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Turner's Take Ag Markets | Oilseeds Drag CBOT Lower

By: Craig Turner, Senior Risk Management Consultant

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

MACRO MARKETS | EU energy prices are nearly ten times higher than they were in the beginning of 2021. The energy crisis Europe is facing will most likely get worse this winter.  Small businesses are seeing energy costs increase to levels that will cause many of them to shutter their doors.  Higher energy prices, lower economic growth, higher unemployment, inflation, and increasing interest rates can put any nation into a deep recession.  Global recession concerns and demand for commodities are likely to keep a cap on ag market rallies going forward.

 

GRAINS | Wheat and corn are following oilseeds lower today.  The PF yield estimates have been priced in and a bull market needs to be fed every day.  Looking over the horizon traders see harvest around the corner, possible recessions in the US/EU/China, and central banks aggressively increasing interest rates to fight inflation.  Demand expectations may be too high if the world economy falls into a recession.  The markets in the short and medium term are all about trading catalysts; the next few weeks offer little bullish news for wheat and corn.

US HRW wheat harvest advanced to 50% with final GD/EX ratings improving 1% to 68%.  Winter wheat seedings will start in a few weeks.  Ukraine reported 1.5 MMT of grain shipped out so far due to the grain export corridor agreement.  Ukraine's Ag Ministry sees exports rising to 6.0-6.5 MMTs by October as ports reopen.  If true then Ukraine will be at or very close to pre-war export capacity.  This could be very bearish for wheat this fall and has the potential to drag down the entire grain and oilseed complex.

Stats Canada estimates 2022 Canadian all-wheat production at 35.4 MMT, from 22.3 last year. Duram more than doubled at 6.5 MMT and spring wheat improves from 16.25 to 26.6 MMT.  Canadian wheat should have a competitive advantage over US wheat due to the currency rate as the export season kicks off.

 

OILSEEDS | US soybean conditions stabilized yesterday at 57% GD/EX, the same as last year and 4% lower than the 51% five year average.  The US soybean crop is on track with last years 51.4 bpa crop.  The finishing weather will be better this year and the growing season will be extended.  The trade will most likely estimate a 51.5 to 52.0 crop as we head into the fall.

Stats Canada sees 2022 canola production at 19.5 MMT, up from 13.8 MMT last year.  This is 1.1 MMTs over the last Principle Field Crops report which build in about 2.3 MMTs of demand rationing.  The additional 1.1 MMTs of supply in theory brings down demand rationing to only 1.2 MMTs for crush/exports combined.  Chinese demand could be weaker as they fall into recession and if that is the case their demand for oilseeds will be lower.  There is a chance that canola will not need significant price rationing this marketing year and that could lead to $700 canola futures in 2023.

 Craig Turner
800.958.9470 Toll-Free
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craig.turner@stonex.com
@Turners_Take
 
 
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