Last week, I suggested that the February reports from the U.S. Department of Agriculture were almost never a market mover.
A few hours after I wrote that, the reports came out, and they did not move the markets. Even a blind hog finds an acorn once in a while.
For the most part, there were no surprises in the World Agricultural Supply and Demand Estimates. The Argentine and Brazilian crops were adjusted a little, but that was widely expected.
For several months, the dry weather in Argentina and the wet weather that was preventing planting in Brazil were talked about. It was noted by all that the local observers consistently downgraded the crops more than USDA did. So, finally, USDA caught up a little, and it did not affect prices.
Wheat movement
Wheat has been the poor stepsister to corn and soybeans for a long time. Wheat prices have steadily declined for months, while corn has been in an uptrend, and soybeans recently broke the downtrend to go up for a time. The wheat showed surprising strength Feb. 14 by closing up 23 3/4 cents to $6.01 1/2. The high was at $6.02 3/4.
Sadly, the reason for the bounce was not technical but fundamental. That is, it involved real bushels, not just some chicken scratching on a wheat chart.
A bit of news set it off, as a freeze scare hit the Black Sea region of the world. This is where the Ukrainian wheat is produced and is close to Russian production, which was already being downgraded because of dry weather problems.
Wheat is considered a world crop, and much of the world exports come from this region. Russia is the number one exporter of wheat in the world, and their crop had already seen some estimates cut the yield by as much as a third.
Somehow, Ukraine continues to grow and export a significant portion of world exports while in the middle of a desperate war with Russia.
The futures markets in this country were closed Feb. 17 for Presidents Day, so it still remains to be seen if we are kicking off a wheat rally, or just bouncing off the bottom right now. For some, it is significant that we broke the $6 barrier Feb. 14. Round numbers are watched as targets by traders.
Corn
Corn did not quite break through the $5 barrier, with a high just a quarter of a cent below that magic number. It did gain 2 3/4 cents on the day.
The semi-professional chart watcher in me is worried about the March corn chart, as I mentioned last week. We now have nine of the last 14 sessions trading March corn futures in a narrow range above $4.91 or so. It would be very easy for corn to give up on new highs after it got that close to $5 and did not break through in 14 sessions.
The corn trading shows us that, even though the February reports were a non-event, traders are still cautiously trading the January reports. Those showed that the corn yield should be lowered, which lowered the crop production, which lowered the final carryout. This is significant.
Back in September, USDA was estimating that we would end the year (Aug. 31) with 2.057 billion bushels. Now, the January report says the carryout will be only 1.54 billion bushels.
The significance of the lower carryout is that we are getting close to the significant accepted pipeline supply of 1 billion bushels. Pipeline supplies for corn is a total of all the little bits here and there in the augers, the bin bottoms and the ground corn tanks.
For all practical purposes, we are actually out of corn when we are down to the last billion bushels. Many believe that the pipeline actually takes a little more — maybe 1.2 billion. Whatever the number is, when we start getting close, we can see higher prices to ration what is left.
The thing is, we are close to where the carryout matters, but there are a lot of factors needed to break out corn prices. They include lower planted acres than expected, better weather in South America, more feed consumption in the U.S. and ideal weather here. Our exports are better than expected so far, but higher prices hurt exports.
The livestock numbers are not increasing, and some bird flocks are being eliminated because of bird flu. The most likely gains come from fewer acres and perfect weather.
Looking at prices, at 11:41 p.m. Feb. 17, we had March corn futures at $4.94, down 2 1/4. March soybean futures were down just a quarter, at $10.27 3/4. March wheat futures were at $5.94 1/4, down 5 3/4. The Feb. 14 wheat gains are already being eroded.
The good news is that corn has gained almost a dollar since the end of August. Chicago wheat has gained 60 cents. Soybeans have actually lost 52 cents since Feb. 5.
Random thought
Why are so many people all of a sudden so interested in A.I.? Dairy farmers have been involved in this for at least 75 years.
Makes me wonder why we are supposed to be excited about plastic straws returning. I am dubious that they can stand the low temperatures of liquid nitrogen!
