There is an old saying that no news is good news. That is never true in the grain markets, which live on news. There we see that there is good news and bad news, but no news is hard to trade.
That is where we are today, with a lack of news leaving market analysts struggling to write pieces like this. We find things to talk about, but there is little news that matters really hitting the markets right now.
Maybe that is good. Farmers can concentrate on buying the rest of inputs and planning spring work instead of focusing on marketing.
Corn
Corn prices are being squeezed into a small range, looking for direction right now. There are dribbles of good and bad news, but the trading shows them to be offsetting themselves right now. That is, the good and the bad appear to be equal, as prices are not changing.
Corn futures have traded near $6.75 in each week for six months. That pretty well defines a steady market going nowhere. For the week, March corn futures were down two and three quarters cents, while the new crop December was off a quarter of a cent. Big deal!
Negative news has ethanol demand off. We increased production, but put it in storage. That is measured by the fact that the ethanol stocks are at a 45-week high of 25.3 million barrels.
As usual, ethanol demand is a function of gasoline demand. That is down 3% from last year, and this demand is off almost 6% in the marketing year which began in September.
We can speculate about why gasoline demand is less. The gasoline cars are getting more efficient, so, as we upgrade the national fleet, gasoline demand suffers. Then, the significant, but still small, percentage of electric and hybrid vehicles is having an impact. Third, and most scary, is that a slowing economy is slowing demand.
I would think that the number of employers who are actually demanding their employees report to work would be increasing gasoline demand, so maybe the negatives are stronger than ever.
South America
On the positive side of the market, for us at least, are the continued production problems in South America, especially in Argentina.
Rains improved there this week, but it is too late for that to help much according to current crop condition reports. The good and excellent category was reduced by a whopping 9% this week, to just 11%. The current Argentine production estimate is now at 45 MMT, while our government estimates their crop at 47 MMT.
Harvest is in full swing, and although the small crop will limit exports, the exports will be expected to go strongly to China.
Our corn exports to China are almost non-existent, especially in comparison to the exports last year. Under our trade agreement with them, they bought large quantities of corn for the first time. We hoped that would continue but it has not.
Ninety percent of their contracts have been shipped, and so far they have taken only 65% of the shipments of last year at this time.
Ukraine
The other corn factor that can help us is the anticipated problems in Ukraine. It is expected that the war will resume after the “mud season” passes, allowing more free movement of Russian heavy equipment. It remains to be seen what happens in the war there.
One view is that the Ukrainians are being used as proxies for the West, as the West supplies them with war material. Right now, the Russians are being reported to be emptying jail cells to find recruits for what is becoming a very unpopular war in both the West and East.
On the other hand, there is the view that Russia will inevitably win and become the victor of a huge pile of rubble that used to be a functioning country.
Somewhere in there is the truth, and somewhere is the estimate of what production the Ukrainian farmer can grow and get to market (two different but real problems). Then comes the problem of actually getting it out of the country.
The agreement that allows safe passage of grain cargoes out of the country expires March 18. The last time the Russians agreed to extend it, they did a lot of growling ahead of time about how it favored the Ukrainians because sanctions by many nations against buying Russian grain was hurting them.
They feel that even more now and are getting cranky enough about the Western reaction to their incursion in Europe to suspend the START nuclear agreement with the U.S. last week. That agreement was to limit the size of nuclear stockpiles.
In reality, it might have just allowed us to dismantle old weapons instead of upgrading them, but it is significant in that this was a reaction to President Biden’s “surprise” visit to Ukraine, which was actually generally expected.
The angry Russian Bear can do a lot of damage before its pelt gets stretched, so we should beware of poking it, whether with trade sanctions or cruise missiles. On the other hand, the bear decided to come out of hibernation, and we have a vested interest in not letting it roam free.
It is a tough subject, and another reason I am glad I write about grain instead of ruling the nation from an oval office. Becoming president is a great objective right up until one actually becomes president.
Soybean prices reacted to some welcome rain in Argentina. The results were mixed for the week, with the old crop down 15 cents and the new crop up half of that. The weather has hurt the Brazilian crop, but they are still expected to hit a new production record. There is an unknown still to be determined, in the form of a frost scare for the corn and the soybeans.
The total lack of news in the wheat markets has them defensive. We are still waiting to see how wheat emerges in the Plains after it was planted in the drought and may not have actually germinated last fall. The effect will not be known on the market until April or May, so keep in touch.
