Events in Ukraine again controlling markets

So, now Russian President Vladimir Putin is in talks to extend the grain shipping agreement that has allowed Black Sea vessels safe passage. The story, and the impact on grain prices, keeps changing. First, we had a hard deadline of Nov. 19 as the cutoff for safe passage of civilian vessels carrying Ukrainian grain to foreign ports. The ships were exported through the Ukrainian mines outside their ports and were blessed by the Russian military.

In the process, everyone learned just where the mines were, but that seemed to be the price Ukraine was willing to pay in order to sell grain, the main business of the country. Then came the week where the Ukrainians attacked some Russian military ships 120 miles away from the nearest mined port, and Putin got his feelings hurt.

They were already upset that their crucial causeway to the ports they had stolen a few years ago was bombed. They were shocked. In response, Putin threatened to stop the shipment agreement before the deadline. The ships that were already loaded took a chance and left port anyway. That left Putin cooling off and agreeing to talks to extend shipments.

So far, that has not happened, but why would he do it until the last day? Hang on, this story is not over …

Results

The result of this erratic action was erratic price action on the Chicago Board of Trade once again. Corn futures, which had touched $7, stumbled through four days of lower prices. December futures lost 23 cents for the week, and in the process, closed at the lowest price since Aug. 25. That would be $6.523⁄4, Nov. 10.

On the morning of Nov. 15, we were back trading at the low, $6.523⁄4 again. This is a long way from the $7 that was going to kick off another rally!

Wheat

Meanwhile, wheat prices, most vulnerable to Ukraine news, were also sharply lower. Chicago wheat lost 34 cents for the week. We touched $7.953⁄4, Nov. 10. We were at $8.021⁄2, down 131⁄4 so far the morning of Nov. 15. At least we were above $8!

For perspective, the recent high was just back Nov. 10, at $9.04. Think about that — a range of more than a dollar in just a few days.

The good wheat news for us is that India is still showing the result of a bad crop last year. They had expected to export wheat, then got dry and couldn’t. Now they are counting bushels since they are the largest consumer of wheat in the world.

Local Indian prices have hit an all-time high. They are the consumption oddity since most countries have diets that are either based on rice or based on wheat. India is a huge consumer of both grains.

In contrast, the soybean prices actually went up last week, and then finished over 12 cents lower on the new lead contract, January futures. On the upswing, they set a new high for the recent cycle at $14.69, Nov. 7. Then, we broke to $14.201⁄2, Nov. 10. We most recently recovered to just $14.361⁄4, which was down four and a quarter cents for the morning of Nov. 15.

Other factors

There are other factors influencing grain prices. For corn, the biggest negative is the poor exports that continue to worry the market. Then there is the Mexican problem. Their president has confirmed that they will not buy Genetically Modified Organism corn. Keep in mind that Mexico and Canada are our biggest trading partners.

Transportation issues have not gone away, although the Mississippi River is a little higher from recent rains. All the railroad union members have still not agreed to recent contract negotiations, so we still may have that nightmare ahead of us.

The GMO controversy has mostly gone away from the days when importers were irrationally — my opinion — fearful of “Frankenfood.”

Against the fears of trade problems, geneticists have continued to improve corn and soybean varieties at a fast pace. Much of the doubling of average corn yields in my lifetime is the recent GMO phenomenon.

All of the science indicates that animals don’t know the difference. That is the interesting part of the Mexican objections. Almost all of the corn goes into animal feed, not directly into food.

Yes, the Mexicans eat more corn than most, but much of it is not the same type of corn. It is a yellow and white corn that is special to that market. The reality is that the Mexicans would find it hard to replace our corn because of shipping.

Right now our trains are aimed at Northern Mexico. Argentine vessels would require a different infrastructure and more costs. Hopefully, this reality will cause the Mexicans to back off their demands.