Market Thoughts 3/21/2022
All the chaos that is 2022 has created some unique opportunities – SB&B Foods, Casselton, ND advised recently that premiums for Natto nonGMO beans are now as high as $6.00 per bushel. With input costs for conventional beans soaring that may be an attractive option. If interested, we can get more info.
May corn lost 20’6 to close the week at 741’6. This represents the first weekly loss for corn since January with it now being two weeks since corn last made a contract high. May beans lost 8’0 cents to close at 1668’0. Similar to corn, beans have gone two weeks without finding a new contract high and despite an overall sense of extreme volatility in commodities, beans have actually traded in the same 50 cent range for all of March. May spring wheat lost 10’0 to close at 1060. This is the second straight weekly loss, following last week’s huge collapse. Wheat continues to feature massive volatility/large daily trading ranges with the May contract falling all the way to 1026 on Thursday before recovering to close the week.
A couple of fundamental stories contributed to weakness last week. Ideas that Russia and Ukraine were closing in on some sort of negotiated end to the war weighed on things right out of the gate. But perhaps more importantly and flying somewhat under the radar was an abrupt and massive Covid outbreak in China. Portions of that country are again in severe lockdown and traders are left to ponder implications to global demand. Chinese equity markets were pummeled to start the week, suffering their worst losses since the 2008 financial crisis, and that weakness certainly weighed on grains. So what happens next? If markets have fully discounted the initial shock of the war, truce ideas are being tossed around, Covid is raging and South American weather is not threat it seems reasonable that grains would struggle to hit fresh highs and perhaps stage a deeper correction over the next few weeks. But we don’t think prices can retreat too far before a single acre is planted in the U.S. with the entire global balance sheet counting on large North American crops. And we also don’t think there is much chance for a quick/clean end to the war. Putin hasn’t shown any sign of a willingness to reach a settlement and it seems like the only possible outcome is a complete military victory for one side. And despite our inclination to not bet against the farmer, evidence is mounting of the severe challenge Ukraine will have with planting, harvesting and shipping a crop even if hostilities ended today. A correction now fits with the seasonal in our two analog years but just like those years, we still see a high probability of higher prices this summer.
Dec corn continues to follow most closely the seasonal pattern of 2008, though at much higher prices. That year featured a sharp two week correction in March before quickly resuming its uptrend, ultimately topping out just below 800 in June.
MAY SOYBEAN DAILY CHART