Weekly Commodity Market Update

Brownfield’s Weekly Commodity update featuring former OSU Extension Ag Economist Ben Brown.

This Week’s Topics:

  • Market recap
  • U.S. harvest overview
  • U.S. wheat planting
  • Ukraine production estimate up
  • The Fed holds interest rates steady… but
  • Reports to watch

Market recap (Changes on week as of Monday’s close):

  • December 2023 corn up $.10 at $4.81
  • November soybeans down $.19 at $12.97
  • October soybean oil down 3.64 cents at 58.75 cents/lb
  • October soybean meal up $1.60 at $392.00/short ton
  • December 2023 wheat down $.02 at $5.89
  • July 2024 wheat up $.03 at $6.43
  • September WTI Crude Oil up $0.36 at $89.62/barrelWeekly Highlights
  • US energy stocks dropped across the board this week: crude oil (-90 million gallons), gasoline (35 million gallons), and distillate supplies (-120 million gallons).
  • Ethanol production dropped 17 million gallons to 288 million gallons on the week- the lowest volume in nearly 5 months.
  • The Federal Reserve kept short term rates at a range between 5.25-5.5 during their September meeting.
  • It was a disappointing week for US ag export sales. Corn and wheats were on the low end of trade expectations while soybean sales were below the most bearish estimate. The deficit for export sales is growing fast.
  • Open interest positions of Chicago commodities were mostly up again this week. Corn, soybeans, soybean meal, and wheats saw increases. Rough rice and soybean oil were down.
  • Similar to last week, producers and merchants were active buyers of Chicago corn on the week decreasing their net short position of futures and options by nearly 42% after 42% the week before. Conversely, managed money traders were net sellers increasing their net short by nearly 10,000 positions. For soybeans, producers and merchants sold off 17.6% of their net long position with money managers also shedding 28,000 positions.
  • Friday afternoon’s USDA Cattle on Feed Report showed all US cattle on feed as of September 1 at 11.094 million head, or 97.8% of last year. The estimate was just above the average trade estimate of 97.7%. August placements were higher while marketings were lower.
  • US agricultural export inspections were up week over week for soybeans and wheat, but down for corn and grain sorghum. All were within trade expectations.
  • US corn harvest is now 15% complete with corn crop conditions showing some slight improvement as combines roll along. While it is unlikely that precipitation is having an impact on crop conditions at this point in the season- yield monitors (or reports from monitors) might. Illinois and Iowa both saw noticeable increases.
  • US soybean harvest is now 12% complete up 7% week over week. Conditions declining only slightly.
  • 26% of the Winter wheat crop has been planted so far- slightly behind last years pace and the average pace. Plantings are being the most in the eastern corn belt due to slow fall harvest. This is where most of the soft red winter wheat is planted.

Weekly Commodity Market Update

Brownfield’s Weekly Commodity update featuring former OSU Extension Ag Economist Ben Brown.

This Weeks Topics:

  • Market recap
  • USDA WASDE review
  • Tightness in soybean market
  • Soybean crush down
  • Harvest picks up
  • Reports to watch

Market recap (changes on week as of Monday’s close):
• December 2023 corn down $.14 at $4.71
• November soybeans down $.53 at $13.16
• October soybean oil up 1.05 cents at 62.39 cents/lb
• October soybean meal down $15.60 at $390.40/short ton
• December 2023 wheat up $.07 at $5.91
• July 2024 wheat up $.03 at $6.40
• September WTI Crude Oil up $3.41 at $89.28/barrel

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Best practices for buying farm inputs

Source: Jonathan LaPorte, Michigan State University Extension

Are farm input prices better now or should you wait to make a purchase?

Answering that question presents quite a challenge. Historically, farms that prioritize purchasing inputs early, on average lower total input costs. But this past year revealed better input prices were realized in the spring. As input prices continue to fall, largely driven by lower prices in commodity markets, last year’s strategy may still be a viable option. To decide which approach is right for your farm requires thinking strategically about your buying options.

Understanding market conditions

Understanding market conditions is essential when buying farm inputs. Markets are influenced by a number of different factors, such as supply chains and commodity prices. Recent improvements in supply chains and product availability certainly favor purchases now. Especially when purchases are compared to recent production years.

Declines in commodity market prices have also driven demand for lower input costs. But as market prices decline, concerns of eroding farm profits may increase further demand for lowering costs. If demand is strong enough, it may make waiting to buy a better option.

