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And nothing else matters…

08 November 20216 min reading

“Wheat futures in the US rose to multi-year highs amid concerns over limited global supplies and strong export demand, which are pushing prices higher. Rising wheat prices supported the corn futures quotes. The basis is still holding, but we are again witnessing a struggle. Wet corn, expensive gas, farmers with fertilizers... Everyone is nervous. I just want to remind you that nothing is infinitely long. Then China will come. And Chinese pigs. And nothing else matters.”

Elena Faige Neroba
Business Development Manager
Maxigrain

Sometimes people and markets react late. The water would have understood everything, everyone seemed to be expecting this, and then someone came and loudly announced it as news. And the market rushes again. Aren't you tired of this?

Wheat futures in the US rose to multi-year highs amid concerns over limited global supplies and strong export demand, which are pushing prices higher. Spring wheat hit its highest level since June 2011 amid expectations that importers will soon start looking for high-protein wheat supplies. What's new here? We have already discussed that there is no durum and that this is the “year of wheat”. Doesn't anyone read us? This is their mistake.

Chicago winter wheat futures have been buoyed by worries about the newly planted crop. The most active contract for soft red winter wheat rose to its highest level since February 2013, and for hard red winter wheat, it peaked since May 2014.

Winter wheat is approaching a dormant period after sprouting. Rainy weather in the eastern US Midwest may have prevented farmers from planting planned acreage. In Europe and the Black Sea region, the situation is also not ideal, but it is too early to draw conclusions - the critical moments are still far away, and in winter nobody canceled the snow.

Rising wheat prices supported the corn futures quotes, which are showing a third day in a row, with the most active contract peaking since August 17. The basis is still holding, but we are again witnessing a struggle. Wet corn, expensive gas, farmers with fertilizers...Everyone is nervous.


Soybeans fell on weakness in crude oil futures, which continued to correct from a seven-year high reached the day before. Many agricultural crops are used as raw materials for biofuel production. These are ethanol, biodiesel and hydrogenated vegetable oil. This also applies to soybeans, from which biodiesel production is possible. This fact seriously affects the pricing. During periods of sustained growth in oil prices, biofuel feedstock production begins to compete seriously with food production. When oil prices become cheaper, this implies a decrease in the demand for soybeans for biodiesel production. And corn for ethanol. But here's the thing - compound feed. More meal will be needed because the price of amino acids imported from China had risen a lot. so US feeder increased soybean meal. And not only in the States, although the market continues to look at them - all the money lives there.

ADM and Gevo - a pioneer in converting renewable energy into low carbon, high calorific liquid hydrocarbons - have signed a memorandum of understanding to support the production of cleaner aviation fuels (SAF) and other low carbon footprint hydrocarbon fuels. About 900 million gallons of ethanol produced at ADM's dry alcohol plants in Columbus, North Carolina and Cedar Rapids, Iowa, and its facility in Decatur, Illinois, will be recycled using this technology, resulting in approximately 500 million gallons of SAF and other renewable hydrocarbons will be produced.

Ethanol producers' margins in the US are once again positive, supporting corn prices on the back of declining inventories at Cushing and rising oil prices. Oil prices climbed to Monday weekend, hitting multi-year highs, aided by limited global supply and rising fuel demand in the United States and beyond as the economy recovers from the pandemic-triggered recession. AgResource estimates the US ethanol industry is operating at 96% of full capacity, with production expected to remain at or near capacity for the foreseeable future.

A similar situation is observed in Brazil, where ethanol prices are rising. Due to the shortage of corn at the moment, it is possible that Brazil will import American ethanol. Today Brazil continues to contract corn in Argentina - 8 more vessels were bought for November and December.

The corn lineup in Ukraine for October 2021 is at the level of October 2020 exports (~ 1.8 MMT), although the harvest is estimated to be ~ 25-30% higher than last year. Thus, if part of the lineup goes into November, it would mean an even slower pace of exports on an annualized basis (as a percentage of production) at the same absolute rates. Cleaning in Ukraine, as in a number of EU countries, is 2-3 weeks behind schedule, and there is a problem with increased moisture in uncleaned areas. The situation should stabilize during November. But "a lot" does not mean "good quality". And we repeat the race for quality - as in barley, as in wheat.


Wheat in China continues to rise in price, the spread between corn and wheat is narrowing. Due to the abundance of precipitation in the main wheat growing regions, slightly more than 20% of the area was sown on October 20, which is 13% less than in the same period last year. The State Reserve of China is trying to stabilize prices by selling stocks of 2018 and 2020, but this does not help much to contain the price of wheat.

The price factor influences the choice of corn as the main raw material for feed production. In some regions, the price of wheat has already caught up with the price of corn. The volume of transactions concluded when selling from the State Reserve is about 30%, which means the purchase of wheat, mainly by the processors themselves, without the active participation of traders.

Changes in the accounting policies of the central banks of the main countries participating in the market also affect the cost of grain. While Argentina and Australia are just starting to ease their grain, they are alre

ady selling in January and February. And they say thanks to the drought in Turkey, Syria, and the countries. There is a price, and it doesn't matter why it is.I just want to remind you that nothing is infinitely long. Then China will come. And Chinese pigs. And nothing else matters.

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