Banking and weather problems bring uncertainty to the markets

Editor's note: Catch Randy Martinson every Friday after markets close on the Agweek Market Wrap at agweek.com.

The second full week of March had wheat and corn pushing higher as traders tried to clean up an oversold market condition as well as price in improving fundamentals. The grains were concentrated in wheat and corn as those markets took the biggest hit previously while soybeans continued to hold their ground. That also changed last week with soybeans and the soybean complex slipped lower. By the time the week ended, wheat was up 30 to 38 cents, corn was up 4 to 17 cents, while soybeans were down 30 to 44 cents.

Wheat pushed higher on another lower than expected Crop Progress report as once again most of the winter wheat states saw declining conditions after what was expected to have been a better week of weather in the southern Plains.

Corn pushed higher on confirmation of China exports. Reports are China bought 2.2 million metric tons of U.S. corn by the end of the week. In addition, Dr Cordonnier lowered his production estimate for Argentina’s corn production 3 million metric tons to 37 million metric tons as hot dry conditions continue to devastate the crops. Concerns about planting delays in the U.S. and the potential for lower acreage added some support. It is likely spring will not be early in the northern Plains, and that will result in a shift of some acreage to later season crops.

Soybeans slipped lower due to improving weather forecast for South America. Dr Cordonnier also lowered his soybean production estimate for Argentina 3 million metric tons to 28 million metric tons. The combined production total of South American soybean production continues to decline. And this week’s weather is not showing any improvements.

Uncertainty in the economy continues to add concerns. The biggest question now is what will the Federal Reserve do next week with interest rates. Most were expecting a 0.5% increase, but now with two bank failures and a CPI reading of 6%, the Fed might look to increase rates only slightly.

By the end of the second week of March, the grains continue to be influenced by the current banking crisis. Moody’s downgraded the entire U.S. banking system from stable to negative. That sent bank stocks sharply lower and the U.S. dollar sharply higher. Reports of instability with Credit Suisse added pressure. Markets do not like uncertainty and the banking issues are bringing a whole new set of concerns to the state of the U.S. economy.

The recent sales of corn to China verify concerns are mounting on the potential for Brazil’s second corn crop. Over 50% of the second corn crop is being planted after the ideal planting window, which will make it susceptible to excess heat during pollination and for potential frost at maturity. Reports have the center south region of Brazil seeing slow planting progress due to wet conditions. The soybeans are being harvested, but most are holding off on muddying in corn.

It is a little surprising soybeans are not performing better, especially new crop, as soybeans need to buy acreage for 2023. Or maybe the market is expecting soybeans will get those acres by default due to the adverse weather conditions in the northern Plains and western Corn Belt.

The weather forecast for the next six weeks is not encouraging for the northern Plains and if realized could lead to another year of increased prevented planting acreage. At this point, forecasts are calling for wintery weather to continue to plague North Dakota, South Dakota and Minnesota through the third week of March. Temps are expected to remain below average into the first to second week of April. That will cause a slow snow melt and likely keep producers out of the field until the first part of May to middle of May. On the positive side, there is not a lot of frost so hopefully the soil will take the snow melt.

BAGE’s updated production estimate for Argentina soybeans added support for soybeans. Argentina production was trimmed 4 million metric tons to a devastating 25 million metric tons. If realized, the combined total South America soybean production for 2022 is now just 3 million metric tons to 5 million metric tons above last year, a far cry from the 25 million metric ton increase expected at the start of the growing season.

Argentina is reporting their soybean crush is only running at 30% capacity due to the shortage of soybeans. This will help the U.S. soybean meal export market as Argentina supplies the world with 50% of the world’s soybean meal exports.

Allendale’s acreage survey has all wheat acreage at 48.7 million versus 49.5 million in February and versus 45.7 million last year. Winter wheat acreage is estimated at 36.5 million versus 36.95 million in January. Other spring wheat acreage is estimated at 10.6 million versus 10.8 million last year. Durum acreage is estimated at 1.57 million versus 1.63 million last year. Their corn survey puts U.S. corn acreage at 90.4 million versus 91 million from the Ag Outlook Forum and versus 87.8 million last year. They are estimating planted soybean acres at 87.8 million versus USDA’s estimate of 87.5 million and last year’s 87.45 million acres.

To start the third week of March, wheat and corn saw heavy selling pressure from reports that the Black Sea Export Initiative has been extended. Reports on the length of the extension varies between 60 and 120 days. Russia was fixed on only extending the program 60 days, so that is likely what occurred. In any case, the extension will allow for wheat and corn to continue to be exported out of the Black Sea region, which could result in the U.S. exports of wheat and corn continuing to be lackluster at best.

Wheat was also pressured by the IGC estimates last week. IGC put 2022 world wheat production at an all-time high of 801 million metric tons due to increases in production in the European Union, Australia, India, and Kazakhstan. Stocks are expected to be 286 million metric tons. For 2023, the IGC lowered world wheat production 2% to 787 million metric tons, estimated a record consumption of 294 million metric tons, putting stocks 13% lower than 2022.

The U.S. southern Plains is expected to see rain this week, but most of the rain is expected to fall outside of the driest areas of Kansas. Brazil is expected to see a drier pattern develop this week which should allow for harvest activity to start back up as well as help give producers a chance to wrap up corn planting. The dry conditions will also allow for grain shipments to resume. On the flip side, forecasts have the next two weeks as Argentina’s best chance to see rain. A little too late to help.

The U.S. winter wheat crop did see a slight improvement last week. The March 20 state Crop Progress reports did show a stable wheat crop. As of March 19, Colorado’s winter wheat crop was rated 36% good down 4% from last week. Kansas’s crop improved 2% to 19% good/excellent. Oklahoma’s crop dropped 1% to 29% good/excellent. Texas’s crop improved 6% to 23% good/excellent.

Last week’s recovery was a welcome site, but so far it appears that most of the grains will give back most of those gains in the third week of March. Seasonally the U.S. grains struggle in March, due to the lack of news and exports being handed off to the South America.

Cattle faded lower in the second week of March with much of the pressure coming from position squaring ahead of USDA’s Cattle on Feed report. Light selling was also tied to the uncertainty in the U.S. banking industry. March’s Cattle on Feed report was friendly. The report showed On Feed: 96% (as expected), Placed: 93% (1% below expectations), and Marketing: 95% (1% below expectations). Now it’s up to the cash trade to help give the market direction.

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