There is no doubt that all three major agricultural commodities grown in this country took a price beating over the last two weeks, and especially the last week. The results are hard to take, but there are some bright spots to think about.
We are now talking about May futures as the contract that cash prices are based upon. May corn futures on the Chicago Board of Trade have seen a huge range lately as a result of a price decline.
We have also seen a big bounce at the end of last week and following through to March 6 that can encourage us, if we squint at the chart through rose-colored glasses a little.
Corn
The recent high for May corn futures was $6.821⁄2 Feb. 21 , not that far away. By Feb. 28, we made a low of $6.30, then another low the next day at $6.221⁄4. That is a drop of 601⁄4 cents in a few days, and a drop to a level not seen since last Aug. 22, at $6.25. Yikes!
The good news is, having made that low, we bounced to a high of $6.381⁄2 March 6. I am trying to make that sound better than it actually is. The bounce was good, but we went down 60 cents and back up 16. It is hard to justify this drop.
There are reasons, but the results seem like an overreaction. That is how the market works. It is trying to find fair value, and I hope it has not yet.
The good news is that cheap corn gets sold, and we saw a flurry of business to Korea and China last week. Also, this export news helped us pick up the export totals so that we now are more likely to meet our U.S. Department of Agriculture goal of just under two billion bushels.
Argentina
We should be helped toward that goal by the terrible Argentine corn crop that will have buyers looking to us to replace them. The Argentine numbers don’t mean much to me, since I don’t remember them from year to year.
I am being told that the current Argentine-generated estimate is production of 41 MMT, but is expected to actually decline into the 30s. For reference, the average for the last five years is 57 MMT. It is obvious that there is a huge difference.
Since they have to feed animals at home, the exports this year will not likely be over 20 MMT, down from 38 MMT or so. That makes a real difference to our USDA balance sheet.
Ukraine news
Part of the reason for the drop was Ukraine news. We have been speculating that the “safe passage agreement” that allows ships out of the Black Sea, was not going to be renewed this month. In fact, last week we were told by some sources that this would likely, in fact, be renewed.
Since they are in the middle of shipping corn, this means, if the agreement renewal is realized, that there will be more corn to float in the world than we thought a week ago. The amount of change, however, does not justify the 60-cent price drop.
The USDA will be out with their WASDE report March 8. This is the world balance sheet and could affect the market, but is not expected to. We have just had some fundamental numbers from USDA out of its forum meetings. We are not looking to see anything new March 8, and the market is committed to waiting for the end of March planting intentions report.
Soybeans
Soybeans similarly made a bid drop and a recovery last week. Relatively, however, the drop was not as large, and the recovery was larger. May futures put in the recent high at $15.493⁄4 Feb. 22. We dropped sharply to $14.773⁄4 by Feb. 28, a loss of 72 cents. As this was being written March 6, we got back to $15.10 34, for a bounce of 33 cents.
In round numbers, we had a 50% retracement. It would take a few cents of gain tomorrow for an actual 50%, but I am being optimistic. Fundamentally, optimism is easier in the beans. Exports have slowed, but it is that time of year.
We don’t look for large exports right now because we are into the Brazilian new crop that are 43% harvested as of a few days ago, and the world can get beans from them more cheaply than from us. We are still shipping enough that we expect to meet the USDA estimate for the crop year.
Traders have looked at Argentine growing problems, based on lack of rain, as a reason for beans to go higher. In fact, that idea has been limited by the fact that Brazil is growing a record crop. Yes, the provinces next to Argentina are dry, but the rest of the county is putting bean in the pods.
With the big crop there, and also in Uruguay and Paraguay, South America will produce 14 MMT more than last year, and that is a good reason why November 2023 beans are $1.50 cheaper than the current May.
Wheat
We continue to have no news in wheat trading. The talk of severe abandonment in the Southern Plains of winter wheat that was planted in the dust and potential under-planting of the spring wheat in the Northern Plains due to the price comparison with soybeans still remain in the category of rumors.
The rumor will or will not become reality in Texas soon. Either of these is likely to add to soybean acres. Those potential developing realities may create wheat as the sleeper commodity.
