Mark's Market Talk
Feb 28, 2022
Last week’s trade was wild enough to cause most of us to pull some hair out. Some of us do not have a lot of hair to start with so we hope to see things settle down for a while. The initial reaction Thursday following the Russian invasion pushed the grain trade higher. Corn and wheat were limit up for a time. Beans were a follower to start with before they broke lower. By the end of trade on Thursday old corn was still higher, but a long way from where it was earlier in the day. And then Friday happened. The board was already in the middle of a lot of things prior to the Russia news. Funds were rebalancing for the end of the month, March options were expiring, and the money flow was confused. Specs and funds were bouncing between the equity and commodity markets. Thursday morning commodities were the talk of the day. Suddenly world grain movement was in doubt. It was expected worldwide sanctions against Russia would shut down all grain movement from Ukraine and Russia. That caused grain to explode while the equity companies feared that same action would negatively impact world trade. However, the sanctions were not severe enough to do all of this. The overnight trade proved this as suddenly the flow of money reversed and the stock market gained back what it loss Thursday, while grains gave everything back plus more. After all of this corn still ended the week higher with May 3 cents higher and December up 18 cents. Meanwhile May beans were 19 cents lower at the end of the week while November was 49 lower. Where do the markets go from here? In the short term all attention will be on the Ukraine and what takes place there. Putin seems determined to finish what he has started. The rest of the world is condemning his actions, but today their actions have not had big enough teeth to stop it. Looking further down the road we have a planting intentions report coming out later this month. The USDA held their annual outlook conference last week and they quietly estimated less corn and soybean acres this spring and more wheat acres. But, like everything else there is a competing opinion and that has to do with crop insurance. The spring prices will be announced soon now that February is over. The spring bean price should be record high and some think this may pull acres back from wheat. Cotton will also be a challenger as it is currently an in-demand commodity. In the meantime, instead of worrying about a lost opportunity last Thursday morning, now is the time to rethink our marketing plans as the objectives may have changed. The one thing that has not changed is the need of money moving into the commodity markets to push prices higher. Beans have been riding the inflation train since the first of the year. That may not be over but as we saw Friday some longs appear to be nervous at this point and they need to a reason to reinforce their positions. South American weather has stabilized so attention will shift to the US weather predictions heading into spring. Meanwhile the corn market will be watching the movement of Ukraine corn and the yield potential of South American corn.