Last week’s U.S. Department of Agriculture reports came and went with little net reaction on the Chicago futures exchange. Sometimes the reaction quickly follows the report. Sometimes the reaction comes the next day, after consideration of the traders. Sometimes there is no reaction.
There were little pieces of news in the reports, but nothing that shook the market out of its current lethargy, unless a little improvement here and there counts. After the reports, we did see better prices in all three major commodities, but not large ones. It was more like relieved ones.
Traders continue to focus on all the things that have been having small impacts over the winter. We expect the Ukraine War to fire up again after the “mud season” is over. We expect the Argentine drought to actually cut the crops there as a follow-up to the mere speculation that that would happen.
We expect large crops out of Brazil, both corn and soybeans, even though the southern acres are almost as dry as those in Argentina. We expect soybean exports out of Brazil to start to take most of the Chinese market share as their harvest gets into full swing in the northern areas.
Let’s look at price action, and then we will go back to news specifics. March corn futures are mostly sideways for the last two months, but in a large range — as much as 50 cents. The low of Dec. 12 was at $6.353⁄4, but we just put in the third high at or very close to $6.88. We hit $6.883⁄4 Jan. 18. We hit a high of $6.881⁄2 Jan. 31. As this was written Feb. 13 at 4 p.m., we hit $6.861⁄2.
For the week, March corn gained 3 cents, with another four plus Feb. 13. December futures were unchanged last week. Think about that. Every two weeks, we get back to essentially the same high, but we don’t go higher. The argument can be made that we haven’t seen news that would make us move to new highs. If there was supposed to be something in this report to do that, all it did was get us back to the old highs.
Exports have been disappointing, and we expect USDA to confirm that with a cut for projections in the next report. The reality is that we liked the idea of China buying a lot of corn for a change, and we are not liking the reality that they are not doing it again this year. It is hard to see if they are bargain hunting, or they just don’t need the corn. My guess is they are hoping for lower prices and figure they can catch up when they need to if lower prices don’t materialize.
Keeping prices firm are current South American weather analyses. Those reports are not giving us new highs, however. It is convenient to look at projections for the Argentine corn crop being cut by as much as 10 MMT from last year, but the other South American factor is that Brazil will grow enough to be the world’s biggest corn exporter. I remember when the U.S. was first in corn and bean exports. Now we will not be first in either.
Brazil’s safrina crop makes up 76% of their production and is harvested from June through August. In other words, they get theirs off just before our harvest. Brazil, Argentina, Paraguay and Uruguay together will produce 176.5 MMT of corn this year, and export 87.8 MMT of it.
Soybeans are in a different situation. The cycle highs that we are seeing every couple of weeks or so are getting slightly higher. The March soybean futures high was at $15.371⁄2 Dec. 30. It hit $15.481⁄2 Jan. 18. We saw just $15.433⁄4 on the next high of Jan. 31, but then we had a Feb. 13 high of $15.551⁄2, as this was being written.
The low of a few months ago was clear down at $13.71 Oct. 6, so we have made huge progress in the last few months, and fair progress in the last couple of months. Over last week, the March soybeans were up over a dime, with just a fractional gain Feb. 13. The new crop November futures were up nine cents.
Soybeans are being strengthened by the dry Argentine weather, and a projected crop there that could be the smallest in 14 years. Still, the rally is being moderated in the new crop by the fact that the prime four South American producers will have the largest crop ever, and export the second largest amount of that production.
The Chicago soft red wheat winter wheat market has two looks to the chart, depending upon your focus. If you look at the last three months, the highs have all been near $7.99 March futures. We would call that steady. If you look just at the last three weeks, we have gone from a recent low of $7.121⁄4 to $7.96, which would seem to be an up trend.
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