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Grains whipsaw on Ukraine-Russia war news

The back-and-forth in the market this week on news coming out of Ukraine and Russia is a good example on just how jumpy traders are and how sensitive the market is to any sort of disruption in the grains. Stocks of grains around the world are tight and any issue that could result in the disruption of production will result in the grains to rally.

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News out of Ukraine and Russia created an up and down market in the grains in recent weeks.
Erin Ehnle Brown / Grand Vale Creative LLC
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Editor's note: Catch Randy Martinson every Friday after markets close on the Agweek Market Wrap at agweek.com.

The second week of November had the grains finishing lower. The week started mixed with only the Minneapolis and Kansas City wheat exchanges ending with gains due to adverse weather conditions in the southern Plains and from the expectations that the world will need quality wheat due to the issues in Australia.

The selling pressure continued for the next three sessions as the market took the path of least resistance after the release of USDA’s November Crop Production report. The report did not bring anything new to the market. Stocks were decreased slightly in wheat while corn and soybeans both saw small increases in ending stocks. But none were far off expectations, which resulted in the market continuing to fade.

By Friday, Nov. 11, the grains had slipped far enough that most were sitting at or near support lines. Thursday’s better than expected Consumer Price Index and Core Inflation estimates helped to bring traders back into the market. The slight decline in inflation combined with technical buying to trim the losses for the week. Strong export demand added to the support as Mexico was in and bought 209,900 metric tons of corn while China and an unknown destination combined to buy 462,000 metric tons of soybeans.

Improving weather conditions in South America also kept a lid on Friday’s gains. Two major grain exchanges once again lowered their wheat production estimates. The Buenos Aires Exchange lowered their wheat production estimate from 14 million metric tons to 12.4 million metric tons while Rosario lowered their wheat production estimate from 13.7 million metric tons to 11.8 million metric tons.

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Russia, Turkey, and the UN met over the weekend to talk about the future of the Black Sea Export Initiative. The agreement is set to expire Nov. 19 unless all parties agree to extend the program. Russia would like sanctions reduced or removed on their grain export program, their ability to sell fertilizer, and their banking industry before they are willing to continue to support the program.

Corn continues to struggle with most of the pressure due to export concerns as at present U.S. corn exports are 54% below last year. And with Mexico coming out and confirming their decision to halt all yellow corn imports by 2024 , it puts a bleak picture on corn exports having much of a chance improving.

The third week of November had the grains starting with solid gains. Weather concerns and concerns that the Black Sea Export Initiative might not get renewed helped to push the grains. Expectations that the Nov. 14 Crop Progress report would show declining winter wheat conditions added support. Rumors that China was in buying soybeans also added support.

But the Crop Progress report did not help the grains as much as expected, as it showed better than expected harvest progress as well as improvement in the winter wheat crop.

Corn harvest advanced 6% to be 93% complete as of Nov. 13, 8% ahead of average. North Dakota is reporting corn harvest progress at 96% versus 69% average. The last 4% of the crop might be difficult to get with recent snow and cold. Only Colorado (2% behind) and Pennsylvania (8% behind) are trailing their average harvest pace.

Soybean harvest was estimated at 96% complete, up 2% from last week and 5% ahead of the average pace, but progress was 1% less than expected by the trade. All states are showing progress ahead of their five-year average.

Sunflower harvest was estimated at 91% complete, up 10% from last week and 20% ahead of the five-year average pace. North Dakota is 91% harvested versus 71% average. But like corn, the last 9% of the state’s crop will be tough to harvest due to the early November storm.

Winter wheat planting is estimated at 96% complete versus 92% last week and 93% average. Emergence was estimated at 81% which is in line with the five-year average. Conditions did improve 2% again last week. The winter wheat crop is now rated 32% good/excellent. What was interesting was looking at where the improvements for last week were. The soft red winter wheat crop saw minor improvement with Illinois’s crop improving 1%. The northwestern region shows huge improvement with Montana’s good/excellent rating jumping 17% due to the moisture. The hard red winter wheat crop saw mixed ratings as rains helped Oklahoma (+5%) and Texas (+4%) but did not help Colorado (-1%) or Kansas (-2%).

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Tuesday, Nov. 15, brought a while new wrinkle to the grains. The grains opened and traded lower at the start of the session with most of the grains testing support lines. Early selling was tied to reports from Bloomberg that Russia was going to agree to extending the Black Sea Export Initiative. Details were not released on the terms of the extension.

By noon Tuesday, the grains seemed set to go into the close posting 7 to 10 cent losses across the board. But then reports came that two Russian missiles had hit just inside Poland, killing two people. That news sent the grains sharply higher on the thought that the war was escalating. Little details were known at the time but the grains needed to put some war premium back into the market just in case. A lot of speculation of why and how has since followed. One story was that the missile was just fragments from a missile that Ukraine had shot down as official reports have the path of the missile showing it was not fired by Russia. By late in the day, the official word was that the missiles hit was an accident and that led to the grains to trim some of the war premium back out of the market.

But this is a good example on just how jumpy traders are and how sensitive the market is to any sort of disruption in the grains. Stocks of grains around the world are tight and any issue that could result in the disruption of production will result in the grains to rally.

Technically it looks like the grains are trying to test support as the market transitions from the U.S. growing season to the U.S. demand season and South American growing season. As the production year comes to a close in the U.S., the only news the market has to go on is demand, and so far, this year, exports have not been capturing the headlines.

South American weather continues to be mixed with good conditions in Brazil. But while Argentina picked up some rains over the weekend, conditions remain extremely dry, which was evident with a wheat crop condition rating of 8% good/excellent. This will likely improve next week due to the rains.

Another round of solid exports was reported early in the week with Mexico buying 261,000 metric tons of soybeans and 2.097 million metric tons of corn (1.47 million metric tons old crop and 625,000 metric tons new crop). There was even confirmation of a 150,000 metric ton export sale of hard red spring wheat to Iraq.

Technically the grains are back to the low end of their trading range and at support levels. Stocks are tight, so any further decline in price could result in an uptick in demand, which would lower stocks, and push prices higher.

Cattle finished the second week of November posting small losses. Selling was tied to uncertainty as not only was the cattle market worried about the midterm elections, but traders were also worried about the potential numbers from USDA’s November Crop Production report. Both of those turned out to be nonevents and helped cattle push higher the third week of November, along with a stronger cash trade as cash bids were higher due to strong demand and expectations for tight supplies. Position squaring ahead of November’s Cattle on Feed report was also evident.

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