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Update for November 17th, 2022

Black Sea Agreement, SAM Weather & A Very Cold Weekend

On Tuesday a missile landed within the country of Poland, killing 2 at a grain facility. Initially it was thought to have originated in Russia but NATO members seem to now believe that it was not a Russian missile but instead was a Ukrainian air defense missile. President Biden explained, “There is preliminary information that contests that. (That the missile was intentionally fired into Poland from Russia) I don’t want to say that until we completely investigate it but it is unlikely in the lines of the trajectory that it was fired from Russia, but we’ll see.” Poland is a member of NATO and the U.S. and all NATO allies have vowed to protect, “every inch of NATO territory.” So, when the news broke regarding the missile hitting Poland grain markets rallied on fears that this could be the trigger that escalates into a “WW3” situation. The scare was short lived though as there appeared to be no intent by Russia to attack Poland and the rally immediately evaporated.

U.N. Secretary General Antonio Gueteres announced this morning that the Black Sea grain deal has been extended for an additional 120 days vs the yearlong extension asked for by Ukraine. He said, “I welcome the agreement by all parties to continue the Black Sea grain initiative to facilitate the safe navigation of export of grain, foodstuffs and fertilizers from Ukraine.” Russia did not officially comment on the agreement but one report indicated that Russia will require a relaxation of sanctions from the West. Gueteres also said that the UN is “fully committed to removing the remaining obstacles to exporting food and fertilizer from the Russian Federation.” Any agreements made between Russia and Ukraine could easily change as we have witnessed in the past which will keep U.S. grains on a price roller coaster for the foreseeable future.

U.S. exporters reported a flash sale of 74 million bushels of corn this week to Mexico, this sale ranks in the top 5 biggest daily sales ever. Of this total 67% is for delivery during the current marketing year and the remainder for the 23/24 marketing year. This comes at a good time as U.S. exports have dropped to the 3rd worst in the past decade. There are still many questions regarding Mexico’s plan to ban the importation of GMO corn in 2024 and their ability to source a quantity of non-GMO corn large enough that it could replace the massive amount of U.S. corn that Mexico purchases each year.

U.S. soybean prices have some considerable obstacles to overcome as attention turns to SAM and Chinese soybean demand now that the U.S. harvest is nearly wrapped up eliminating any weather risks here at home:

1. U.S. soybeans have seen export demand weaken in recent weeks.

2. Brazil’s soybean crop is nearly 75% planted and while this is slightly behind the normal pace the weather outlooks are favorable. Looking at the 10-day forecast key growing regions across the country will receive substantial rainfall totals.

3. China and their Covid lockdowns are always a big concern in the grain market. And just as China had begun to relax Covid policies from the “Zero Covid” policy the country reported on Wednesday there was a breakout of more than 23,000 new cases which is the highest total since April. This most recent outbreak did not occur in a large city but instead it was discovered in much more widespread area. This news has caused concerns amongst grain traders regarding what this may mean for U.S. corn and soybean demand.

Soybean planting in Argentina is running behind normal with only 24% completed vs 80% last year due to a severe lack of rainfall that began in May in some areas. This made field work difficult and devastated the nation’s wheat crop. The dry conditions have extended into soybean planting season delaying the start but .75 to 2.0 inches of rainfall is expected across the farm belt over the weekend which should speed up the progress. Eduardo Sierra, an agronomist with the Buenos Aires grains exchange warns that this season’s crops remain in “purgatory” following several months of drought and hot temps that are on the way. Cristian Russo, head of the estimates for the Rosario Exchange is not getting his hopes up despite the weekend forecast. “For a large part of the (central) region, it helps to unlock soybean planting, but in areas that received less than 30 millimeters (1.18 inches), is not something that is going to change the situation.”

Snow covered ground does not just make it look cold outside. Cold air masses arriving from Canada cannot be modified (warmed) like it would if the ground was bare. The first burst of cold air arrived today compliments of a cold front hauling January like temps that are not forecast to improve until after an extremely cold weekend adding to the very cold pattern that has taken charge in November. Follow the black lines in the map below. Notice that the lines leading directly into Iowa and surrounding areas originate at the North Pole this is called the Arctic Pipeline and if it were January we would be in the deep-freeze.

Thursday night lows are expected to hit the mid to upper teens. Friday readings will not move too far with highs only forecast to reach the upper teens to low 20’s. Blustery NW winds will accompany the cold temps pushing wind chills into the single digits, temps Friday afternoon are likely to be 25 degrees below normal.

Don’t expect any improvements on Saturday. Temps are forecast in the low to mid 20’s with wind chills near 5 to 10 degrees. Saturday night we will hit the low for this cold snap. Some northern regions will fall into the single digits and wind chills plummet below zero.

Sunday the cold moves off to the east and warmer temps move back in that will continue to improve into next week. Enjoy the milder temps while they are here, trends are hinting at a colder December than we’ve seen in years. If you follow the green line in the following graphic, you see that the MJO is cycling to Phase 7 now and by the beginning of December it may move closer to Phase 8 which during December is a strong signal for cold and is shown in the bottom map of the graphic.

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