Phyllis Nystrom

The following marketing analysis is for the week ending March 10.

CORN — Corn began the week on a sour note which carried throughout the week with losses mounting in post-World Agriculture Supply and Demand Estimates trading. May corn dipped to seven-month lows and closed lower for four straight sessions before posting a bounce on March 10.

Here’s the recap from the March 8 WASDE report: U.S. ending stocks were increased 75 million bushels to 1.342 billion bushels by slashing exports by an identical amount. This was a slightly larger cut than expected with the average ending stocks trade guess at 1.308 billion bushels. This is the second-lowest stocks number in the last nine years. The stocks-to-use ratio grew from 9.1 to 9.6 percent. The average farm price was lowered a dime to $6.60 per bushel.

World corn ending stocks were 296.46 million metric tons compared to the average estimate of 293.17 mmt and last month’s 295.28 mmt forecast. Brazil’s corn production was unchanged this month at 125 mmt which is up 9 mmt from last year; but their exports, at 50 mmt (1.968 billion bushels), were only up 1.5 mmt from last year. If accurate, Brazil’s exports this year would outpace U.S. exports of 1.85 billion bushels. The average trade guess was 124.86 mmt. For Argentina, their corn production was chopped by 7 mmt from last month to 40 mmt which is down 10.9 mmt from last year and the smallest in seven years. Argentina’s corn exports were lowered by 7 mmt to 28 mmt. China’s corn imports were unchanged at 18 mmt.

The day after the WASDE report, the Rosario Grain Exchange cut Argentina’s corn crop by 7.5 mmt to 35 mmt. The exchange indicated the numbers could go even lower, saying “there are no weather conditions on the horizon which allow us to offer an estimated minimum for the harvest.” Argentina’s corn rating was down 1 percent at 5 percent good/excellent and compared to 27 percent good/excellent last year. The Buenos Aires Grain Exchange cut their Argentine corn estimate to 37.5 mmt from 41 mmt previously. Conab raised its Brazilian corn production outlook by 1 mmt to a record 124.7 mmt and increased the export forecast by 1 mmt to 48 mmt. On March 6, Ag Rural estimated Brazil’s safrinha corn planting was 70 percent complete vs. 80 percent last year.

Weekly export sales were the third highest of the marketing year at 55.6 million bushels and above the highest trade estimate. This keeps total commitments 39 percent behind last year at 1.206 billion bushels. We need to average 22.4 million bushels per week of sales to hit the new export forecast of 1.85 billion bushels which is down 25 percent from last year.

Weekly ethanol production was up 7,000 barrels per day at 1.01 million bpd. Ethanol stocks were a record for this week at 25.32 million barrels and up 545,000 barrels for the week. Net margins improved by three cents to 21 cents per gallon. Weekly gasoline demand fell from 9.112 million bpd to 8.562 million bpd. For the marketing year, gasoline demand is down 5.1 percent from last year.

We are nearing the expiration of the Black Sea grain agreement on March 18. Talks will take place next week and, in my opinion, it will come down to the wire whether an extension will be given. If one party objects, the deal is off.

Comments by Federal Reserve Chairman Powell this week sent a negative signal to the ag markets. He indicated the Federal Reserve may be more aggressive on rate hikes due to strong economic growth so far this year. Traders are now expecting the March interest rate hike to be 50-basis points vs. earlier expectations for a 25-basis point increase. Higher interest rates are usually bearish for ag commodities and increase the carrying costs of grain.

Argentina’s government will allow exporters to postpone using corn export licenses between March 1 and July 31 by up to 180 days due to drought conditions cutting new crop supplies. Normally, if an exporter doesn’t use their licenses during the specified time frame they are penalized.

The National Weather Service Climate Prediction Center says La Niña has ended, neutral conditions are in place, and El Niño could form during this summer and last through the fall. There is a 50 percent chance the El Niño pattern will begin by July-August-September. This would indicate for now that we could have normal summer weather.

