Weather woes, geopolitical concerns continue to impact markets

The grains wrapped up the first week of February mixed with all three wheat exchanges posting losses as did old crop corn. New crop corn and the soybean complex were a different story.

Corn plants stick up in front of an orange and yellow sky.
Old crop and new crop corn have been on different paths.
Erin Brown/Grand Vale Creative

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The grains wrapped up the first week of February mixed with all three wheat exchanges posting losses as did old crop corn. New crop corn and the soybean complex were a different story.

Technically wheat was showing signs of trouble as all three wheat exchanges scored key reversal down performances for a second time in one week (Monday and Thursday). But the second time, corn also scored a key reversal lower performance. With both of those grains showing a potential change in the trend it appears that we could be in for a bit of a pullback. How deep of a cut will depend on how quick export demand picks up or how adverse South American weather gets in the next week or if Russia invades Ukraine.

The tensions between Russia and Ukraine seem to be simmering a bit, but there are still some concerns that this is the calm before the storm. The U.S. sent more troops to Ukraine and Russia has also responded by increasing the number of troops on the border. Putin has promised to hold off until after the Olympics, but with all the military muscle sitting across each other, who knows what will happen.

The market is also watching the developments of new agreements between Russia and China. Late last week, China signed an agreement to import wheat and barley from Russia. They also signed an agreement for Russia to supply China with its natural gas needs for the next 30 years. It appears Russia and China are getting a little cozy with each other. And surprisingly enough, both Russia and China put out statements stating that NATO should not expand any further and not allow Taiwan or Ukraine to join.


The ever-changing South American weather forecast continues to send the grains sharply higher. It is starting to become a bit of a broken record, but every day it seems weather forecasts for northern Brazil get wetter while southern Brazil and most of Argentina get hotter and drier. The weather is a little more adverse for soybeans in Brazil than corn as South America’s corn production could still be close to average. Brazil is just starting to plant their safrinha corn crop, which accounts for 75% of the country’s corn. That still has opportunity, but Argentina’s corn crop has been hurt.

Argentina released their latest crop rating on Feb. 3. After heavy rains the previous week and last week’s small improvement, most expected Argentina’s crop would see another week of improving conditions. But corn conditions dropped 4% to 28% good/excellent and soybeans slipped 1% to 37% good/excellent. To add to the frenzy, officials also lowered their soybean crop production estimate 2 million metric tons to 42 million metric tons. As of Feb. 4, Brazil’s soybean harvest was estimated at 17% complete versus 10% average, their first corn crop harvest was at 26% complete versus 15% average, and their second corn crop planting was at 18% complete versus 11% average.

Argentina is the world’s largest exporter of soybean meal, supplying the world with 50% of the exportable supply. With the expectation that Argentina’s soybean production will be severely reduced, the expectation is that the U.S. will need to pick up the slack in soybean meal exports.

The adverse South American weather has certainly helped to improve U.S. soybean exports. Since January 18, 3.3 million metric tons of U.S. soybeans (old and new crop) have been sold to either China, Mexico, or an unknown destination.

The U.S. ag attaché in China is looking for China to only import 20 million metric tons of corn this year, 6 million metric tons less than USDA’s projections. And although Canada is in dire need of corn, the U.S. is having issues in getting the corn across the border due to trucking issues.

Crude rallied to another new contract high to close out the week, trading to $90. This occurred after the news broke that OPEC+ agreed (for the second time) to increase oil production 400,000 barrels per day starting in March.

The average trade estimate is looking for the Federal Reserve to increase interest rates as many as seven times this year. The Fed is calling for only three or four rate hikes. The higher interest rates go, the tighter the consumer disposable spending gets. This could trim demand for higher priced goods, like beef and pork. We will see as the fun with the Fed starts in March.

Wheat put in a strong performance on to start the second week of February. Support came from Stats Canada’s stocks estimate, which estimated all wheat stocks sharply lower than expected. All wheat stocks were estimated at 15.56 million metric tons versus expectations of 17.3 million metric tons. This means that either Canada has seen a stronger than expected demand for wheat, or Canada has overestimated their 2021 production. Both are friendly to U.S. wheat as it means supplies of good quality spring wheat are even shorter, which should help encourage an acreage battle this spring.


The rest of the numbers from the Stats Canada report were close to expectations. Durum stocks were estimated at 2.09 million metric tons versus expectations of 2 million metric tons. Barley stocks were estimated at 3.1 million metric tons versus expectations of 3.3 million metric tons. Canola stocks were estimated at 7.56 million metric tons versus expectations of 7.5 million metric tons.

Wheat was also supported by weather forecasts calling for continued dry conditions for the U.S. southern Plains. Last week, the Drought Monitor map estimated 69% of the U.S. winter wheat crop is in some stage of drought. And with forecasts calling for little relief, it looks like the winter wheat crop could continue to see adverse conditions. But poor demand and another slight sign of de-escalation in the Black Sea region has limited wheat’s gains.

Cattle closed out the first week of February strong, and that strength has pushed into the second week as well. The southern Plains were forecasted to get another nasty winter storm the first week of February, with forecasts calling for heavy snowfall and bitter cold temps. This system moved a little further south and east than expected, mostly missing the major cattle feeding region. There were reports of some logistical issues but for the most part, the storm did not back feedlots up, which has helped cattle push to another round of new crop highs. Strong demand and tight supplies will be the main driver in the cattle market over the next few months.

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