Supply doubts trigger grain gains

Corn: China snapped up more U.S. corn yesterday. Argentina’s corn crop is expected to see more drought damage. Plus, continued Russian resistance to renewing the Black Sea Grains Initiative (which is economically irresponsible) also added some bullish price pressure to corn and wheat markets this morning, sending corn futures $0.01-$0.03/bushel higher this morning.

Overnight, the Russian government doubled down on its desire to extend the Black Sea Grains Initiative for only 60 days instead of the 120 days that Ukraine, U.N., and quite frankly the rest of the world would prefer. The U.N. emphasized overnight that negotiations between all parties involved were still ongoing and that they would remain focused on attaining the 120-day extension, despite Russia’s protests.

A shorter extension period would increase logistical risks for international grain vessels. The added shipping costs and freight insurance would further strangle global supplies as it would restrict current Ukrainian shipping paces and deter Ukrainian farmers from planting more acreage this spring.

Global supplies are already tight and the resultant higher food costs have been a key driver of inflationary pressures around the world. We need this deal to be extended for longer so that the global economy can have a chance at cooling off inflation – despite Russia’s best efforts to continue stoking chaos in international markets.

Soybeans: Slow Brazilian soybean shipping speeds are breathing fresh life into late season U.S. soybean exports, as last week’s soy export volumes surged amid Brazilian slowdowns. In fact, last week’s soybean shipping paces were the highest recorded since January as Chinese buyers scrambled to procure readily available soy supplies.

Soymeal prices also rose this morning on continued worries about Argentine crop shortfalls, adding even more bullish pressure to soybean prices. As forecasts for the Argentine crop continue to be slashed, markets are anticipating Argentina will begin importing soy bushels from Brazil to maintain crush production schedules or that U.S. and Brazilian crushers will step up to cover the shortfall.

The prospects sent soybean futures in the U.S. up $0.02-$0.05/bushel this morning while soymeal prices rose $0.70-$2.40/ton overnight.

Wheat: Egypt snapped up Ukrainian wheat during the overnight trading session. International buying activity has been steady in the wheat market over the past week after wheat prices dipped to a one-year low last week.

Worries that India will not return to the global export market this year also created fresh supply worries for the wheat market, sending U.S. wheat prices $0.02-$0.05/bushel higher this morning. Extended forecasts in the U.S. Plains point to dry and cool weather, which may not be favorable for winter wheat crop development in the coming weeks.

Weather: According to NOAA’s short-term forecasts, the recent winter snowstorm that has traversed the Heartland this week will continue to drop snow in the Upper Midwest, mixed precipitation in the Eastern Corn Belt, and more rain and thunderstorms in the Southeast today.

Some snow flurries could pop up in the Northern and Central Plains today as well as cooler temperatures settle across much of the Heartland headed into the weekend. More scattered snow flurries are expected to pepper the Upper Midwest throughout this weekend.

NOAA’s 6-10-day outlook is still trending cooler than average for the Western U.S. into late next week. Precipitation outlooks during that time are trending above average west for most of the country, with the highest chances expected in the Southwest and Southeast.

NOAA’s 8-14-day outlook shows the cool weather trends fading slightly for the eastern half of the country through next weekend but still remaining abnormally cool for the Western U.S. Above average chances for moisture will continue to linger across the coasts during that time, with the highest chances for moisture in the Pacific Northwest and Southeast. The Plains and Upper Midwest will see below average chances for precipitation during that time, which could help accelerate snowmelt if the North sees adequate sunshine (and some non-forecasted warmer temperatures, please) during that time.

Financials: Another bank failure occurred yesterday – this time to First Republic. Other Wall Street banks were able to step in and help cover First Republic’s asset shortfall, though the markets continue to be rattled by this latest sign of weakness from the finance sector. S&P 500 futures continued to fall overnight, dropping 0.25% to $3,984.50 at last glance.

Here’s what else I’m reading this morning on FarmFutures.com: