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Update for September 9th, 2022

USDA Report Worksheet and Ukraine Grain Shipments in Jeopardy

The largest grain convoy to leave Ukrainian ports set sail Sunday with 13 vessels carrying 282,500 metric tons of agriculture products. The ships loaded at the ports of Odessa, Chornomorsk and Pivdennyi contain cargo headed to 8 different countries. Eighty-six ships have left Ukrainian ports since the deal was reached on July 22nd. (Reuters)

This week Russian President Vladimir Putin has said Russia may back out of the grain export deal. He claims that Ukraine has been cheating on the agreement reached in July and wants the terms to be revised. The changes he seeks would regulate the final destination of Ukrainian grain shipments because he does not believe that the majority of current exports are actually headed to the world’s poorest nations as was originally agreed to. Putin believes that 85 of the 87 grain shipments that have left Ukrainian ports have instead been destined for European Union counties. Putin warns of a “looming food crisis” and calls the agreement a “brazen” deception by the international community but market analysts say that this is not the case. Allison Thompson with the Money Farm says, “We do have reports that it has been going to the Middle East and African countries. So, it’ll be interesting to see what his goal is with talking about it but definitely it appears that he might cancel the agreement and the incentive right now all together.” Kent Beadle with CHS Hedging says that he believes this is a ploy by Putin to drive wheat prices higher once again while also reducing competition for the Russian crop. “He says Russia would prefer to get the dollars from the wheat sales in order to continue to push forward with their war and finance that war.” With the export deal set to expire soon analysts see Putin’s actions as an indication that he will demand a renegotiation of terms or not agree to a deal at all.

Turkish President Erdogan agrees with Putin regarding the destination of Ukrainian grain shipments. He said, “The fact that grain shipments are going to the countries that implement these sanctions (against Moscow) disturbs Mr. Putin. We also want grain shipments to start from Russia…The grain that comes as part of this grain deal unfortunately goes to rich countries, not to poor countries.” Overnight the Russian foreign ministry echoed Putin’s comments saying that the grain deal is being fulfilled “badly”. This added to concerns that the shipping agreement is in jeopardy and that steps may be taken to change or restrict the grain movement out of Ukraine.

Monday the USDA September WASDE and Crop Production reports will be released. There are a lot of private yield and production estimates out prior to next week's report (many shown in the graph above). Traders expect that the average U.S. corn yield will be lowered by 3 to 4 bushels per acre and total production could be trimmed by -250 to -350 million bushels. The expected yield reduction would put the average U.S. corn yield somewhere between 171.4 and 172.4 bushels per acre although some analysts question if these adjustments will actually be made now or if they will elect to wait until more actual harvest data is available in the coming weeks. Traders are not looking for many changes in the USDA soybean numbers in the September report so if there are any surprises in the data it could cause rapid swings in soybean prices.

One important change to note with the September report is that the data from the review survey, satellite-based data and FSA data for planted and harvested acreage for corn and soybeans will be included in the September numbers. Normally this information is not sufficiently completed until the October report but this year it is ready early.

Doane Agricultural Services Company is “an independent information, statistical, research, and advisory firm for the agricultural industry”. They expect, “corn supplies will remain tight enough for long enough to limit downside price risk through spring 2023.” Corn stocks-to-use ratio for 2022/23 is 9.6%. “Traditionally, a ratio under 12% suggests the need for more acres in the next growing season-and maintaining a high-enough price (and positive margin) is what it takes to keep any crop in play for more acres in the next growing season.”

Our calendar still says it is still “summer” and with temps in the high 70’s and 80’s all across the Midwest the last few weeks it’s easy to forget how quickly that can and will change. This weekend cooler temps are in the forecast which reminds us that the first freeze of the 2022 season isn’t far off. Parts of the Rockies have already had their first freeze and accumulating snowfall. The maps below show the average freeze data by region but as we know this can vary wildly from one year to another.

The forecasted system that is expected to arrive over the weekend is going to be a slow mover carrying significant moisture. The Weather Prediction Center has issued a watch for a marginal risk of excessive rainfall Saturday night for the area’s shown in green.

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