Progressive Ag Marketing Report with Lilja
Late October into the first week of November can at times mark a short term high in the grain markets. This is more typical for wheat as the fall planting season for winter wheat concludes. I’ve often stated to clients that when you are getting your triggers ready to shoot your deer have your triggers ready to pull some post-harvest grain sales. The boys in Kansas are wrapping up and the market has no more need to bid for acres. This works when markets have adequate supply, stable logistics and good weather. This would not have worked last year with the short crop situation in Canada and the northern plains. The Russian invasion also threw a monkey wrench and numerous concerns over logistics coming out of the Black Sea Region. It would have been nice to get the memo that Putin was going to invade but I’m not part of that club.
The wheat & corn markets backed off last week in typical mid November fashion. CFTC weekly data showed the funds selling a net combined 34,546 contracts of grains with the highest liquidation coming in the corn market. Simply put, the funds are losing interest in buying grains as US crop size is known and attention shifts to South American weather over the next 5 months. They are also done buying any wheat acres that they can in the southern plains. There will be monitoring of US winter wheat conditions but those turn to monthly ratings from various states December through February. So far those are not off to a good start but recent rainfall has helped.
Weekly US winter wheat conditions improved 2% to 32% good to excellent but are still historically low. 36% of the US crop is rated fair and 32% poor to very poor. Texas ratings improved 4% to 18% g/e and Oklahoma improved 5% to 19% g/e. Kansas declined 2% to 24% g/e. 96% of winter wheat is planted vs. 93% average. Emergence is at 81% vs. 81% normal.
There has also been a widening of wheat protein spreads. The strength in MPLS and Kansas City vs. Chicago in the last week points to reports of the Australian wheat crop quality being downgraded to feed grade vs. milling grade and steady world demand for higher protein. Australia had a big crop but a lot of rain during harvest and it looks like they will be supplying less higher protein wheat and more feed wheat in the coming marketing year. Higher feed wheat quantities generally have a negative effect on corn futures as well.
The monthly WASDE report was neutral via trade estimates with 2022-23 US wheat ending stocks estimated at 571 million bushels, a cut of 5 million bushels from last month. Minor adjustments were made to domestic usage. The stocks-to-use ratio was lowered slightly to 30.6%. World ending stocks increased 0.28 MMT to 267.82 MMT vs. expectations of a 0.8
MMT reduction. World stocks-to-use ratio remained unchanged from last month at 33.9%. Australian production was raised 1.5 MMT to 34.5 MMT. Argentina production was reduced to 15.5 MMT. Russian and Ukrainian production were left unchanged at 91.0 MMT and 20.5 MMT, respectively. The Buenos Aires Grain Exchange lowered Argentina wheat production estimate to 12.4 MMT vs. 14.0 MMT previously. They reported good to excellent ratings down -1% to 8% and poor to very poor ratings +3% to 57%.
US corn yield was raised by 0.4 bushels to 172.3 bu/acre and production of 13.93 billion bushels. This was higher than expectations of 171.9 bu/acre and 13.895 billion bushels. Exports were unchanged at 2.15 billion bushels despite recent poor export reports. Feed and residual usage was increased 25 million bushels. The net result was 2022-23 ending stocks of 1.182 billion bushels vs. 1.212 bb pre-report estimates and 1.172 bb last month. World ending stocks for 2022-23 were trimmed by 0.4 MMT to 300.8 MMT which was close to pre-report estimates. Brazil and Argentina production were left unchanged at 126 MMT and 55 MMT, respectively. Ukraine production was also left unchanged at 31.5 MMT with export projections of 15.5 MMT.
Past 72-hour rainfall maps show that southern Oklahoma and eastern Texas received 0.25 to 1.25+ inch widespread rainfall. 6 to 10 day forecasts are extremely cold and dry for most of the US with Texas showing the best chances of rainfall. Weather forecasts for SAM show normal temperatures and rainfall for Brazil, which so far shows growing conditions off to an excellent start. Argentina is called warmer and drier than normal in the next two weeks. The stress forecast continues for Argentina which is currently under dry conditions.