Long-term commodity projections lean towards lower prices unless production estimates significantly change. A significant change is often brought on by global or domestic events. These events can include global trade, wars, or poor weather, such as drought. Many parts of the country experienced drought in the early summer months. But it remains unclear how drought conditions will impact commodity prices.

When uncertainty exists in the markets, other options to assist decision-making should be explored. One such option is to compare differences between current and historical prices. For fertilizer purchases, a crop to fertilizer price ratio helps consider short-term profits compared to product use. The fertilizer nutrient price ($/lb.) is divided by the crop price. Crop prices are then adjusted to a per pound value. For example, corn prices are divided by 56, while soybeans are divided by 60. A higher price ratio indicates a more expensive fertilizer (see Figure 1 below).

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Farmer Sentiment Dips Amid Weaker View of Current Conditions

Source: James Mintert and Michael Langemeier, Purdue Center for Commercial Agriculture

U.S. farmers’ sentiment weakened in August compared to July as the Purdue University-CME Group Ag Economy Barometer dipped 8 points to a reading of 115. This month’s decline was fueled by producers’ weaker perception of current conditions both on their farms and in U.S. agriculture as the Current Conditions Index fell 13 points to a reading of 108. The Future Expectations Index also declined in August to a reading of 119, 5 points below a month earlier. This month’s Ag Economy Barometer survey was conducted from August 14-18, 2023. Although producer sentiment weakened in August, producers’ rating of farm financial conditions changed little this month, as the Farm Financial Performance Index declined just one point to a reading of 86. However, producers’ perspectives on farm financial conditions were noticeably weaker than a year earlier when the index stood at 99. Weaker producer sentiment this month did translate into a decline in the Farm Capital Investment Index. The investment index fell to 37, eight points lower than in July and two points lower than a year earlier. Among producers with a negative view of the investment climate, the increase in prices for farm machinery and new construction along with rising interest rates were the two most commonly cited reasons for their negative view. In a related question, over half (60%) of producers in this month’s survey said they expect interest rates to rise in the upcoming year.

When asked about top concerns for their farming operations in the next 12 months, producers continue to point to higher input prices and rising interest rates as their top two concerns. Higher input prices was chosen by one out of three (34%) and rising interest rates was chosen by one out of four (24%) survey respondents as a top concern. Even though crop prices weakened significantly this summer, producers ranked declining commodity prices as their number three concern, chosen by one out of five (20%) producers.

Click here to download the full report

 

 

Weekly Commodity Market Update

Brownfield’s Weekly Commodity update featuring former OSU Extension Ag Economist Ben Brown.

This weeks topics include:

  •  Market recap
  • Harvest market outlook
  • Hot, dry weather impacting soybeans
  • Wishlist for new marketing year
  • Reports to watch

Market recap (changes on week as of Monday’s close):
– December 2023 corn down $.15 at $4.81
– November soybeans down $.42 at $13.63
– October soybean oil down 1.00 cent at 63.97 cents/lb
– October soybean meal up $.50 at $400.20/short ton
– December 2023 wheat down $.19 at $5.98
– July 2024 wheat down $.19 at $6.49
– September WTI Crude Oil up $4.04 at $83.74/barrel

Weekly Highlights:
– US crude oil stocks were down again last week continuing a trend over the last month. The hurricanes hitting the US southeast have cause some temporary shutdowns that are expected to tighten domestic stocks again next week.
– Ethanol production pulled back to 296 million gallons on the week- the lowest level in just over 3 ½ months. The reduction in ethanol production and higher gasoline use decreased ethanol stocks another 50 million gallons providing support to ethanol prices.
– Ag export sales were mixed, supportive for feed grains while being bearish for soybeans. There were 39 million bushels of 2023/24 corn export sales- the largest volume of the marketing year. For soybeans, there were net cancelations of soybean sales for the current marketing year with below average new crop sales.
– Total corn consumed for fuel in July totaled 454 million bushels up 3% from June and 2% from July 2022.
– Soybeans crushed for crude oil in July totaled 184.8 million bushels up 10 million from June and 4 million from July 2022. The July 2023 volume was also above the average trade guess of 181.2.
– Open interest positions of Chicago futures and options were mixed on the week: Chicago wheats-flat, corn- -12.7%, soybeans- +1.2%, cotton- +4.4%, and rough rice- +3.8%.
– Managed money traders bought 18.8 thousand net corn contracts after being big sellers the last couple weeks. Money managers also bought net positions of soybeans to increase their net long 32.8 thousand contracts.

