CBOT agricultural futures fell last week on news that a maritime grain export corridor may be cleared for Ukraine with Turkey as the destination.
As the Russian-Ukrainian conflict rages and could continue into 2023, the duration of the conflict will have significant implications for commodity markets, including supplies and prices of fertilizers, food and energy.
Chicago-based research firm AgResource doubts Ukrainian corn will have access to Black Sea ports, though the speculative community has no choice but to liquidate until there is clarity.
AgResource remains bullish as the US summer weather pattern is expected to form over the next three weeks, adding to the upside in the grain market.
Central US weather conditions are favorable, but most extended range models are forecasting warm and dry conditions, indicating that there will be significant weather warnings.
The U.S. ethanol industry has responded to cheaper corn and seasonally higher gasoline consumption, with spot ethanol production revenues about US$0.09 per gallon above of all costs, which is rare. Spot markets reflect a tightening of global balance sheets, not an easing.
Even minor additions or subtractions to the global exportable surplus will trigger rapid and violent price reactions from the CBOT.
Wheat futures ended sharply lower this week, with CBOT futures down $2.30 a bushel from the mid-May high. Recent price action shows how sensitive the market is and will be to perceived changes in supply and demand.
Proposals for a Humanitarian Grain Export Corridor in Ukraine and the release of some 4-5 million metric tons of old-crop Ukrainian supplies dominated price discovery last week, leading to a long, massive and widespread sell-off. .
However, AgResource maintains that the chances of this corridor being created do not exceed 5%, because Russia demands the lifting of sanctions. Without any concrete proof that this agreement will progress in the short term, the market must again subtract significant tonnages from the world exportable surplus.
The results of Egypt’s tender this week confirmed that the supply of Russian wheat will be rather difficult due to the lack of insurable freight. Additionally, weather threats remain intact in Europe, China and south-central Canada.
An early seasonal bottom is forming in wheat futures. A quick recovery awaits post-harvest as millers and importers battle for available supplies.
Soybean futures traded in the red for most of last week and were down 34.5 cents at Friday’s close. The U.S. Department of Agriculture announced last week that national soybean plantings have reached 66% completion, while progress this week is expected to reach 78-82% completion.
US and South American export premiums continue to trade well above last year. At the same time, bumper old crop sales in the United States are near record high at 365 million bushels and new crop sales are record high at 445 million bushels.
The United States is expected to export a record volume of soybeans over the next 12 months. This keeps the outlook for soybeans up on record demand. Key support remains below $16.50 for the July contract and $14.50 for the November contract. Any threat to US soybean yield in 2022 would push soybean production to new highs above $18.00.