Bearish sentiment keeps most grain prices downBearish sentiment keeps most grain prices down
Afternoon report: Grain prices mostly incurred heavy losses in a selloff on Wednesday as traders continue to monitor global events.
March 22, 2023
Grain prices mostly incurred heavy losses in a selloff on Wednesday as traders continue to monitor harvesting progress in South America, an extended Black Sea shipping deal and a fresh interest rate hike from the Federal Reserve. Soybeans settled 1.25% to 1.5% lower on the ensuing round of technical selling. Wheat losses were variable, ranging from 1% to 3%. Corn prices were spared thanks to a fresh infusion of export optimism, with nearby contracts firming 0.5% today.
Ample rainfall is coming to parts of the Midwest between Thursday and Sunday – particularly in a band stretching from southern Missouri through Ohio, which could receive another 3” or more during this time, per the latest 72-hour cumulative precipitation map from NOAA. The agency’s new 8-to-14-day outlook predicts near-normal precipitation for much of the Corn Belt between March 29 and April 4, with colder-than-normal temperatures likely for the Northern Plains and upper Midwest.
On Wall St., the Dow spilled fractionally into the red in afternoon trading to 32,560 following the Federal Reserve’s decision to increase interest rates by another 25 basis points. The Fed is also predicting just one more hike in 2023. Energy futures pushed higher, with crude oil rising nearly 1.5% this afternoon to $70 per barrel. Diesel rose 1.75%, while gasoline found gains of around 2%. The U.S. Dollar softened moderately.
On Tuesday, commodity funds were net sellers of all major grain contracts, including corn (-2,500), soybeans (-8,500), soymeal (-1,000), soyoil (-5,500) and CBOT wheat (-5,000).
Corn prices found immunity among an otherwise widespread selloff on Wednesday as traders observed another large sale to China announced this morning, with expectations of an unusually large export data set on its way Thursday morning. May futures added 3.5 cents to $6.3350, with July futures up 0.25 cents to $6.1150.
Corn basis bids were steady to weak across the central U.S. after trending 2 cents lower at an Iowa river terminal and 3 cents lower at a Nebraska processor on Wednesday.
Private exporters announced to USDA the sale of 7.0 million bushels of corn for delivery to China during the 2022/23 marketing year, which began September 1.
Ethanol production faded lower in the week through March 17, with a daily average of 997,000 barrels, according to the latest data from the U.S. Energy Information Administration, out earlier today. It was also the first time since early January that the daily average failed to reach the 1-million-barrel benchmark. Stocks eased 1% lower last week.
Prior to Thursday morning’s export report from USDA, analysts expect the agency to show corn sales ranging between 66.9 million and 147.6 million bushels for the week ending March 16. An unusually high volume is expected after China announced several large flash sales last week.
UDSA expects Japan’s corn imports during the 2023/24 marketing year to show a modest increase of 1.4%, with a forecast of 590.5 million bushels. The United States has historically been the largest (by far) supplier of Japanese corn imports.
Brazil’s Agroconsult reports that with the exception of Mato Grosso, most production states will be planting their second corn crop relatively late during the 2022/23 season. Because of this, the consultancy has lowered its total corn production estimates by 4.1% to 4.941 billion bushels.
Ukraine’s total grain exports during the 2022/23 marketing year are down 19% from last year’s pace so far as the country continues to struggle with numerous production and logistical challenges amid the ongoing Russian invasion. Current exports include corn sales totaling 838.5 million bushels, plus another 455.6 million bushels of wheat sales. Ukraine is among the world’s top exporters of both commodities.
Preliminary volume estimates were for 309,458 contracts, tracking moderately higher than Tuesday’s final count of 242,479.
Soybean prices continued to get hammered by harvest progress in South America on Wednesday as Brazil still anticipates a record-breaking harvest this season (more on that below). May futures dropped 18.5 cents to $14.4850, while July futures lost 23.25 cents to $14.2525.
The rest of the soy complex was also in the red today. Soymeal futures lost nearly 2%, while soyoil futures tumbled nearly 3% lower.
Soybean basis bids were mostly steady across the central U.S. on Wednesday but did trend 2 cents higher at an Illinois river terminal and 2 cents lower at an Iowa river terminal today.
Ahead of tomorrow morning’s export report from USDA, analysts think the agency will show soybean sales ranging between 14.7 million and 40.4 million bushels for the week ending March 16. Analysts also expect the agency to report soymeal sales ranging between 400,000 and 1.2 million metric tons, plus 125,000 MT to 350,000 MT of soyoil sales.
Brazilian consultancy Agroconsult is the latest group to anticipate a record-breaking soybean production for the 2022/23 season, offering a new estimate of 5.695 billion bushels. That’s 1.3% above its prior projection from January. Agroconsult said its already bullish estimate would have been even higher if not for recent dry conditions in the country’s southern production states.
To say Argentina’s corn and soybean production is on the downward decline is a huge oversimplification of how dramatic these losses really are, according to Larry Shonkwiler, senior agricultural economist with Advance Trading. “With the release of its March WASDE report, USDA has subsequently lowered Argentine corn 15 million to 40 MMT [since September]; likewise, the soybean crop took an 8 MMT hit from the February forecast, down to 33.0,” he notes. Shonkwiler investigates the potential implications for U.S. exports and more – click here for details.
Preliminary volume estimates were for 272,690 contracts, shifting moderately above Tuesday’s final count of 187,198.
Wheat prices incurred heavy losses amid a major technical setback on Wednesday that left some contracts as much as 3% lower. May Chicago SRW futures lost 20.5 cents to $6.6275, May Kansas City HRW futures dropped 8.5 cents to $8.1175, and May MGEX spring wheat futures fell 12.75 cents to $8.33.
Prior to Thursday’s export report from USDA, analysts expect the agency to show wheat sales ranging between 7.0 million and 27.6 million bushels for the week ending March 16.
Turkey’s state grain buyer issued an international tender to purchase 25.5 million bushels of milling wheat from optional origins that closes on March 28. Turkey has been scrambling to secure large quantities of milling wheat since the devastating earthquake in February that killed thousands of people and caused billions of dollars in infrastructure damage.
Jordan issued a new international tender to purchase 4.4 million bushels of milling wheat from optional origins that closes on March 28. The grain is for shipment in September and October.
China announced it will hold another auction to sell 5.1 million bushels of its state reserves of wheat on March 29. The country has offered a series of similarly sized auctions in recent months in an attempt to supplement local supplies and cool high prices.
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