Farmers Remain Cautiously Optimistic About Agricultural Economy

Source: James Mintert and Michael Langemeier, Purdue Center for Commercial Agriculture

Click here to download the full report.

Agricultural producer sentiment improved slightly in July as the Purdue University-CME Group Ag Economy Barometer rose two points above its June reading to an index value of 123. This month’s two-percent rise in the barometer was primarily the result of farmers’ improved perception of current conditions on their farms as the Index of Current Conditions rose 5 points to a reading of 121. The Index of Future Expectations changed little compared to June, rising just one point to 124. This month’s Ag Economy Barometer survey was conducted from July 10-14, 2023.

Farmers’ rating of financial conditions on their farms was virtually unchanged in July, compared to June, as the Farm Financial Conditions Index rose just one point to 87 vs. a reading of 86 in June. Looking back to May, however, the percentage of producers rating their farm’s financial performance as better than last year improved from 14% to 17%, while those rating financial performance as worse than a year ago fell from 38% to 30% of respondents. When asked to look ahead one year, there was a one percentage point increase in farmers expecting farm financial conditions to improve in July vs. June and, correspondingly, a one-point decline in the percentage of farmers expecting conditions to worsen. And farmers’ longer-term perspective on the U.S. agricultural economy improved somewhat in July, as the percentage of respondents expecting bad times in the upcoming 5 years fell from 41% in June to 39% in July.

Figure 1. Purdue/CME Group Ag Economy Barometer, October 2015-July 2023.
Figure 1. Purdue/CME Group Ag Economy Barometer, October 2015-July 2023.
Figure 2. Indices of Current Conditions and Future Expectations, October 2015-July 2023.
Figure 2. Indices of Current Conditions and Future Expectations, October 2015-July 2023.
Figure 3. In a year, will your farm operation be better off financially, worse off, or about the same as now?, October 2015–July 2023
Figure 3. In a year, will your farm operation be better off financially, worse off, or about the same as now?, October 2015–July 2023

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Weekly Commodity Update

Brownfield’s Weekly Commodity update featuring former OSU Extension Ag Economist Ben Brown.  This week, Will and Ben discuss ethanol production and continued interest rate pressure.

Topics:
– Market recap
– Corn demand, ethanol production up
– Export sales remain unimpressive
– Federal Reserve action moving forward
– U.S. crop conditions
– Reports to watch

Market recap (Changes on week as of Monday’s close):
– September corn down $.49 at $5.04
– December 2023 corn down $.43 at $5.13
– September soybeans down $.83 at $13.70
– November soybeans down $.75 at $13.31
– September soybean oil down 5.10 cents at 63.11 cents/lb
– September soybean meal down $6.60 at $423.80/short ton
– September 2023 wheat 80 $.80 at $6.65
– July 2024 wheat down $.73 at $6.91
– June WTI Crude Oil up $3.51 at $81.88/barrel

Weekly Highlights
• Finally, one part of US corn demand is showing some life. US weekly ethanol production rose to a 28-month high last week at 322 million gallons.
• The Federal Reserve raised interest rates by a quarter of a percentage point on Wednesday, citing still elevated inflation as a rationale for what is now the highest US central bank policy rate in 16 years.
• Weekly US agricultural export sales were neutral last week with corn, soybeans and collective wheats up week over week. Sorghum was down week over week. Everything was within expectations.
• Open interest positions were down for corn (-2.8%), soybeans (-0.5%), soybean oil (-6.6%), and soybean meal (-0.1%) while being up for cotton (+11.5%), and rough rice (+15.3%).
• In the wake of renewed Russian attacks in Ukraine money managers bought back 73,529 positions of Chicago corn giving the commodity a net long while producers and merchants were sellers of 47,896 contracts. Managed money traders added 24,925 positions to their already long position while producers and merchants sold another 33,410 positions.
• US agricultural export inspections were on the higher end of all expectations and relatively strong compared to recent weeks. Wheat exports exceeded all pre-report expectations.
• US crop conditions largely fell more than market traders had expected this week. Corn and soybeans were down 2% while spring wheat was down 7% all compared to an expected 1% week over week decline, cotton fell 5%.
• 80% of the US winter wheat crop has been harvested compared to 81% at this time last year and a three-year average of 83%.

