Grains closed higher on Friday:
Mar Corn + 9 ¼ cents/bu (6.51)
Mar Soybeans + 8 ¾ cents/bu (15.83)
Mar Chi Wheat + 26 ¼ cents/bu (7.96 ¾ )
Cdn $ -0.00155 (78.48 cents)
WTI Crude Oil +3.22/barrel (93.10)
Grains enjoyed another extremely volatile trading day to end the week, as ongoing production concerns in South America, coupled with growing concerns over a Russian invasion of the Ukraine allowed prices to rally from early morning weakness. Grain trade was somewhat subdued until the Biden administration issued an announcement on Friday that all US citizens should leave the Ukraine immediately, saying that if Russia invades, no US troops will be sent to rescue them. That statement reinforced market fears over the disruption of grain shipments out of the Black Sea region, alarming the trade that such a shake up in trade flows could happen sooner rather than later. Wheat was the primary beneficiary of these concerns, but corn was also upwardly affected as the Ukraine/Russia represent a significant percentage of the global cereal trade.
Corn traded up as much as 16 cents/bu on Friday, due to the aforementioned concerns over Ukrainian supply. However, corn struggled to hold onto all of those gains into the close, as there is no shortage of North American supply at the moment, and despite the potential for Black Sea problems, Ukrainian corn still is maintaining a $9 US/tonne discount to USA corn, landed in China. The USA corn market desperately needs to see evidence of Chinese interest in buying corn, if it is to take prices to the next level higher. SW Ontario farmers are taking advantage of the warmer temperatures and higher corn prices to sell corn out of their granaries. Industrial corn buyers have seen a LOT of corn being offered over the past couple of weeks, and are getting filled up for movement in the coming weeks. Producers should not be surprised to see corn basis bids break somewhat in the coming weeks (depending of course on what our Loonie does in the meantime).
Soybean futures actually traded down as much as 11 cents/bu on Friday before the Ukrainian news brought all grain markets higher. The Ukraine is not a significant player in export soybeans, but it is the second largest exporter of sunflower oil on the planet, so potential disruptions in those oil exports stresses a market that is already on edge over reduced South American supplies and reduced North American availability of canola oil. Safras and Mercado lowered their Brazilian soybean production estimate by 5 million tonnes to 127.1 million on Friday, just slightly above Thursday’s CONAM estimate. However, Brazilian soybean export basis broke by 12 cents/bu to end the week, which encouraged some more Chinese buying of Brazilian soybeans. Bottom line, Brazil’s soybean crop is smaller, but Brazil will still remain a significant player in the export bean market. We are at all time high soybean prices for the month of February, so prices will remain volatile, with little forewarning of steep drops or rises in values.
Wheat was the primary star from the Ukrainian news to end the week. Speculative funds could not ignore the headlines, and as such, were believed to have pared their short position in USA wheat futures in half in one trading session. If this weekend does nothing to allay the fears of a Russian invasion, the rest of their short position could be covered in on Monday. Unfortunately, Russian export wheat offers remain unchanged to end the week, meaning that North American wheat became that much more expensive than Black Sea wheat, and thus, likely further priced ourselves out of the market for new export business.
On Friday, the USDA confirmed the following Flash Export Sales:
108,000 tonnes of soybeans to China for shipment in 2022/23
128,000 tonnes of corn to Japan for shipment in 2021/22
30,000 tonnes of soybean oil to unknown destination for shipment in 2022/23
On Friday afternoon, the CFTC released their weekly report on fund positions in commodities as of the close of business, Tuesday, February 8th. Friday’s report showed that over the past week, funds had actually sold off 35,000 corn contracts, while buying an additional 15,000 soybean contracts and selling another 3,000 Chicago wheat contracts. On Friday, funds were thought to have been buyers across the board, picking up an estimated 5,000 corn futures (now long 349,000), 5,000 soybean futures (now long 169,000), and 20,000 Chicago wheat futures (now short 18,000).