Outlook: Next up on the report schedule are the Prospective Planting and Grain Stocks reports to be released on March 31. The market will anxiously await trade estimates. The Black Sea grain deal expires on March 18. Talks among the parties will be held in the upcoming days. If either Ukraine or Russia objects to extending the agreement it won’t happen.

This week’s non-farm payroll report sent the U.S. dollar plunging to end the week which supplied the corn market with some profit-taking and a small bounce to break the four-day losing streak. We may be setting up for rangebound trade at a much lower level than we’ve recently seen as we head into the March 31 reports.

For the week, May corn tumbled 22.5 cents to $6.17.25, July dropped 21.5 cents to $6.06.5, and December was 13.25 cents lower at $5.57.75 per bushel.

SOYBEANS — Soybean trading looked supported in the first half of the week but began to fade in the second half of the week after the WASDE report. The new crop November contract suffered the largest loss; but even it was moderate.

The March WASDE report sliced the U.S. soybean crush by another 10 million bushels after lowering it by 15 million bushels last month. Exports countered the reduction with an increase of 25 million bushels to 2.015 billion bushels. Ending stocks fell 15 million bushels back to 210 million bushels. This is the lowest stocks figure in the last seven years. The stocks-to-use ratio fell from 5.2 to 4.8 percent, but the average farm price was unchanged at $14.30 per bushel.

World ending stocks were slightly lower than anticipated at 100 mmt vs. 100.28 mmt estimated and 102.03 mmt last month. China’s soybean imports were unchanged at 96 mmt. Brazil’s soybean crop was unchanged at 153 mmt and in line with pre-report estimates. Based on their February to January crop year, their soybean exports were 96.5 mmt vs. 77.1 mmt last year. Argentina’s soybean crop was chopped by 8 mmt to 33 mmt vs. estimates for 36.35 mmt. This would be their smallest soybean crop since 2008-09. Based on their April to March marketing year, their crush was pegged at 35.3 mmt, down from 37.2 mmt last year. Argentina’s ending stocks were 4 mmt vs. 6 mmt last year. There is talk in the trade that Argentina’s soybean crop could be sub-30 mmt. Argentina’s soybean crop rating was unchanged at 2 percent good/excellent; but the poor/very poor category was up 4 percent at 71 percent.

The Rosario Grain Exchange is pegging Argentina’s soybean crop at 27 mmt which would be the smallest crop since 1999. They added the crop could continue to shrink. Argentina’s BAGE lobbed 4.3 mmt off their last soybean estimate to 29 mmt. Oil World surmised Argentina’s soybean crop could be as low as 25 mmt. It’s been estimated that nearly half of Argentina’s soybean area has received less than half of normal rain in the last three months.

Conab lowered Brazil’s soybean production by 1.5 mmt to 151.4 mmt which would still be a record crop. As of March 6, AgRural estimated Brazil’s soybean harvest at 43 percent complete vs. 55 percent complete last year.

Weekly export sales were dismal with net cancellations of 900,000 bushels and the lowest of the marketing year. The cancellations were to Pakistan and unknown. Total export commitments are 7 percent behind last year at 1.79 billion bushels with the newly-increased export projection. We need to average 8.3 million bushels of sales per week to hit the new 2.015 billion bushel export forecast.

Outlook: Soybeans did not take the severe hit that corn took this week, but it was weaker, nonetheless. Sharply lower palm oil prices spilled over to the soyoil market which lent underlying pressure to soybeans. Soybeans were able to hold above the previous week’s lows and in general stayed above support levels to stay within recent trading ranges. This may continue as the market watches export activity and prepares for the planting and stock reports at the end of the month.

For the week, May soybeans fell 11.75 cents to $15.07, July was 11.25 cents lower at $14.94.75, and November was down 15.5 cents at $13.57.5 per bushel.

Weekly price changes in May wheat for the week ended March 10: Chicago wheat crumbled 29.5 cents to $6.79.25, Kansas City fell 18 cents to $7.98.25, and Minneapolis dove 48.25 cents to $8.24.5 per bushel.    

Phyllis Nystrom is a market analyst with CHS Hedging in St. Paul. 

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