There isn’t much rationing going on in the grain market right now, as grain is trading at “fairly high levels” during a “choppy week,” said Don Wick of the Red River Farm Network.
Wick joined Randy Martinson of Martinson Ag Risk Management at this week’s Agweek Market Wrap sponsored by Gateway Building Systems.
“We’re seeing some really strong prices,” Martinson said, citing all-time high prices for soybean oil, canola and cotton and near-all-time contract highs for corn, soybeans and wheat.
Wick noted that confirmation of export sales to China played a role. Typically, Ukraine and Brazil would have a lot of business at the moment. But Martinson said Ukraine isn’t getting much shipping due to Russia’s invasion of its country, and Brazil’s soybean harvest appears to be “far from expectations,” opening the door for more U.S. exports to other countries.
The global vegetable oil market is also affecting soybeans. Indonesia has banned palm oil exports to protect domestic supplies. Martinson explained that palm oil is the largest segment of the vegetable oil market and Indonesia is the largest global supplier of palm oil and vegetable oil in general. So, after Indonesia pulled out of the market, and Ukraine and Russia dropped out of the market for sunflower oil, which is the biggest global exporter, “this market suddenly came under quite a bit of pressure,” he said. That drives soybeans higher.
Wick said the weather was also a big factor in the markets as cool, wet weather didn’t allow for much in terms of weather planting.
Martinson said the system currently moving through the region is likely to “set the tone for northern plains agriculture going forward.” The Risk Management Agency’s final planting dates – that is, the last date for sowing with full crop insurance coverage – are as early as May 15 for some crops. The final sowing date for corn in much of the region is May 25th. He wouldn’t be surprised to see farmers who wanted to plant spring wheat, canola or corn switch to later crops.
The US dollar has also appreciated, but Martinson said it hasn’t impacted the market much for any crop other than wheat so far. When it comes to wheat, India exports aggressively. But other crops are still finding global deals, meaning they haven’t been hurt “yet,” he said.
Another thing to watch in the markets, Wick said, is the CME announcement that daily trading limits for corn and soybeans have been increased. The limit for corn is now 50 cents, while that for soybeans is $1.35. Martinson reckons this could discourage some manufacturers from using the futures markets for hedging and change some contract options on elevators.
Live cattle were on offer this week, but Wick pointed out packers would bid for cattle two to three weeks in advance. Martinson said this is likely an indication that packers are trying to continue booking out cattle.
Wick also drove up cattle production costs at the moment as grain is sky high.
“That feed bill is going to be pretty high,” he said.
Martinson said the feedstock market has declined somewhat while fatstock has stayed there. The spread between the two makes up the profit for cattle feeders. However, he said the spread may not be enough at the moment to “reward the feeder who takes the risk”.
Visit the Red River Farm Network for market news throughout the week.
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