Progressive Ag Marketing Report with Lilja
I helped a friend knock on some doors for his re-election campaign prior to the June primary in 2006. I’ll always help a friend out but this was one request I should have passed on. In 2006 we were witnessing a period of increasing fuel prices and the people that did open their doors were in foul moods. I remember him inviting me to a meeting with a number of other candidates early that summer and telling the room that people are really pissed about gas prices and that being that you guys are the incumbents, you guys are in big trouble this fall. They laughed me out of the room and given their arrogance I didn’t help any of them the rest of that fall. In November of 2006 my friend and a number of his fellow incumbents lost. For my friend, it was one of those times where I wish I would have been wrong but the writing was on the wall.
The writing is on the wall with one more week of silly season to go until the 2022 midterms conclude. At least that’s what the polls are showing on a national level. Based on what I observed in 2006, I think the polls are right. People typically vote their wallets. If the polls are right there will be a changing of Congress similar to the 2006 gas price increases and the 1978 midterms that saw similar inflation rates as now. The financial market prefers it when one party is controlling the Congress and the other party is controlling the White House. The market prefers gridlock. The market doesn’t like policies that push too far one way or the other. The NASDAQ Composite Index, Dow Jones and S&P 500 futures have rallied considerably in the month of October. It appears that the market is anticipating a change.
Brazil also saw a big change as incumbent Jair Bolsonaro lost to Lula da Silva. The new government is likely to reduce or stop deforestation of the Amazon region for agricultural use. Deforestation in the Amazon rose to an all-time high in the first half of 2022 and was 80% higher than the same period in 2018, the year before Bolsonaro took office, according to a report by the Amazon Environmental Research Institute. When Bolsonaro took office, he had proposed major infrastructure upgrades including the Amazon region that would have improved road and railways to make their farmers more competitive in world markets.
The Russian Ukrainian war continues to rage. The grain complex exploded higher after Russia suspended the Black Sea shipping corridor agreement. Reports stated that Ukraine guided drones attacked the Russian Black Sea fleet and that the Russians suspected that the west was using the grain corridor for military purposes. The wheat complex attempted to back off somewhat but was then met with further bullish news. The first winter wheat ratings of the fall show 28% of the crop rated good to excellent, 37% fair and 35% poor to very poor. This compares to 45% g/e and 21% p/vp last year at this time. Trade was expecting 41% g/e and this is the worst overall US ratings to start the fall in history. Texas shows the worst ratings with 65% of the crop rated poor to very poor. Winter wheat planted is at 87% vs. 85% normal. Emergence is at 62% vs. 66% normal.
Weekly export sales continue to disappoint for corn and wheat but there were a few flash sales of soybeans last week to China and Spain. Their continue to be concerns about the historically low levels on the Mississippi River for barge traffic. 49% of last weeks soybeans for export were inspected at the Gulf and 39% at the Pacific Northwest.
Past 72 hour rainfall maps show 0.5 to 1 inch rainfall amounts for northern Texas and eastern Oklahoma. Kansas and Oklahoma are favored for rainfall late this week off a pattern working through the western US. The 6-10 day outlook shows good precipitation chances for the PNW and the northern plains. Temperatures are much above normal for the eastern half of the US and including the southern plains.
The grain market will now shift attention to South American weather for the next 6 months. Currently it’s a mixed bag with much of Brazil seeing a perfect start to their growing season. Parts of southern Brazil and most of Argentina are experiencing drought conditions.
Progressive Ag Marketing, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Progressive Ag Marketing’s Research Department.
Tom Lilja is an employee of Progressive who writes this column for the Times-Record.