Grain prices respond to global market changes

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Brazil soybean plantation

Two reasons are being given for weakening corn, wheat and soybean prices. First, we have the matter of the spec funds being short and uncomfortable. We have declined enough that they are buying back shorts to get positions closer to even in case prices seek higher levels. In effect, the buying makes the prophecy of higher prices self-fulfilling. The trouble is any fund action can happen quickly and then the market needs new news again.

Brazil

Then, there is the fundamental issue of Brazil, especially, being very dry. Some areas of Brazil have only had half the rain that is normal, but we have to recognize that they usually get more than they need, so it is not like half the rain yields half the crop.

The biggest effect of the rain is that it is slowing the buying of fertilizer since there is the fear that enough dry weather will mean the safrina (second) crop corn will not be entirely planted. Given an unknown planted acres reduction and an expected drought-reduced yield, we are now anticipating a 12% drop in production. Much like we looked at the big picture last week, the big picture in corn markets hangs on the fact that Brazil is now the biggest exporter of corn. So, weather news in Brazil affects markets more than it used to.

China

China continues to demand attention when we plan our marketing. They had a huge corn crop this year, over 11 billion bushels. That is a significant percentage of what we produce. Even with this production, they have been taking large quantities of available corn to import.

The cynic in me thinks that they are bargain hunting, worried that the current decline is a good buying opportunity. In fact, they have taken in 141 million bushels in the last month, which is an amazing 384% of normal for this time of year.

The other big China news involves fertilizer. I did not realize until recently that China is the world’s largest exporter of phosphate. They are also a leading exporter of urea. And yet, they have an embargo on selling fertilizer right now. That could be because they anticipate a rise in prices that will give them a sales opportunity.

Of course, they are much of the reason for the rise in price because of their embargo. They may be encouraging more use of fertilizer at home for better yields. They may be just a little too cute, or they may make money both by buying cheap commodities and then selling more valuable fertilizer.

Sustainable aviation fuel

It would seem that we have reason to believe that soybeans are now too cheap since we are seeing USDA projections of a very small carryout. Add to that the reality that we are adding crushing capacity in this country. Several plants that have been talked about are getting finished and will be buying beans in 2024.

Part of the increase in crushing capacity comes as the nation is working to produce what is known as sustainable aviation fuel. I thought this was soy-based, but I am reading tonight that SAF can be made from other bio-sources. The goal of the aviation industry is to use 100% SAF in some applications. If I remember correctly, one airline made news recently by making a flight using 100% SAF.

SAF will be a huge use for bio-mass since the airline industry represents over 11% of all the fuel consumed in our country. Autos consume four times that. The current industry goal for the airlines is to get 70% of their carbon footprint eliminated by using SAF. The first goal is 5% by 2030, then 65% by 2050.

Grain prices

Let’s look at some of the grain prices. We put in the low for March corn futures at $4.82 1/2 Sep. 19. We then slowly worked higher until the $5.21 1/2 of Oct. 20. Since then, we have seen a steady decline to the low we were trading overnight Dec. 18, at $4.77.

January soybean futures were trading Dec. 18 overnight at $13.21 3/4, down five and a quarter. We had a high in the middle of November at $13.98 1/2, and a low of $12.92 three weeks later. That is a loss of almost 30 cents.

We closed Dec. 18 up 11 1/4 on the strength of the soy products. Meal rallied $7.80 on the January meal contract. Soyoil gained as much as 69 cents. We exported 1.411 MMT of beans last week, which was part of the reason for the gains. That was up from the 1 MMT of the week before.

Sadly, we are still lagging behind the exports of last year at this time by 28%. We are also 17% below the five-year average for this time. For the marketing year, we have exported 21.17 MMT, significantly less than the 25.5 MMT we moved by this time last year.

The soft red winter wheat that is traded on the Chicago market has traded differently than the corn and beans. We have had a long, steady downturn since the July 25 high of $8.09 1/2. In a little more than two months, we lost almost $2.40. We have bounced back a little but had lost $12 1/4 cents Dec. 18 in the day session. We were up four cents in the overnight trading into Dec. 19.

Sometimes in this space, we look at shipping problems on the Mississippi. Those are still unresolved, and they are being added to by international problems. Houthi missiles are interfering with shipments through the Suez Canal. That is mostly crude oil.

Then, there is the dry weather problem in the Panama Canal. Low water has that canal limiting the number of Panamax vessels that can transit in a day. In August, the limit was 32 per day. That was reduced until only 18 per day was the cap. Now, that is being raised back to 24 per day. I do not remember a time when this happened before this.

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