Editor's note: Catch Randy Martinson and AgweekTV's Michelle Rook every Friday after markets close on the Agweek Market Wrap at agweek.com.
The grains were able to post solid gains by the close of the fourth week of March, recovering all of the previous week’s losses and then some. The ongoing war in Ukraine and concerns of tight world supplies helped to bring buyers back into the market. The concern about tight global supplies for food has once again started a couple side debates: the need to open up Conservation Reserve Program acres in the U.S. and the debate of food versus fuel.
The Biden administration suggested opening up CRP for a year to allow for some acreage to come back into production without penalty. This is not a good idea. For one, most of the land in CRP belongs in CRP and two, the cost benefit for bringing the land into production for one year is not feasible. The EU will allow producers to utilize 6% of their set aside acreage. But although that sounds good, it has been met with the same enthusiasm as allowing CRP out in the U.S.
In the fuel versus food debate, Brazil has removed import tariffs on ethanol and bean oil in an attempt to increase supplies and hold down prices domestically. U.S. officials have floated the idea of suspending the Renewable Fuel Standard for 2022, but that has not gained traction. There is also debate about increasing the ethanol blend to 15% to help alleviate some of the sting of halting the importing of Russian oil, which does have merit.
The big news that helped to push the grains higher came from the Ukraine production estimates. The Ag Minister in Ukraine estimated producers would only be able to get 7 million hectares of crop planted versus 15 million hectares last year due to logistic issues in getting inputs. Corn acreage was estimated to be close to 3 million to 3.3 million hectares versus 5.4 million last year. The Ag Minister is projecting wheat harvest acreage to drop to 4 million hectares of the 6.4 million planted.
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But just like the weather in North Dakota where you can wait a minute and it will change, the markets started to trade the headlines again the last week of March. Reports were filtering in that Russia was changing its approach and would focus efforts on taking full control of the Donbas region and would be pulling out of Kyiv. The idea that there could be a resolution to the war sooner than later resulted in traders running for the door as they pulled war premium out of the grains.
It was not surprising that the market came under heavy selling pressure as the grains have been trading up against the high end of their trading ranges for the past week to 10 days. Also, the fundamental picture has turned a little more negative.
Weather has improved in both the U.S. and South America. Rain has been falling a little more consistently in Brazil and Argentina the past week. Although this will do nothing to help the soybeans crop (other than some really late planted soybeans), it will help the second corn crop in Brazil. Argentina is harvesting corn now and so far results have been disappointing.
Rain has also fallen in the U.S. Southern Plains. Although the weekend was dry, rain did move through parts of the winter wheat region the previous week bringing much needed rain. It was not enough to end the drought situation but was expected to be enough to help improve the winter wheat crop in a few states.
The March 28 Crop Progress report was surprisingly neutral to friendly wheat. Most were expecting to see the four major wheat producing states to show improving conditions, especially after some rain last week. But instead, conditions were all over the board. Colorado’s wheat crop dropped 8% to 11% good, Kansas’s crop did improve, showing a 7% increase in the good/excellent rating, now at 32% good/excellent. Oklahoma’s crop dropped 3% to 18% good/excellent while Texas’s crop improved 1% to 7% good (poor/very poor did increase 3%). USDA will start to release this report weekly starting in April.
Traders were also positioning ahead of USDA’s Quarterly Grain Stocks estimate and the Prospective Plantings report.
The updated weather forecasts continue to be negative as the first half of April is expected to bring good moisture to the Plains and Corn Belt. The southern Plains and western regions of the northern Plains need the moisture the most, but it looks like those regions will see only light activity while the eastern regions of the northern Plains and Corn Belt could get hit hard by this system. It is still early in the U.S. 2022 growing season, but if this system brings the expected moisture in the form they are talking it could result in a late start to the 2022 planting season.
Planting progress has started to in western North Dakota. The 2022 planting season for spring wheat has begun. But activity is limited to western North Dakota as rain and snow have moved into eastern North Dakota and western Minnesota.
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China was looking to auction off 500,000 metric tons of reserve soybeans on April 1. They are also continuing to auction off 500,000 metric tons of reserve wheat weekly. Both are being auctioned in an attempt to control price inflation in country.
The third week of March had cattle trading mostly steady as the market dealt with a bearish Cattle on Feed report. The report showed a record number of cattle in the feedlots (which was expected), sharply higher placements estimate than expected, and a little better marketing estimate than expected. The report was friendly to the front month cattle contracts but maybe a little negative for the far-off months (due to higher placements). It is friendly cattle long term as it continues to show heifers going into the feedlot, not the breeding herd.
The March 30 Quarterly Hogs and Pigs report should help add some support to the cattle market as well. The Hogs and Pigs report was friendly hogs as almost all of the estimates came in 1% to 2% below expectations. The all hogs and pigs estimate came in at 98% of a year ago, kept for breeding came in at 98% of a year ago, and kept for marketing came in at 98% of a year ago. All were 1% lower than expected. The weight groups were also all 1% to 2% below expectations with the heaviest categories (120 to 179 pound, and over 180 pound) coming in at 96% of a year ago. This shows how tight the supply of pork is and should help support cattle the two major sources of protein as seeing tighter than expected supplies.
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April 01, 2022 at 05:30PM
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Markets continue to trade the headlines - Agweek
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