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ISSUE 124, May 31, 2024

Joe Foley, Merchant



CORN

Corn prices have been gyrating in large part following the volatility in the wheat markets. U.S. planting pace is approaching the 85% completion mark and is on par with the 5-year average. PNW export programs are seasonally winding down now, although Japan is still buying some PNW origin for August. Taiwan and Korea however have been sourcing their late summer needs from Brazil and Argentina. China remains a major disappointment for the U.S. exporter with their U.S. purchases this crop year down almost 5mmt vs. last year. Other Asian destinations are well ahead of their year ago commitments for U.S. corn. PNW exports for this crop year crossed the 9mmt mark last week and should continue to climb in the June-July position, before cheaper Brazilian safrinha supplies are available August forward. We are approaching the seasonal U.S. weather markets now, so that, in combination with the latest Russian wheat production estimates, will offer near term price direction.

SOYBEANS

Soy futures have rallied 35cnts and then retraced same over the last two weeks without any major fundamental changes. Planting progress in the U.S. is largely proceeding at a normal pace, with nearly 70% completed per the most recent USDA estimates. Typically, 63% of the nation’s crop has been sowed by this time. Harvest in S. America is wrapping up as well, with Argentina approaching its 80% mark, slightly behind an average pace. Brazil harvest has been completed, except for some problem areas in their southern regions (flooding in Rio Grande do Sul). The Brazilian and Argentine producers have been only grudging sellers of late which, in combination with active Chinese buying in May-July, has led to firmer landed cash values to China. There have in fact been rumors of unexpected U.S. summer demand from the PNW to Sinograin, which normally would be for reserve stock replenishing.


This may have prompted the earlier run up in futures. However as of this writing there has yet to be any overnight confirmations thereof. Look for continued choppy markets ahead, with the focus squarely on U.S. weather and whether any late summer demand switches back to the U.S. 

WHITE WHEAT


Steve Yorke, Merchant

Another couple of weeks of volatility in the wheat markets. News has been limited to the Russian frost damage and their final production number. Today there are reports that the final number will be closer to 80MMT versus the last USDA estimate of 88MMT. All eyes will be on this situation in the next few weeks. Besides that developing story, we are left with little other news to move the market in either direction. Demand has been light for white wheat with only routine buyers in the market at this time. We will need some swing business in the months ahead to help soak up last year's carryover and what is looking like a nice crop coming this harvest. By no means is this year’s crop out of the woods yet but at this stage things are looking very solid in most areas. As we have talked about in past articles this may be a year with much lower basis levels. We are currently sitting at -10 to -20c which is way below the last couple of years levels. For this to change we would need to see Chicago futures drop considerably and/or white wheat demand to pick up dramatically. Both may be hard to obtain in the near term. On a positive note, we are starting to see China asking about white wheat values for Aug-Sept shipment dates. Currently white wheat is cheaper into Korea and China compared to world values. Keep in touch with your local grain buyer for current updates on this situation.

HARD RED WINTER AND

SPRING WHEAT


Rudy Weitze, Merchant

Hard red winter harvest is finally upon us with early returns hitting the pit in Texas and Oklahoma. Good yields (as expected), good test weights, and protein in the mid 11s have all been reported. It’s a breath of fresh air compared to the last 2 crops on the plains which have been rather poor. As harvest moves north to Central Oklahoma and the Texas Panhandle, it’s expected that good yields will persist, and protein should work lower on the results of great growing conditions. Harvest in Kansas is still a few weeks out. They have seen their crop conditions deteriorate over the last few weeks (32% good to excellent) but are still looking at a large year-over-year increase in production. In our backyard, crop conditions are in good shape with Montana at 62% GTE and Washington at 48%. Both areas could use rain, but just like the plains, prospects are looking solid.


Despite the large harvest we’re walking into, we’re still finding Kansas City futures at elevated levels. For the month of May, futures have rallied an impressive 86 cents and shown a range of 1.24. The driving forces have been fund short covering and Russian dryness. On the fund position side of things, they moved their short from 48,000 (5/3) to 16,000 (5/21), which is a staggering change. That amount of purchasing almost makes it feel as though the path of least resistance in KC is to move higher. I suspect that Fridays (5/31) COT report will continue to show the funds eroding away at their short. On the fundamental front, dryness in Russia has stepped into the spotlight. A vast portion of their wheat growing areas are rather dry and are suffering from abnormally warm temps. Simply put, its getting burned up and is in desperate need of a drink. Production estimates are being lowered and chatter of export restrictions are surfacing. Make no mistake, there will still be a wheat crop in Russia, but it’s a developing situation that could serve as a net positive for both futures and exports. Unfortunately, things haven’t quite caught up with exports market yet, which find themselves slow as we can’t compete from a price perspective. Milling markets are just as bad with mills either full or sitting on their hands waiting to buy cheap harvest wheat. All the action feels geared toward futures with little to say about cash today.


