As this is being written, the U.S. is starting its midterm election day. News has been focused on the election on most TV channels, and some of us are hunting around on the History Channel or a movie channel, or binge-watching French police dramas with subtitles just to find something new.
If you are in the grain trading business, your focus is not just the election. You are watching the on-again, off-again grain shipment out of Ukraine and the resultant jerks in grain prices. You are waiting impatiently for the U.S. Department of Agriculture reports to come out to see if there are any jiggles in numbers to bet your house on.
But, if you are a Plains farmer, you are only watching the skies and the weather reports for any hint of rain — nothing else matters much right now. The Plains are in the middle of a drought at a bad time. The wheat is planted, but it is not germinated in large areas. Winter wheat has to actually grow in the fall, and then go dormant with winter weather. It can survive incredibly low temperatures in the winter, but it has to grow a little first.
Tough conditions
This week, the USDA crop conditions report for wheat reported the worst crop conditions ever reported. That is a big statement. For context, if you care about the Plains farmer, and you should, last year was the previous awful condition record.
I used to farm in Ashtabula County, so the last thing I normally worried about was having enough rain. There were exceptions. I remember experimenting with double crop beans after wheat at a time when no-till drills were not around. The fourth year of the trial was a problem.
I scratched the ground over, planted soybeans and watched with frustration, as I did not get enough rain to germinate the soybeans for 10 days. That was 10 days too long. When the frost hit, the pods were still flat. It was a good green manure crop, I guess, but that was not the plan.
Another year, I planted wheat in early October, the latest I had done it. Conditions were dry and stayed dry. I remember stopping regularly at one field and digging for seeds and never finding sprouts. Then, in the January thaw the snow melted, and I thought I could see a little green in the last of the snow.
When the snow melted in March, I could see strong rows of green, but the wheat was very short. I ended up with some of the best wheat I had raised until then, but it was scary. Another dry week would have probably meant no crop. And, that is where farmers are right now from the panhandle of Texas to Montana.
Ukraine effect
While Plains farmers have been fixated on rains, corn and soybean producers are watching prices move around. Corn futures spiked to exactly $7 on Putin’s announcement that he was not happy with Ukraine having the nerve to use drones to attack some ships. As a result, he was going to stop the agreement to allow grain shipments out of Ukrainian ports. Wheat, most affected by shipping problems, reacted by going almost limit up.
Then, Putin launched missiles into civilian targets, worked out his indignation and reversed himself. The shipment agreement would stand until it ran out Nov. 19. Now, he says he will announce on Nov. 18 if he will extend it.
With the reversal, wheat futures were limit down. Corn prices declined to the lowest level of the recent range, at near $6.75 Nov. 7 and below that Nov. 8. We were trading at $6.74 the morning of Nov. 8.
After the jerking around in price, December corn futures closed the week virtually unchanged. However, January soybean futures actually gained 62 cents to $14.621⁄4. Soybeans have gained three of the last four weeks.
Remember, the soybeans are not directly affected by the geopolitical disaster that is Ukraine. However, Ukraine does export sunflower seeds, which compete with soybean oil when crushed.
The USDA WASDE report will be out Nov. 9, so by the time readers see this, they will have numbers to compare. Currently, traders expect no change in corn yield from the October report of 171.9 bpa.
Some other minor changes are thought to give us a production of 13.887 billion bushels, down from the October 13.895 billion. The same traders expect to change in the October 49.8 bpa for soybeans. They expect production at 4.315 billion versus 4.313 billion.
These changes are minor, but must be confirmed by the actual report. Surprises are what move the market.