What Factors are Driving the Current Grain Market Volatility?

By: Seungki Lee, Assistant Professor, Agricultural, Environmental, and Development Economics, The Ohio State University

Click here to access PDF version of the articles

During the last few weeks, grain futures markets have showed significant swings in response to several events: the expanding drought, USDA’s June Acreage Report, and the looming Black Sea Grain deal. The heightened uncertainty in the commodity market is causing concern among US growers about market prospects. Given the current influence of multiple variables on prices, relying solely on price indices may lead to a misinterpretation of the market outlook. Therefore, in this article, we will look into three primary factors individually that have the potential to impact the market in the upcoming months.

  1. Expanding Drought Conditions and USDA’s July WASDE Report

The first and very perceivable force that raises uncertainty is the domestic growing condition – the expanding drought in the Midwest. A striking example is that 98% of Minnesota’s crop land are currently experiencing drought (Brown, 2023). USDA’s July WASDE report adjusted down corn yield to 177.5 bushels per acre, 4 bushels down from last month, whereas soybean yield forecast was not changed. However, a substantial change in the acreage projection (corn up and soybean down) in the June USDA’s Acreage Report mainly determined the overall production estimates. This indicates that the market has not fully accounted for the potential yield reduction caused by the drought. Despite the undeniable impact of the drought, the exact extent of harvest reduction remains uncertain, further contributing to market unpredictability. Even though commodity prices hold steady, growers can be largely worse off (Probert et al., 2023). Table 1 provides a quick summary of July WASDE updates for new crop corn, soybean, and wheat.

Table 1. Summary of July WASDE Estimates

  Corn Soybean Wheat
Marketing Year 23/24F ∆Jun ∆22/23 23/24F ∆Jun ∆22/23 23/24F ∆Jun ∆22/23
Yield (bu/acre) 177.5 -4.0 +4.1 52.0 ** +2.5 46.1 +1.2 -0.4
Production 15,320 +55 +1,590 4,300 -210 +24 1,739 +74 89
Total Supply 16,747 +5 +1,615 4,575 -185 0 2,449 +51 -21
Feed & Residual 5,650 +225            
Ethanol 5,300 +75            
Crush       2,300 -10 +80      
Domestic Use 12,385 +305 2,426 -10 +85 1,132 +20 +1
Exports 2,100 +450 1,850 -125 -130 725 -34
Total Use 14,485 +755 4,276 -135 -45 1,857 +20 -33
Ending Stocks 2,262 +5 +860 300 -50 +44 592 +31 +12
Price ($/bu) 4.80 -1.80 12.40 +0.30 -1.80 7.50 -0.20 +1.33

Note: The default unit is a million bushels if not specified.

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Coffee & Grain Webinar Recap – Tight Supply Drives High Commodity Prices

On Monday morning’s Coffee and Grain Zoom, Dr. Seungki Lee (Assistant Professor in the Department of Agricultural, Environmental and Development Economics) discussed  the grain market outlook and the new crop prospects based on the USDA February World Agricultural Supply and Demand Estimates (WASDE) report. In all three major crops – corn, soybean, and wheat, strong prices are projected in the 2022/2023 market mainly due to the tight supply. Additionally, Brazil was singled out as its production can swing both the 2022/2023 and 2023/2024 commodity markets.

Click here to read Dr. Lee’s Summary Report

 

Evaluating the Prevent Plant Option

By: Eric Richer & Chris Bruynis, OSU Extension Educators

Planting progress goes differently every year and in each part of the state. This year is no different in Ohio. Some places got in early and are finished. Others had their ‘normal’ planting progress with ‘normal’ Mother Nature breaks, perhaps with some re-plant needed. And still others have not had ideal conditions all spring to plant.  As such, we have received some recent calls regarding the mechanics and economics of utilizing the Prevent Plant through crop insurance this year in certain parts of the state. First and foremost, we are not crop insurance agents, so speaking with your agent is of utmost importance. In this article, we will walk through an example on the economics of electing Prevent Plant.

In Ohio, once you arrive at the final plant date of June 5 for corn (already passed) and June 20 for soybeans, you basically have 3 options in a corn scenario: Continue reading