Prices were higher on all three major commodities on the Chicago Board of Trade this week — you can pick your reason why.
Was it the non-event Ukrainian peace talks, or the U.S. Department of Agriculture supply and demand reports out April 8, or was it a continued reaction to the March 31 USDA planting intentions report?
Russia continues to level more than a thousand years of civilization in Ukraine regardless of any “talks” they may be having.
USDA reports contributed to bullish enthusiasm in the markets, as there were no big changes, but the market seemed to focus on the tight ending stocks projection of just 1.44 billion bushels.
In modern times, we consider a billion bushels very tight. The March 31 planting intentions report surprised the market with a planting estimate that was 2.5 million acres less than expected, and that is still working through market thinking.
At the same time, the soybean acres came in 2.2 million higher than expected, but we are so tight on supply with South America having had weather problems last year, that we are still seeing soybean price gains.
Corn
For the week, July corn futures were up 39 cents and the December contract was up 28 cents. December of 2023 was also up over 27 cents and has been higher an incredible 23 days in a row. This is a market that sees bullishness that extends for more than one year.
Once the carryout supply is dropped to pipeline levels, good prices remain until we build a surplus again, and that takes time in periods of good demand. The Chinese deal of a couple of years ago defines that good demand.
Part of the corn picture is defined by the fact that Ukraine is a major corn producer and has increased exports in recent years. The market now believes that we will lose a billion or more bushels or worldwide supply from the war there.
The South American safrina (double-crop) corn is a bridge to supply in our summer, and USDA thinks Brazil is having a bigger than normal crop. Weather forecasts are calling for dry weather just as the crop is pollinating, however, so that larger crop may not materialize.
Soybeans
Soybeans have been a rough ride for specs the last few weeks. The week before last, we had huge losses in soybean prices, partly as a knee-jerk reaction to the higher acres predicted in the planting intentions report.
This week, however, the beans came roaring back with the old crop up over a dollar and the November futures up almost 89 cents. In the process, we got back almost all of the losses from the previous week. That trend continued as we started this week.
We have now gained over $1.16 in July futures since the low of $15.601⁄2 April 4. We have gained $1.08 in the November futures since the low of $13.94 April 1.
The bad week in soybeans seems to be a reaction to the increase in acres, as stated above. The good week we just had is more of a reaction to the supply and demand report, which shows Brazil down another 2 MMT and Paraguay down another 1 MMT.
The Brazilian government is now expecting 16 MMT less than last year, and Argentina and Paraguay are expected to be off another 8 MMT.
We are now talking about a loss of production in South America of most of a billion bushels. That production loss in South America is causing problems for the Chinese, who normally stop buying from us this time of year and buy from the South Americans as their new crop becomes available. Instead, they are continuing to buy from the U.S.
Wheat
The Chicago futures market, which trades our Soft Red Winter wheat, has seen big fluctuations in price, based mostly on the Ukraine war since they are a major wheat exporter.
Our July contract had a high March 3 of $12.781⁄4. That came two weeks into the war.
We collapsed into reality over the rest of March, making a low of $9.671⁄4 March 29. We were already back to a recent high of 11.25 April 12. A range over three dollars is something to remember for a long time.
It is worth noting that even in the corn and soybeans, our big runs have come since the invasion Feb. 24. We have seen a gain of nearly a buck in the new crop and almost $1.20 in the old crop corn.
