Jon Scheve with weekly market commentary made on February, 25, 2022
Geopolitics changed drastically this week. How the upcoming events unfold could still really impact the markets. It looks unlikely the current Ukraine situation will end quickly. The USDA Economic Forum presented their crop planting estimates this week and they are looking for 92 million corn acres and 88 million bean acres. Both were in line with expectations and seem reasonable. The trade will use these numbers as estimates until the March 31st planting intentions report is released. The forum also released their yield and carryout estimates for the next year. Both values came across bearish from where prices are trading today. Still, the estimates are for 18 months from now, and A LOT could still happen to change those numbers between now and then. Weather will likely play the biggest role in what those final yield and carryout numbers look like next year. At the end of the week, May beans had an extremely volatile final 48 hours. First beans rallied $1.25/bushel, but then immediately dropped $1.75/bushel in the last 24-hour span of the week. In the end, Friday’s close was still higher than where the market traded 9 days earlier. May corn finished the week 3 cents higher than where it closed the prior week. New crop values were 18 cents lower than last week, but at the same levels from 3 weeks ago. May wheat was still 50 cents higher than last Friday’s close. After a wild week in the markets, it is important to note that fundamentally for grains not much has changed since last Friday. World grain stocks are still the same, demand seems to still be there, production in South America has been reduced this year and prices closed out the week similar to that of last week. Looking Forward Beans: South American bean production estimates are suggesting there will be between 800 million to 1.2 billion fewer bushels produced this year in the Southern Hemisphere than were originally planned for. The US is the only other world supplier with beans left, and we only have 200 million extra bushels of supply available until we harvest in October. The unknown in the market right now is how tight China wants to let their supply reserves drop to until we begin to harvest our beans this fall. If there are any Midwest weather issues this summer, it could trigger major price rallies in late summer to ration demand for new crop. Corn: Corn prices will be most impacted by Brazil’s weather during the pollination period of their second corn crop over the next few months, and the US’s weather in June and July. If there are droughts in South America and yields are reduced, it could trigger increased buying of US old crop, which would tighten carryout like last year and potentially drive prices back into the $7’s. US’s weather in the southern plains has been dry and could be hurting wheat crop conditions. If yields are reduced for wheat and prices stay strong, this could help corn prices from drifting lower. Plus, if fertilizer prices stay elevated, there may be fewer corn acres planted this spring, which could tighten carryout and support prices this summer. Bottom line: There are still a lot of unknowns right now. We do not know how the eastern Europe events will unfold and weather is always a wild card. There are still 45 days before US crops get planted and 90 days before the weather market in the US starts. I would expect a bumpy ride for prices moving forward.
Jon Scheve Superior Feed Ingredients, LLC
9358 Oak Ave Waconia, MN 55387 jon@superiorfeed.com