Update for November 23rd 2022
Headwinds Facing Grain Prices & 50% of Ukrainian Corn Crop May Spend Winter in the Field
No news is not good news for grain markets. There have been very few supportive headlines and some analysts seem nervous. Corn exports have been slow for a while now which has raised concerns that the USDA may be over estimating 22/23 U.S. exports by a drastically large margin (hundreds of millions of bushels). Last week the USDA reported 19.5 million bushels of corn were inspected for export, 40% less than this same date a year ago. Exports for the current marketing year are down 30% from last year and currently the USDA projects corn exports will only be off 13% from last year’s total. If any reductions are made to the export projection it could ultimately lead to larger U.S. ending stocks.
Soybean prices have remained quite stable despite the negative headlines regarding Brazilian weather, China’s decrease in soybean imports and their COVID shutdowns, demand remains strong and exports are adequate.
• Chinese soybean imports in October fell by 19% to their lowest monthly total since 2014. Shipments from Brazil totaled 2.8 MMT during the month of October a decrease of 15% vs the same month in 2021. High soybean prices and a lack of crushing due to low profit margins hampered the typical demand from South America. Updated numbers indicate that U.S. imports during the period were nearly unchanged from the previous year. (Reuters)
• Weather in Brazil has been mostly cooperative for the planting season. As of late last week 80%, of the soybean crop had been planted vs the average of 73%. (Ag Rural) The Brazilian state of Mato Grosso is basically finished with planting with 98.8% completed, only a small NE corner of the state is still planting. The nation’s corn crop is 82% planted vs 91% last year. Development of the corn crop has fallen behind in southern Brazil due to below normal temps in October. Dr. Michael Cordonnier reported on Mato Grosso, “Over the last several weeks, a dryer weather pattern has persisted in regions of central Brazil. The rains that fell last week were irregular leaving many dry pockets. In Mato Grosso for example, in the municipalities of Diamantino and Camp Novo do Parecis in central and west-central Mato Grosso, many areas have been dry for 15 days or longer with the driest areas being dry for over 25 days. The region was dryer than normal last growing season and they only received enough rainfall to get the soybeans planted and emerged, so there is not much subsoil moisture reserves. After colder-than-normal temperatures in early November, the temperature has now increased significantly to the upper 90’s.” Soybean planting progress in Argentina is running behind normal pace with 12% planted vs 28.7% last year. There have been some reports that farmers are planting soybeans in abandoned wheat and barley fields as well as fields that were originally intended for early corn. Corn planting is 23.6% complete vs 28.7% a year ago and the average of 35.8%. Dr. Cordonnier did not make any adjustments to his SAM production estimates this week.
Analyst APK-Inform told Reuters Sunday that a significant amount of the Ukrainian corn crop may spend winter unharvested in the field. While corn can be harvested during the winter or early spring it is very uncommon for such a large percentage to be left to overwinter. APK-Inform reported that the likelihood for a large portion of the corn crop to stay in the fields this winter was “becoming more and more possible” due to low crop prices, complications with field work caused by the war and high fuel costs. Last Friday the Ukrainian agriculture ministry said that only half of the acres planted to corn had been harvested.
Threats for a U.S. rail workers strike remain following the voting results of two of the largest unions. SMART-TD, one of the largest rail unions voted down a tentative agreement escalating the likelihood of a national rail strike in early December. A representative from the union said, “It’s now back to the bargaining table for our operating craft members…This can all be settled through negotiations and without a strike. A settlement would be in the best interests of the workers, the railroads, shippers and the American people.” The Brotherhood of Locomotive Engineers and Trainmen Union voted to ratify the deal but 4 out of the 12 unions have rejected the agreement but all agree to honor the picket line if a strike occurs. The remaining 4 unions are going back into negotiations with a deadline of December 8th. If an agreement is not reached and approved the U.S. could see all rail service come to a stand-still as soon as December 9th.
Travel for Thanksgiving will not be a concern across the much of the country. Temps have warmed again as the MJO has entered phases 5 and 6 as shown in the diagram below. The 3 small maps shown on the right show the various temperature variations associated with Phase 6 based on the month of the year.
Unfortunately, the NCEP forecast suggests the MJO will move out of Phase 6 into 7 by the beginning of December. The following map shows what a Phase 7 in December does to temps across the country.
In addition to the MJO contributing to the cold so too will the Eastern Pacific Oscillation (EPO) and the Arctic Oscillation (AO). The following graph shows the AO which will be strongly and consistently negative into the new year.
This will allow the higher pressure located at the North Pole to push polar air into the mid-latitudes.
Snowfall is also expected. The total through December 22nd is shown in the first map, the second map indicates possible totals through January 6th.
Weather models are constantly changing and evolving and this is a long-range outlook that will likely be adjusted as the time gets closer. Long-range forecasts -aren’t known for their pinpoint accuracy but they are very useful with determining trends and right now it definitely looks to be a wintery period.
The staff at Ag Performance hope each of you have a happy & healthy Thanksgiving!