Crop markets rebound on technical bounce and South American weather news
Martinson Ag Risk Management's Randy Martinson and Red River Farm Network's Don Wick discuss a grain market rebound and conditions in South America and the Black Sea region on the Agweek Market Wrap.
After a down week following news from the U.S. Department of Agriculture's Ag Outlook Forum , grain markets made a little rebound Friday thanks to a technical bounce and support from reports of problems with crops in South America, Randy Martinson of Martinson Ag Risk Management told Don Wick of the Red River Farm Network on this week's Agweek Market Wrap.
Martinson said the technical bounce was the main reason for the little uptick on Friday, because grain markets had gotten badly beaten up since the Forum's forecast came out and needed to come back. But drought in Argentina and wet conditions in Brazil also played a part.
In Argentina, the crop is "failing and failing badly" because of drought, Martinson said. Some of the market response was a realization of that.
Wick asked him how things were looking in Brazil, and Martinson said there are struggles there, too. Rains are delaying harvest for soybeans.
"What they have harvested is good, but they are starting to see some delays and they are starting to see some quality issues," he said.
Those delays will impact the planting of the safrinha corn crop, and Martinson said if the delays are too long, not all of the corn will get planted.
Also helping out markets on Friday were rumors of export demand, in part because of the reduced prices for U.S. grains, but Martinson said there's been no confirmation of those sales.
Along with "trouble spots" in South America, Wick pointed out some uncertainties in the Black Sea region. Russia and Ukraine have been at war for more than a year, and the Black Sea grain deal is set to end soon. Martinson said Russia is "playing hardball" over the deal and wants some concessions to get a new one. One concession is fertilizer exports, which he said the U.S. also would like to see. Ukraine, meanwhile, would like to see more ports opened for shipping, a year extension of the deal rather than 120 days and more inspectors. Martinson thinks Russia will give in eventually.
The World Agricultural Supply and Demand Estimates will be released on March 8, and Martinson said the March report often is a placeholder while everyone waits for the March 31 Prospective Planting and Quarterly Grain Stocks reports. However, even "placeholder" reports have been significant lately, and the question for this one is how much Argentina's crop will get reduced.
"This one, we really won't look for a lot for U.S. numbers," he said.
Basis has widened since export market has switched to Brazil, like a "flip of a switch" a week or more ago, Martinson said. Corn and wheat are widening out, which is typical this time of year, as farmers tend to move grain to get bills paid around the end of February and early March. If there are snow storms, he anticipates basis will improve for corn and wheat, but export demand will be necessary to improve it for soybeans.
Cattle had a disappointing week, Martinson said. Two weeks ago, there were daily contract highs, he pointed out, but despite a better cash trade this week and strong boxed beef demand, the market lagged.
"I think this market is getting tired," he said.
The market is "holding their market" to see what the Federal Reserve's next move will be, Martinson said.
(The Agweek Market Wrap is sponsored by Gateway Building Systems.)