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Market impacts are 'at the mercies of a madman,' and wheat takes the lead for the week

AgweekTV's Michelle Rook and Randy Martinson of Martinson Ag Risk Management discuss the latest movements in the markets, mostly stemming this week from Russia's invasion of Ukraine and the outlook for exports from and planting in the Black Sea region.

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It's been "another wild week in the markets," with news and movements largely centered around what's happening with Russia's invasion of Ukraine, AgweekTV's Michelle Rook said on this week's Agweek Market Wrap.

Wheat was up this week on news out of the Black Sea region, where ports are shut down. The biggest gains were in the Chicago and Kansas City markets, while Minneapolis wheat lagged a bit.

While Martinson said wheat "put in a heck of a week," he thinks that market is overvalued and likely has run its course. He thinks feed grains, like corn and barley, will be the focus in the future if Ukraine can't get a crop planted. Another factor is that Europe may be considering opening up "set aside" acres to farming, which could increase available stocks. Martinson said he highly doubts the U.S. would do anything similar with Conservation Reserve Program acres.

But of course, much will depend on what happens next in Ukraine. Will Russia cease control or will Ukraine hold them off? How long will the conflict last? And what happens when it's over?

"We're at the mercies of a madman right now, and what his actions are going to be in this country," Martinson said, noting there are "more unanswered questions" than there are answers now. It could be three to six months at minimum until ports are reopened and operational, but longer depending on the course of the conflict, he said.

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Martinson said estimates are now that there are about 14 million metric tons (about 500 million bushels) of corn and about 7 million metric tons (about 250 million bushels) of wheat that were slated to be shipped out of Ukraine in March, April or May. He expects some sales could move to the U.S., as the buyers need to get product.

Elevators in many places are bidding either no quote or are pricing grain based on the July contract rather than on March or May. Martinson explained that's due to the elevators not seeing demand and facing unusual volatility.

"Once we start to see no grain being bought at the elevators, that's a sign things are changing," he said.

Soybeans aren't shipped out of the Black Sea region, so they didn't move as much as wheat and corn. Sunflowers — and sunflower oil — in particular do ship out of there and do impact the soybean oil market, but soybean oil also is impacted by palm oil, which Martinson said "imploded this week." Other news that held the soybean market back was of negative crush margins in China and some rains falling in South America.

Soybeans, however, can't lose much ground to corn and wheat without risking losing acres.

A strong corn market was hard on the livestock markets this week, Rook said, and the cattle market was "fairly ugly." Also weighing on cattle were issues like the stock market, price of fuel and expected increases in interet rates. However, Martinson said he's still friendly cattle long term and expects them to find a floor soon.

Hogs had a tough week, too, though Rook said it likely had something to do with traders getting money out of the market. Martinson agreed and said it's likely "a short-lived thing."

"This is a week where fundamentals didn't matter, technicals didn't matter," he said. "It was about money flow and pushing the market."

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