(Let there be (more) light!)
We are living in wild times, but at least there will be more sun after the weekend thanks to some much-anticipated daylight savings. It’s a true bright spot in an otherwise sour world.
The markets are trading in huge trading ranges. One minute it’s up the next down hard. These are huge swings. Limit up and limit down moves, yes I’m talking about wheat. Did we just see the peaks? Peace talks and headlines of trying to find diplomatic resolutions cause markets to pull back...but are they getting ready to ramp up again?
Grab a coffee or bevy of choice (after all it is Friday) - Here's the Farmbucks weekly debrief. Better yet download Farmbucks and get the skinny on all the latest prices. They will be eye-catching no matter what, we promise.
Weekly Market Recap:
- This week we saw wheat markets back off and consolidate before creeping back up today as the Russian attacks have intensified. Russia widened its attacks on Ukrainian cities. Airports and western Ukrainian cities are now targeted for the first time. It appears to be an attempt to cut off the supply lines of Ukrainian aid.
- Russian convoy and troops are deployed and gathering around Kyiv. Speculation that an attack on the capital city is imminent. (As tensions rise markets rally.)
- Earlier this week, the U.S. announced it was banning imports of Russian oil, natural gas and coal. The U.K. and EU announced plans to wean off Russian energy. In response, the Russian Deputy Prime Minister threatened to cut of gas supply to Europe if governments sanction energy imports warning oil could surge to '$300/barrel'. Russia also threatens to cut off natural gas flow from Russia to Germany through the Nord Stream 1 pipeline.
- Ukraine bans export of ag goods including wheat, millet, sugar, oats, meat.
- Wednesday: USDA report was not a big market mover.
Deals of the week:
(Wheat highs were on Monday, Canola highs on now)
CANOLA - $26.00+ old-crop and $21.25+ new-crop
CWRS - $14.60+ old-crop or $13.30+ new-crop
CPSR- $14.90+ old-crop or $13.10+ new-crop
Canola: Stands out! Canola continues to show us strength as it made new highs, trading mostly in the green all week! What's behind the push higher you ask? Well, for starters, last year's drought had a huge effect on our total production and the continuous South American production cuts to soybeans have proven significant. Rising oil and energy prices are lending support to the biofuel markets. Earlier this week, Indonesia tightened its restrictions on palm oil exports, increasing mandatory domestic sales of palm oil from 20% to 30%. There are also growing concerns over Ukraine not being able to harvest its winter canola or plant any spring sunflowers, most of which are grown in warzones. All of this has contributed to the rally in both old- and new-crop futures. Check out your local prices: there are many $26/bu old-crop offers and also $21.25/bu new crop offers.
Soybean futures have not performed strongly, although they are trading in exceptionally high territory. Futures are failing to make new highs despite the stop to sunflower oil exports from Ukraine, higher vegetable oils and crude oil markets. CONAB released its latest Brazilian production totals and pegged soybeans down at 122.8 MMT down from 125.5 MMT the previous month. South American weather has improved enough to stabilize the crop where it's no longer worsening.
Wheat: What a ride! Wheat makes new highs on Monday. Those Monday moves saw CPS bids surge to $14.93/bu March-July, $13.15/bu Dec. and outbid old-crop CWRS. For comparison, 1 CWRS 13.5 was fetching around $14.65/bu June-July and $13.37/bu Dec.
After posting six limit-up days, Chicago wheat finally turned and fell Tuesday and took the other two down with it. Wheat traded huge ranges as limits were expanded to $1.30 for Chicago and Kansas. Profit-taking and more hope arriving from peace talks and potential de-escalation type of news headlines (like Zelensky rumouring to agree to not join NATO) are partially behind the moves lower.
Wednesday’s USDA report did lower Russian wheat export by 3 MMT and Ukraine by 4 MMT but then increased Australian by 2 MMT and India by 1.5 MMT, so, in essence, providing some balance.
We all know Russia and Ukraine grow a lot of wheat and play an important part in the global supply. Most of Ukraine's wheat production is winter wheat and with the ongoing war, it remains unknown how much of it will actually be harvested. Fuel and labour are already scarce. There is war debris like metal and potentially unexploded bombs lying in fields. Who will want to go harvest fields when war is happening all around them? How safe is it? Roads and bridges are destroyed. Then, there are rumours that Putin may limit Russian wheat exports in retaliation for the sanctions placed on his country. It is almost certain that business will not resume “as usual” when all this is said and done and trade flows will change.
Weather markets are right around the corner. La Niña and the drought across the southern Prairies and across the U.S. Plains and winter wheat growing areas such as Oklahoma, Kansas and Texas, is not going away as fast as meteorologists originally thought. The EU is estimating a 9% increase in wheat production this year, but they too are experiencing drier-than-normal conditions. China's winter wheat is reported to be extremely bad and potentially the “worst in history.”
After all said and done, it was nice to see the three wheat markets make a slight comeback of 20-30 cents today. One thing is for sure, more volatility is ahead. Another selling opportunity may be right around the corner.
Barley: Barley remains strong. Ukraine is a large barley exporter, in fact, the world’s second largest. If they can’t get a crop in, there will be good opportunities and demand for our new-crop barley.
Corn futures have also been strong. China's demand is lending a hand of support. Just keep in mind there is still lots of corn in the world, South America could produce a record large crop and the U.S. is expected to grow a big crop, too. Concerns are mounting over the situation in Ukraine as we inch closer to its planting season; however, much of this may already be priced into this high-flying market.
Peas: Peas bids are climbing or holding $18/bu, green peas $15/bu. There is additional demand for nearby export. Ukraine's 2022 pea crop is questionable and unlikely to be planted. Russian peas typically supply the European feed market, but with EU sanctions, most of their peas will probably head to China. In exchange, Canadian peas may head to the EU. As mentioned, trade flows will be changing.
Oats: Oat cash bids steady.
Around the farm: Not a tonne, I simply plan to stay warm, drink tea (fun fact: I don't drink coffee unless it has some adult juice in it), watch markets, find you the best bids and market my own grain. I’m getting ready to move grain next week but first will enjoy some family weekend time! I hope you all have a fun-filled weekend!