Spring wheat planting marches on with good progress being made despite persistent rains across North Dakota. For the week, Idaho, Minnesota, South Dakota, and Washington are all complete or nearly complete. This leaves North Dakota at 84% planted and Montana at 88%. I’d expect both states to be practically complete by next week and nearly all acres planned for spring wheat to get in successfully. Emergence has been solid with the 6 major spring wheat states reporting 61%, which better than this time last year. Hopefully these timely rains will yield another positive spring wheat harvest.


Minnesota futures have been moving higher but not with quite the same gusto as KC. For the month of May, front month Minny futures have risen 48 cents and shown a range of 69 cents. Of note, the spread between Minny/KC has come in nearly 40 cents since the beginning of the month. It’s an interesting development for millers, who have been trying to avoid the use of any excess HRS due to the price spread. Funds have ripped up their short and have moved into a net long position of 4,000 contracts. This is staggering considering they were over 30,000 contracts short not that long ago. The rally we’ve seen has been a bit much for basis values which continue to weaken. Millers are still buying spot as needed but have little wheat to buy for June/July. They’ve set their sights ahead to Aug/Sep but find themselves in no rush to be buyers. While the rally has been a positive for the grower, it’s been frustrating for the flour buyer who is burying their head in the sand. Exports are in better shape than HRW, but the flat price rally has also not enticed international buyers. It does seem like we could still be competitive with FOB Vancouver prices in July/Aug/Sep, the only question is if the business will come.

RAIL UPDATE

Rudy Weitze, Merchant


Rail freight markets have been rather quiet on the front end with rail service preforming at an average level. Crews and the situation at the Mexican border have been the main hang ups in finding improved performance. All eyes are shifting focus to OND, when the BNSF, CP and UP will start up more of their fleet to accommodate the large fall harvest demand. After a rather tumultuous 6 months of service, the hope into next year is for better service but only time will tell. 

Ryan Statz, Merchant



BARLEY

A solid planting season is coming to a close throughout barley production zones in the US. While dryness concerns were definitely evident early on in spots, moisture throughout the month of May aided these issues and we are in a good spot to start. Now eyes will turn to the growing season in front of us.


Planting Completed:


WEEK ENDED MAY 28

BARLEY

Current Wk

Previous Wk

Previous Yr

5-Year Avg

North Dakota

81%

65%

67%

72%

Montana

88%

79%

83%

87%

The marketing side remains lifeless with many maltsters still on the sidelines as they wade through the cumbersome ‘23/24 crop. However, the overwhelming old crop supply can only take demand so far and ultimately buyers will need to step up their efforts in procuring more for this year’s campaign. When, is the million dollar question. With planting concluding without any sort of negative hitch, the growing season will be eyed closely. Buyers are in a favorable position as prices and programs continue to break, but acreage was also down 20% so there is risk in maintaining their ‘sideline’ stance. For now, the market waits.

DURUM

We are on the tail end of durum planting in ND and MT and while progress is significantly ahead of average, heavy rainfall in the month of May has conditions also looking very promising in nearly all US and Canadian durum production areas. 


WEEK ENDED MAY 28

DURUM

Current Wk

Previous Wk

Previous Yr

5-Year Avg

North Dakota

83%

67%

63%

66%

Montana

93%

71%

70%

73%

While world weather is spotty in other durum production areas (Italy and N. Africa), the favorable start in the US and Canada will keep buyers at bay from pushing demand too early. Eyes are on the growing season in front of us and what the Turkish government will do in terms of releasing stocks to the world. Turkey was the surprise throughout the ‘23/24 campaign. Will they be back for more? If so, how much and at what pace? While Turkish harvest is just getting going, note that production forecasts are bigger than last year. With this, the expectation of Turkey being back in the world mix is definitely present.

SELL THE RALLIES

DON’T LET THE GREEDY BIRD MESS ON YOUR SHOULDER


Phil Symons

Weather markets of the 2024 crop year are in full swing now. The Black Sea continues to be the main focal point for the wheat markets and the potential production implications coming out of this area of the world. Currently, the USDA has Russian wheat production pegged at 88.0 million metric tons for the 24/25 crop year at the latest World Agriculture Supply and Demand Estimate. In the most recent adjustment IKAR (Institute for Agriculture Market Studies) took the Russian wheat production down from 83.5 million metric tons to 81.5 million metric tons. SovEcon also took their current estimates down on Russian wheat production from 85.7 to 82.1 million metric tons. The potential reduction in production in Russia is signaling that they may also trim some of their export numbers up to 10 million metric tons lower than current estimates.


As a result, we have seen the commodity complex react to the potential production issues coming from Russia. Over the last month Chicago December wheat has rallied 84 cents Kansas City December futures have rallied 82 cents and Minneapolis December wheat has rallied 54 cents.


