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Turner's Take Ag Markets | Crop Ratings Better Than Expected

By: Craig Turner, Senior Risk Management Consultant

Turner's Take Ag Markets
 
Craig Turner
Senior Risk Management Consultant
Turner's Take Podcast

GRAINS | The first ship has left Ukraine with grain exports and there are more to come.  The vessels and tonnage may be small at first and it will be slow going, but progress is being made.  US corn ratings were expected to drop by 1% GD/EX yesterday but held steady instead.  The eastern corn belt (ECB) conditions improved enough to offset worsening conditions in the western corn belt.  US spring wheat conditions increased 2% to 70% GD/EX, which is 11% higher than last year and well above the 53% five year average.  The ECB continues to have timely precipitation and moderate temperatures while the WCB deals with drought conditions.

 

A lot is being made of the drought conditions in the WCB, but crop ratings are still between last year and 2017, the two highest yielding corn crops on record.  The ECB could make up for any production losses in the WBC.  StoneX Brazil raised their 2nd crop corn estimate from 90.7 MMT to 93.0 MMT.  The S. American crop has quietly been getting bigger as harvest data comes in.

  

If the US is close to a 177 bpa, the S. America crop is bigger than originally thought, and progress continues to be make in the Black Sea, new crop corn ending stock forecasts will be around a 1.5 billion carryout or higher.  That translates to a 10% stock/usage and suggests corn is overvalued at $6. 

 

OILSEEDS | US soybean ratings improved 1% to 60% GD/EX.  The trade was looking for a 1% decline.  The bearish surprise was due to higher ratings out of the ECB, most notably IL.  November canola is down $50 today, almost 6% lower. Soybeans were down 60 cents yesterday and canola was closed due to the Canadian holiday.  Today canola is playing catch up to yesterday's big move lower.  The rally in oilseeds is getting long in the tooth.  N. American will have sizable soybean and canola crops. S. America will plant record acres this winter and with a trend line yield could have record production.  Grains and oilseeds exports are starting to move through the Black Sea again.  Central banks are raising interest rates to curb inflation.  Moral of the story is we are getting to a point in the cycle where they is more risk to the downside than potential tot he upside.

 

StoneX Brazil's initial soybean crop estimate is at a record 152.6 MMT, up about 20% from 2021-22.  This includes a 4% increase in planting and a trend line yield.  Keep in mind the Black Sea export issues are more about grains than oilseeds.  Canada will rebound from their drought impacted crops last year and produce over 20 MMT of canola.  Soybeans are tight now but new crop will bring down cash price premiums and prospects of a large S. American crop will cast a dark cloud on prices.  Soybeans could go back to a 300 to 400 mm carryout for 2022-23 and which puts prices sub $12 at some point in 2023.  $14 for May 2023 soybeans seem rich if ending stocks are 300 or higher after a big S. American crop. I like getting put protection out in May 2023 soybeans.  I like buying puts and selling calls spreads to start.  

 

 Craig Turner
800.958.9470 Toll-Free
312.706.7610 Local
312.706.7510 Fax
craig.turner@stonex.com
@Turners_Take
 
 
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