Russia gives grains strength, then takes it away

Russia's back and forth on the Black Sea grain deal had a big impact on this week's markets, Randy Martinson of Martinson Ag Risk Management says.

Wheat stalks and heads
Wheat gained strength then lost some of it on Russia's back-and-forth on a Black Sea grain moving deal.
Ann Bailey / Agweek
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The last week of October was a rough one for the grains as they spent most of the week trading lower. Minneapolis wheat posted losses in every session during the week while corn lost ground in four out of five sessions. Soybeans were the best performers posting gains in three out of five sessions, but still not enough to post gains for the week.

Modest to heavy losses dominated the grains to start the week with improving weather forecasts and expectations for a bearish Crop Progress report. The report did show slower than expected harvest progress, which helped to support corn and soybeans later in the week. Soybeans were also supported by strong demand as China, Spain and unknown destinations were buyers of soybeans over the past few weeks. Corn and wheat exports continue to lag behind last year’s pace mainly due to the absence of China. China released their year-to-date import pace for each crop and so far for the year wheat exports are 13% behind last year, corn is 26% behind last year, barley is 49% behind last year, pork is down 61% from last year, soybeans are down 7% and sorghum is up 21%.

Argentina was forecasted to see rain, and light rain did fall in parts of the country, but overall, the rain was disappointing and long-term forecasts have now pulled rain. The drought in Argentina has progressed enough to cause Rosario to lower their wheat production for Argentina to 13.7 million metric tons versus 15 million metric tons from last week and 16 million metric tons last year.

Thursday’s Drought Monitor map continues to show drought conditions advancing across the Midwest. The report is now estimating 85% of the continental U.S. is in some stage of drought. The number of states reporting drought in 100% of the state has increased and is starting to be concerning as a lot of the Corn Belt states are included.


Mexico is reportedly moving ahead with their intentions to only import GMO free corn by 2024. This will impact the U.S. the most as the U.S. exports about 20% to 25% of our exportable corn to Mexico (over 600 million bushels per year the last two years).

Volatility jumped a notch during the first week of November. The grains started the week gapping sharply higher. Most of the early week strength was due to Russia’s announcement on Oct. 29 that they will no longer honor Ukraine’s safe exports corridor due to a recent drone attack on Russia’s Black Sea Fleet. The feeling was that Russia wanted the program halted immediately and that no safe passage would be guaranteed for ships.

The grains rallied sharply on the idea that if Ukraine was out of the export game the U.S. might see an increase in wheat and corn demand. That sent both of those markets sharply higher. Soybeans did not participate in the rally as it has no direct connection to either Russia of Ukraine. But soybean oil does, and that market saw solid gains as well on the thought that sunflower and sunflower oil exports would give way to more demand for soybean oil.

The gains spilled over into Tuesday’s session with not only the hope of increased demand but changing weather forecasts with less rain. The rains that were expected to bless Argentina and the U.S. southern Plains started to decrease in coverage and amounts. By Wednesday the early forecasted heavy rains were reduced to potential light rain that would not make much of a dent in the drought.

In true fashion, late Tuesday Russia started to back peddle on their abrupt exit from the Ukraine safe corridor program and said it was just a suspension of the program. And by late Tuesday night Russia was back in and the safe export corridor program was back in operation. Even the insurance providers of the vessels, which had also walked away from insuring any vessels entering the Black Sea, returned to insuring the vessels. The return of Russia to the program sent another shock wave through the markets reversing all of the gains from earlier in the week.

In other news, inflation numbers improved last week, which might have a slight influence on the Federal Reserve. The Fed did end up increasing interest rates 0.75%, making it the fourth 0.75% increase in a row. The market was expecting that increase and was more interested in the press conference after to see what hints Chairman Jerome Powell would give on the potential of the December meeting. The message was friendly to the market, as it appears by their press conference, the December increase will be small if one is needed at all.

The grains have been trading in a tight trading range the past few weeks (months seems more like it) waiting for news of some sort to break the rangebound trading. Last week it was appearing that the grains were looking at taking the path of least resistance and retreating to the bottom of the trading range. With the news of Russia’s walking away from shipping program, the grains appeared to be ready to make another test of the high end of their trading ranges ($10 in Minneapolis and Kansas City wheat, $7 in corn, $14 soybeans). But with the program reinstated (at least for two more weeks) it’s more likely the grains will return to the low end of the trading range. It is unlikely the grains will break below the low end of the range as there are still major issues that the market has to deal with, tight stocks being the biggest one.

The Oct. 31 Crop Progress report was not as negative as expected. The report did show solid harvest activity last week, but less than expected. As of Oct. 30, 76% of the nation’s corn was harvested, up 15% from last week and 12% ahead of average. And 1% higher than expected by the trade. Soybean harvest was estimated at 88% complete, up 8% from the previous week and 10% ahead of average, but 1% less than expected. Sunflower harvest is estimated at 60% complete, up 25% from the previous week and 15% above average.


The winter wheat estimates were the friendliest. As of Oct. 30, 87% of the nation’s winter wheat crop had been planted, up 8% from the previous week and 2% above average, but 1% lower than expected. Emergence was estimated at 62%, up 13% from the previous week but 4% below average.

The friendly surprise came in winter wheat’s crop rating. Now it is important to remember than fall conditions are not indicative to how the crop will end in 2023, but this is telling to just how rough a journey wheat is going to have. Crop conditions were rated at 28% good/excellent, 37% fair, and 35% poor/very poor. This is the lowest rating for winter wheat for the last week of October in history. The rating was also 13% below expectations and 17% below last year at this time. The good/excellent rating for some of the major winter wheat states are Colorado, 28%, Illinois, 35%, Kansas, 24%, Montana, 32%, Oklahoma, 11%, and Texas, 4% (all good, no excellent).

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