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Weather and Russia-Ukraine tensions lead to market gains

Weather in both South America and the winter wheat region of North America and continuing tensions between Russia and Ukraine helped propel the markets in recent weeks.

Wheat has started to emerge in little green rows shown in a top view.
While winter conditions haven't been ideal in most of the winter wheat growing areas of the U.S., spring conditions after emergence will be a larger factor in the status of the crop.
Kallie Jo Coates / Grand Vale Creative LLC
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The grains wrapped up the third week of January posting solid gains. Wheat was the leader with most of the strength coming from increased tensions between Russia and Ukraine. Soybean oil also post strong gains, which in turn spilled over to help push soybeans higher. Soybean oil was supported by another round of new all-time contract highs in palm oil. Soybean meal struggled with most of the pressure tied to improving weather conditions in Argentina.

Solid demand added to the gains toward the end of the week as well, with wheat even seeing some export demand. Taiwan bought 49,000 metric tons of U.S. milling wheat, and Japan was in and bought 51,000 metric tons of U.S. milling wheat. On Friday, China reportedly bought 132,000 metric tons of soybeans and an unknown destination bought 248,000 metric tons of corn.

Farm Futures put out their survey estimates for the 2022 crop year. Their farmer survey is estimating corn acreage at 90.39 million, a decline of 2.97 million from 2021. They are also estimating corn’s yield at 181 bushels per acre, which would result in a production estimate of 14.9 billion bushels. Soybean acreage is estimated to increase 5.18 million to 92.38 million acres. Soybean’s yield is estimated at 51.5 bushels, putting production at 4.7 billion bushels. All wheat acres are estimated at 47.56 million, an increase of only 856,000 acres from 2021. Winter wheat acreage is estimated at 35.22 million, up 1.58 million from 2021 while spring wheat acres are estimated at 10.81 million, a decrease of 613,000 acres.

South America weather continues to be the main driver for the corn and soybean markets. Argentina picked up good rains and rain remains in the forecast. The question is, did the rains come in time? As of Jan. 20, 97% of Argentina’s soybean crop was planted versus 98% average. Argentina’s soybean crop was rated 30% good/excellent down 1% from last week but 9% above last year. Argentina’s corn crop was 87% planted versus 92% average. Corn’s crop rating was estimated at 22% good/excellent, down 1% last week and 6% below last year.


As of Jan 21, Brazil was reporting harvest progress at 5% versus 3% average. The first corn crop harvest was estimated at 14% complete versus 7% average. The second corn crop planting progress were estimated at 2% versus 4% average.

The dry conditions are not just isolated in South America. The U.S. southern Plains continues to see warmer, drier conditions than expected. As of the third week of January, 68% of the U.S. winter wheat crop was in some stage of drought. Now, winter conditions are not indicative of how the winter wheat crop will turn out, but it goes show just how good the growing conditions need to be when the winter wheat comes out of dormancy.

The U.S. Department of Agriculture is now releasing their Crop Progress estimate on a monthly basis. The January estimate was released Monday, Jan. 24, and it once again showed declining conditions for both the hard red winter wheat and white wheat region. Most of the soft red winter wheat states saw improving conditions, except for Illinois, which saw sharp declines. The January crop rating for the major states is Colorado, down 5% to 20% good; Kansas, down 3% to 30% good/excellent; Oklahoma, down 4% to 16% good/excellent; Texas, down 13% to 7% good; Montana, up 2% to 14% good; and Illinois, down 33% to 42% good/excellent.

By the start of the last week of January, most of Argentina had seen at least some level of rain, with some regions seeing flooding. Brazil, on the other hand, was still experiencing drought situations with 25% of the country still in some stage of drought. Most of the dry region is in the center south with most being in Rio Grande do Sul and Parana. Paraguay continues to see dry conditions as well as 60% of that region that remains in drought. Most of the corn in this region is in the pollinating stage while soybeans are in the flowering to pod setting stage.

The adverse weather conditions have helped to heat up the U.S. export market. Corn sales were above expectations last week and sorghum sales were at a new marketing high. Corn shipments are also starting to see an increase, which is normal for this time of year as soybeans shipments slow, corn shipments pick up.

Soybeans saw the new crop November contract bounce to another round of new crop highs due to support from World Oil’s South American soybean production estimate. Oil World has Brazil’s soybean production at 135 million metric tons versus USDA’s 139 million metric tons. Argentina’s production is estimated at 42 million metric tons versus USDA’s 46.5 million metric tons. Most major analysts are now expecting Brazil’s soybean crop to come in below 2021 production, which is friendly.

Wheat saw solid gains to close out the third week of January but gave a lot of that strength back by midweek. Wheat continues to see support from increasing tensions between Russia and Ukraine. The Black Sea region accounts for about 29% of the world’s wheat exports and Ukraine is in the top five for corn exports, so one can see how any military action could result in an increase in U.S. exports. But it is unlikely any sort of action will occur before the Olympics.

Wheat also saw selling pressure tied to heavy snow in western Kansas and eastern Colorado, with amounts anywhere from 2 to 20 inches. To add to the pressure, forecasts are starting to show better chances for rain. Selling was also tied to technical selling as wheat traded to a 50% retracement of its recent decline. Then profit taking set in and that helped uncover sell stops which accelerated selling pressure. Wheat needs to see strength to prevent further selling pressure.


Like soybeans, old crop corn contracts came within cents of the old crop high while new crop December traded to new highs. Support came from reports that Canada only has five days’ worth of supply on hand . The expectations are that corn export demand will see an increase, not only from Canada but also from China. Old crop corn contracts saw their gains being kept in check by another disappointing ethanol production estimate. Ethanol production for the week ending Jan. 21 was estimated at 1.035 million barrels, a decline of 18,000 barrels from the previous week. Stocks were estimated at 24.48 million, an increase of 884,000 barrels. Gas demand improved to be near the middle of their range. Ethanol margins have decreased to now be near breakeven levels.

The 2022 acreage race is also starting to become a bigger issue. Corn is holding its own in that race as new crop December continues to hold up at contract highs. The same can be said for soybeans as November continues to hold contract highs.

The market is going to be paying close attention to the Fed. The Fed wrapped up their two-day meeting on Jan. 26. The Fed decided to leave interest rates unchanged but indicated people should expect increases in March.

Cattle lost ground last week and started the final week of January on the defense. The Jan. 21 Cattle on Feed report was bearish cattle, and although it appears cattle worked in a slightly negative report in last week’s poor performance, it appears that more premium needed to be pulled out of the market. The on feed estimate and placement estimate came in at record levels for January while marketing’s were at the second highest for January. Hogs, on the other hand saw a strong week last week, trading higher in every session and setting new contract highs in all deferred contracts.

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