Corn futures prices reversed pre WASDE report losses Friday inched $0.01-$0.02/bushel higher on smaller Ukrainian and Chinese corn crops immediately following its release. THE USDA said lower 2021/22 U.S. corn exports will help grow 2022/23 stocks. The USDA was increasingly more optimistic about planting progress in Ukraine. Corn prices finished the week down another .9% falling for the fifth consecutive time, the longest losing streak since the summer of 2020.
The selling appears to have much to do with taking pressure off from the speculative surge on record corn export volumes and higher unit values. Total U.S. agricultural exports are expected to improve $7.5 billion to reach a record $191.0 billion.
Longer term corn prices remain underpinned by possible U.S. planting delays and Ukraine grain unavailable for export. Ukraine’s spring plantings are now 98% complete and will drop 25% from a year ago due to the ongoing Russian invasion, per the country’s agriculture ministry. That includes 10.304 million acres of corn. The USDA this week appeared to be optimistic about Ukraine however.
Corn Futures Highlights
- Corn dipped 0.9%, still up 21% ytd
- Futures prices ended Friday’s trading session in July up 0.25 cents to reach $7.7325, while September futures added 3.5 cents to $7.3275
- Corn basis bids were steady to firm after rising 2 to 10 cents higher at three Midwestern locations on Friday. An Illinois ethanol plant bucked the overall trend after dropping 5 cents today.
- On Thursday, commodity funds were net buyers of corn (+4,500), soybeans (+10,500) and soymeal (+4,000) contracts but were net sellers of soyoil (-3,000) and CBOT wheat (-3,500)
Corn Technical Outlook
Corn rally topped out at the highest since 2012 in Chicago at +1/8 and has corrected back to break the Tenkan which it swiftly regained this week after bouncing off 720, which also the price successfully retested the high from April 2021. From here we watch if Tekan can be reclaimed, which will tell the wave structure. Support is at the Kijun 7/8 confluence.
“Farmers are in a race against the clock to get their crops in the ground this week, with planting of corn, soybeans and wheat well behind their usual pace. Wet and cool temperatures in key parts of the Midwest have delayed farmers’ planting plans, leaving them days to get crops in the ground before they start to lose out on a bigger harvest. If they don’t, some grain traders say that already high prices for agricultural commodities could rise even more… The U.S. Department of Agriculture said 22% of corn was planted, compared with 50% for the previous-five-year average. For soybeans, 12% was planted, compared with the previous-five-year average of 24%, and 27% of spring wheat was in the ground compared with a typical 47%…”May 11 – Wall Street Journal (Patrick Thomas and and Kurk Maltais):
Domestic Corn Stocks
Domestic ending stocks for 2021/22 increased to 1.485 billion bushels, and 2022/23 ending stocks also moved higher, reaching 1.400 billion bushels. Analysts expected to see a modest decline for both numbers. The season-average farm price for producers held steady, at $6.75 per bushel.
Russian president Vladimir Putin gave a nationally televised interview in Russia last Friday and addressed issues of food security surrounding the Russian war in Ukraine. Putin called reports of Russia not allowing Ukrainian grain exports safe passage through the Black Sea “a bluff” and that “there are no problems with shipping grain out of Ukraine.”
Putin guaranteed safety for Ukrainian grain exports in the Black Sea and Azov Sea, encouraging shipments out of key Ukrainian export hub, Odessa.
Putin also suggested alternative exporting measures for Ukrainian grain, including by railway through countries neighboring Ukraine, including Russia’s key ally Belarus, as well as Romania and Poland, estimating Ukraine could potentially ship 184 million bushels of wheat and 276 million bushels of corn currently locked into storage.
“If someone wants to solve the problem of exporting Ukrainian grain – please, the easiest way is through Belarus. No one is stopping it,” Putin said. “But for this you have to lift sanctions from Belarus.”
Putin’s political goodwill with his country’s farmers is likely beginning to shake. He increased Russian grain export forecasts to 50 million metric tonnes (MMT) ahead of the largest Russian wheat crop expected to be harvested since the fall of the Soviet Union.
