Grains closed mixed on Thursday:
May Corn + 22 ¾ cents/bu (7.55 ¾ )
May Soybeans + 14 ½ cents/bu (16.86 ¼ )
May Chi Wheat -$1.14 ½ per bu (10.87)
Cdn $ +0.00345 (78.29 cents)
WTI Crude Oil -2.93/barrel (105.77)
Another crazy day in grain futures trade, as the market went from a two sided overnight trade to very strong corn and bean bids, and collapsing wheat prices. The fall in wheat prices should really not come as a surprise, as the run up in values after the Russian invasion of the Ukraine was all about an emotional response to the war, and did not reflect the cash market price of wheat whatsoever. The fact that Black Sea wheat exports will not be available to the world for an unspecified amount of time is no doubt friendly to the wheat market, but the fact remains that even with the recent slide in wheat futures, July Chicago wheat futures are still $1.60/bu higher than they were on the eve of the Russian invasion. North American mills continue to complain that their hedging “vehicle”, namely CBOT wheat futures, is broken. Days of limit up and limit down have many mills still reluctant to offer bids against futures, instead preferring to try to buy on a flat price. It’s going to take some time for things to get back to any kind of standardized process for wheat marketing.
That being said, the war in the Ukraine appears to be motivating imports around the globe to try to ensure that they build up their reserves of grains. The COVID pandemic forced countries to build reserves, out of fears that COVID flare ups could disrupt their ability to secure supplies. Now the war in the Ukraine is forcing countries to make similar decisions, as there is no way to predict when the Black Sea region will become a reliable supplier again. Russia announced that it was banning agricultural exports through August to ensure domestic supplies.
The USDA release it’s Weekly Export Sales Report this morning, with massive corn and soybean sales reported for the week ended Thursday, March 3rd. Of the 2.143 million tonnes of corn sold last week, unknown destinations were the biggest (801,000 tonnes) followed by the regular USA corn buyers of Japan and Mexico. Trade sources suggest that while China was definitely a buyer of corn, non-traditional buyers of USA corn were also in the mix last week. On the soybean side of the ledger, China accounted for 1.1 million tonnes of the old crop beans sales, with unknown destinations the second biggest buyer at 334,000 tonnes. Wheat sales were poor again, as US wheat remains overpriced to the world. USDA data is listed below (in thousands of tonnes):
We saw further cuts announced this morning to Brazilian and Argentine 2022 production levels. CONAB (Brazil’s equivalent to the USDA) has cut Brazilian bean production to 122.8 million tonnes, down from their February estimate of 125.5 million tonnes. Corn production was left unchanged. Meanwhile, the Rosario Grain exchange cut Argentine bean production by another half million tonnes, and cut Argentine corn production by 300,000 tonnes.
On the day today, funds were believed to have been buyers of 20,000 corn contracts (now long 357,000), buyers of 10,000 soybean contracts (now long 166,000), while being sellers of 20,000 Chicago wheat contracts (now short 9,000)