With weather markets, all it really takes is a forecast predicting to see some relief to either too hot and dry or too wet and cool conditions. As of this writing there are a few weather forecasts that do look to bring some relief to the dry conditions in Russia. With that, as of this writing, the wheat futures are down 10-15 cents.


With all the uncertainty in the commodity markets over production issues/concerns and weather markets kicking it into full swing, we are seeing some wonderful pricing opportunities that we should take advantage of. Although we have seen futures rally over the last month, we are not seeing basis follow suit. This does signal that we, as producers, need to be selling into the rallies as they occur. Given the current moves we have seen, we should be looking at locking in the futures values by doing either a Hedge-to-Arrive or an accumulator contract. This will lock in the futures price of your cash contract, leaving your basis price at risk, but you are taking the futures price risk off the table.


Be sure to reach out to your local merchandiser, buyers and managers to go over all the different types of contracting that we can tailor to your farming operation to help you maximize your sales and returns through Columbia Producer Solutions.

VISIT THE PRODUCER SOLUTIONS WEBSITE

Sean Ferguson, Merchant



CANOLA

ICE canola has broken from its sideways pattern partially due to lower CME soybean oil values. Crush margin recovered slightly over the past few weeks but remains skinny compared to previous months. ICE canola is becoming more competitive globally as the trade is worried about cold weather significantly affecting the Black Sea/EU rapeseed crop. Soy crushers in the US have slowed crush processing as oil demand remains lackluster and stocks continue to build. Subsequently, the meal market is in limbo as the crush slows and less meal enters the market. While Chicago oil continues to have carries in the market, meal markets have now inverted.

FLAX

The flax market is quiet as demand remains sparse. Global production of flaxseed is expected to be sharply lower YoY, but most of the lower production is expected to be offset by global ending stocks. The EU subcommittee responsible for the Russian import tariffs proposed an initial tariff of 10% starting July of this year with the tariff increasing to 20% in 2025 and 50% in 2026; this is significantly lower than the initial proposed tariff of 50%, which is welcomed by European importers. The market will continue to digest new planting information out of Europe and Canada.

BEANS &

PULSES


Cameron Underwood, Merchant

LENTILS

Domestic values slowly weakening as strong moisture has come across the northern USA tier and the prairies of Canada. Current conditions and forecast would project above average yields and bring strong supply to the market with an increase in acres in both USA and Canada. International markets continue to have strong demand as nearly all of the global market will be empty by the end of the summer.


PEAS

Values continue to sway back and forth as strong export demand brings back and forth interest into the market. Russian production concerns have kept values from pushing downward too quickly as USA and Canadian crops grow larger with each rain event. Russian pea production is currently set at slightly below last year but a reduction from expectations seen 2 months prior.  


CHICKPEAS

Concerns over large global production looming and many buyers remain on the sideline to await crop expectations over what Turkey, Black Sea, and North America will add. As North America receives strong rains it poses some concern for quality if late season rain persists.


EDIBLE BEANS

The USDA now has North Dakota dry bean planting at 36% complete vs 35% last year and 5-year average of 37%. I agree with this % planted #. Last Friday/Saturday’s weather system resulted in anywhere from 2.5-5” of rain across the whole Red River Valley and put a stop to planting through at least tomorrow. There is another couple tenths of rain in the forecast this week and early next week. At this point, the heavy rain is a concern but not “code-red”. The last plant date for Full-Crop Insurance coverage is 6/10 with daily % coverage reduction after. The next hurdle after getting the seed in the ground is heat units for emergence and plant development progress. Dry Beans are more susceptible to stunted development due to too-wet soils, but heat units drastically improve the plant’s overall health. I guess Mother Nature couldn’t make it too easy on us! 

INTERNATIONAL


Wiley Wang, Merchant

The past two weeks we continue to see a majority of West Coast South American demands fulfilled by Canadian wheat. Most end users over there are covered for July and some extended to September. The price disadvantage for PNW wheat would get larger going into LH Sept and Oct when the whole pipeline begins to make room for the soybean export.


The last bit of wheat demand for July to Philippines covered this past week. All major importers in Asia are moving on the Aug/Sept. Most are waiting for the new crop winter wheat prices to fall to their targets. The black sea weather concerns certainly are not convincing enough for anyone to jump in to buy, they are all waiting for this to be over in the news cycle.


Corn market is very interesting. Some of the recent trades into Korea might look close enough for PNW to get back in the game, then it gets pulled back to Brazil again. South American farmers are still holding back from selling, but time is running short.


Ocean freight begins to show signs of some weakness. Hopefully this will get us back to early Jan level to help save $2/mt on the transpacific route. We do not expect too much weakness since there are still many factors continuing to distort some of the traditional routes such as Red Sea.