Highlights
On Saturday, India banned all wheat exports immediately.
Here is the big picture:
India is the world's third largest oil importer. India has booked at least 16 million barrels of Russian oil since the February 24 invasion of Ukraine by Russia. That is almost as much as India bought from Russia in all of 2021. India is getting oil at a discount because of sanctions on Russia to export oil to its traditional buyers.
Ukraine’s old crop wheat and soon to be harvested new crop wheat cannot be exported through the ports. Only about 10% of normal export pace is flowing west by train to be loaded on ships at Baltic and Western Black Sea ports.
The media and politicians are telling everyone there will be millions of people starving because Russia will not allow Ukraine’s wheat be exported.
Russia’s wheat exports in March 2022 were triple of the March 2021 exports. Then India started selling wheat in April.
India comes to rescue of the world in early April by announcing it has plenty of wheat to easily replace the wheat Ukraine cannot export.
Hot weather in late March reduced India’s wheat crop about 5.3 million mt to 105 million mt.
Rumors and predictions are prominently circulated worldwide that India will ban wheat exports. India continued to sell wheat and restated multiple times it will not ban wheat exports. After all, even their reduced 2022 wheat crop is the sixth consecutive record large wheat crop for India.
Turkey bought 50,000 mt of Indian wheat just a week ago. India’s wheat exports this spring are triple (as is Russia’s) what they were a year ago.
India’s wheat harvest started the first week of March. The heat wave hit the last half of March. It is pretty difficult for hot weather to do a lot of damage to wheat two weeks after harvest started. Granted, their harvest extends into May so some wheat would have been hurt in March.
So, what is the real reason India banned wheat exports? India needs Russian crude oil worse than it needs to export wheat. Either Russia told India to stop exporting wheat so Russia could have a bigger share of the export market or people who want the war to expand made India stop exporting wheat. The warmongers need starving children around the world to provide an excuse to expand the war.
Since April first:
Soft Red Winter Wheat is up $1.93
Hard Red Winter Wheat is up $2.69
Hard Red Spring Wheat is up $2.79
Don’t you think those price gains pretty well priced in the Indian export ban?
Roger was the only person we know of who thought the ban would not happen. Obviously the price gains shows “everybody” else did expect the ban. So, wheat will probably open a bit higher tonight on the last panic buying to liquidate short positions and then weakness later this evening as all the buying will be done. It has been going on for a month!
Buy the rumor, sell the fact. The wheat export ban is already priced in. Sell 22 and 23 wheat if you have not sold it already. If you have sold it already, buy more puts.
About Corn…
You Make an Informed Decision
On Friday, Roger said to price 2021 and 2022 corn. Why?
A very highly respected technician told Roger in December 2018, the low would be May 10th in 2019; he missed it by one day.
In November 2019, the same technician said the low in 2020 would be the last half of April and it would be followed by a shockingly strong rally in the fall of 2020. The low was made April 21st and by the end of the year, corn was higher than any time the past 6½ years.
This same technician predicted months ago the high this year would be May 9th.
Since last December, we expected the high to be early this year instead of the normal seasonal high the third week in June because:
March 31st Intended Acreage was very bullish corn. The market will expect a lot more corn acres on the June 30th Actual Planted Acreage. The closer we get to the end of June the more estimates will indicate more corn acres.
Livestock numbers have been in decline for six months and bird flu accelerated the decline this spring.
Brazil is the world’s #2 corn exporter. It had terrible crop last year. This year’s safrinha corn crop will be available for export in early June.
The war in Ukraine started in February; it is old news. The only potential news from there will be the war is over and all grain prices will crash.
The high for corn last year was May 7th.
December 2022 corn made a new contract high 7 times in April, peaking at $7.57 on the 29th, $1.19 above the December 2021 high. That was right on target for an early May high after the usual end of the month correction which extended all the way May 9th as crude oil and the stock market suffered badly as the interest rate was raised for the first time in 7 years. The low on May 9th was 54 cents below the contract high on April 29th! We were not going to sell that as the outlook was still bullish. Great exports, ethanol crush margin stronger than last year (but considerably weaker than six months ago), seasonal trend up, corn planting was going to be late in the Upper Midwest and 40% of Brazil’s safrinha corn crop had just suffered the driest April in 17 years. The Tech Guy moved his projected top from the second week of May to the second week of June.
Quite honestly, last Monday, Roger put the idea of selling corn out of his mind for a couple weeks.
Thursday evening, Roger and Olga went 30 miles northwest for dinner while December corn made a new contract high. The amount of corn planted in West Central Ohio was shocking! Several phone calls Friday morning across the Corn Belt combined with the weather forecast through the weekend made it clear there would be a huge percentage of the corn crop planted by Sunday night.
Lance called Roger Friday morning to say he had recommended his full service clients sell some corn. I told him that is fine; price was new highs and his marketing decisions are based on the best facts available. His clients are his responsibility. He has to earn their business every year.
I sensed Lance was disappointed with my response, but he did not say why. After the call ended, I searched for reasons why Lance disappointed in my response. I talked it over with Olga, which required me to refresh my memory of conversations I had had with her and Lance the past several months about the specifics of this year’s corn market action. It took me about thirty minutes to realize:
The contract high for corn Thursday night was just 3 days after May 9th. For a six-month prediction, three days off is mighty close to perfection.
We had made three contract highs the past three weeks, but only by a total of 3½ cents. That is not a very bullish market.
The May 9th correction was 11 cents lower than the April 25th correction. That is down-right bearish. Corrections in an uptrend are supposed to be higher than the previous correction.
Nothing is 100% in this business and we still think corn will make new highs, but why take the chance? We also know corn futures may drop far the next 7 weeks, but it will not stay down far until the market concludes the crop will be made and that will not be until the first week of July.
It is reasonable to think the high is in, just like last year. Because there is so much which can go wrong with the US and Brazilian crop plus the uptrend is still intact, is why Roger did not recommend buying corn puts just yet.
Take a look at the December 2021 and 2022 daily charts. The red circles are bearish indicators and the green ones are bullish indicators.
Note the December 21 corn made lower highs in June and an even lower high in July; very bearish. But the July 9th correction low was higher than the May 26th correction low (bullish).
One last thing, one could say that December corn made a triple top with the high prices so close on the on April 19th, April 29th and May 13th. Double tops are reliable indicators of a trend change, but triple tops seldom, if ever, stop an uptrend.
Roger still recommends you price all the corn your nerves can stand and wait to buy puts no later than early July.
Rain Days Update
The Western Corn Belt has 7 less rain days in the 10 day forecast than yesterday and the Eastern Corn Belt has 6 less rain daysthan yesterday.
The 6 to 10 day forecast updated every day at: https://www.cpc.ncep.noaa.gov/products/predictions/610day/
Explanation of Rain Days