“The situation will worsen, because the British and Americans have imposed sanctions on our fertilizers,” Putin said in the interview, noting that higher global fertilizer prices are not correlated with Russia’s ongoing military occupation in Ukraine and calling for Western sanctions against neighboring Belarus to also be lifted. – Farm Progress
“We are now seeing attempts to shift the responsibility for what is happening on the world food market, the emerging problems in this market, onto Russia. This is an attempt, as our people say, to shift these problems from a sick head to a healthy one,” Putin said
Macky Sall, president of the West African country of Senegal, praised Putin’s comments for offering hope to African nations suffering from soaring food costs and growing scarcity.
“President #Putin has expressed to us his willingness to facilitate the export of Ukrainian cereals,” Sall, who is also the chairman of the African Union, wrote on Twitter.
We would suggest take these ramblings with extreme caution and take them for what they are, a propaganda piece. However, the rise and fall of grains prices are impacted with such reactions to his words.
U.S. EPA Blending Targets
The EPA released blending targets after the market close last Friday. Biofuel blending targets for 2022 are forecast at 20.63 billion gallons, below the proposed volume. Retroactive adjustments for 2021 blending were above market expectations while 2020 volumes went unchanged.
The EPA added a 250-million-gallon supplemental standard to the 2022 blend mandates. It also denied 69 petitions for biofuel blending exemptions from refineries but will allow small refineries extra time to fulfill 2020 blending mandates.
Ukraine’s spring plantings are now 98% complete and will drop 25% from a year ago due to the ongoing Russian invasion, per the country’s agriculture ministry. That includes 10.304 million acres of corn, 2.292 million acres of spring barley and 466,000 acres of spring wheat.
French farm office FranceAgriMer noted a two-point quality decline for corn in its latest crop report, with 88% of the crop rated in good-to-excellent condition through June 6.Corn Production
The Ukrainian Agribusiness Club estimates that the country’s total grain production will drop nearly 38% this season. That includes corn production sliding 39% lower to 1.012 billion bushels and wheat production dropping 44% to 661.4 million bushels. Ukraine is a significant exporter of both crops.
European Union grain trade association Coceral has slightly lowered its estimates for EU corn production this season to 2.598 billion bushels. That would be a year-over-year decrease of 1.8%, if realized.
A USDA-ERS report shows U.S. corn exports in fiscal year 2022 are now forecasted to improve by $2.2 billion, reaching a new total of $19.1 billion “due to record volumes and higher unit values.
Total U.S. agricultural exports are expected to improve $7.5 billion to reach a record $191.0 billion.
Effect of Higher Input Costs on Farmers
A recent report by the Agricultural and Food Policy Center (AFPC) at Texas A&M University shows higher input prices are having a larger impact on farmers than originally thought.
- Net cash farm income on the representative feed grain and oilseed farms is projected to decline by an average of $534,000 from 2021 to 2022 across the 25 feed grain and oilseed farms.
- Representative wheat farms face an average reduction in net cash farm income of $399,000.
- Representative cotton farms face an average reduction in net cash farm income of $716,000.
- Rice farms face the largest reduction in net cash farm income per farm at $880,000 and a per acre reduction of $442.
Compiled by Joe Outlaw, Ph.D., and Bart Fischer, Ph.D., co-directors of the AFPC.
Commodity Round Up
- Bloomberg Commodities Index gained 1.2% (up 36.6% y-t-d).
- Spot Gold rose 1.1% to $1,872 (up 2.3%).
- Silver slipped 0.2% to $21.89 (down 6.1%).
- WTI crude gained $1.80 to $120.67 (up 60.4%).
- Gasoline declined 1.9% (up 87%)
- Natural Gas rallied 3.8% (up 137%).
- Copper dropped 4.0% (down 3.8%).
- Wheat rose 3.0% (up 39%),
- Corn slipped 0.9% (up 21%).
- Bitcoin fell $525, or 1.8%, this week to $29,155 (down 37%).
From The TradersCommunity Research Desk