $14.17.5 a bushel. September’s WASDE report will provide short-term guidance, but the harvest will come quickly and we’ll see if US growers are inclined to sell. South American weather will gain in importance with planting of Brazilian soybeans allowed to begin on September 15.
Weekly December Wheat Price Changes for Week Ended September 9: Chicago Wheat up 58.5 cents to $8.69.5, Kansas City up 51.5 cents to $9.29.25 and Minneapolis up 37.5 cents at $9.27.5 a bushel.
Phyllis Nystrom is a market analyst at CHS Hedging in St. Paul.
