Ag Finance
May 2, 2022 www.hpj.com AG FINANCE 7
Grain markets have strong fundamental support heading into summer
Grain futures have had a tremendous price rally so far in 2022 and rightfully so. Poor weather in South America, the war in Ukraine and the fact that there are nine United States grain and oilseed commodi- ties with tight ending stock supplies has justified every inch of this rally. Nearby corn and soybean futures have been inching toward the all-time highs, which were made in 2012, during a drought. These are impressive values, yet without new, fresh bullish news, prices have little reason in the short term to take out those 2012 price highs. Grain futures prices may ebb and flow over the coming weeks, yet overall remain funda- mentally well supported at these loftier price values. Near the 2012 price highs The all-time high on the continuous front-month soybean futures chart was $17.94 3/4 a bushel on Sept. 4, 2012. On Feb. 24, 2022, of this year, the March 2022 soybean contract raced as high as $17.65 a bushel in response to the war in Ukraine. Also, on that day the May 2022 soybean futures contract reached $17.529-1/4. Therefore, the $18 a bushel threshold for soybeans continues to be termed as the major overhead resistance on charts. When looking at corn futures, recently the May 2022 corn futures price rallied as high as $8.19-3/4 a bushel, which is nearly 25 cents shy of the previous 2012 high. The continuous front-month corn futures chart traded up to $8.43-3/4 a bushel on Aug. 6, 2012. Chicago wheat futures did not have an all-time price contract high set during the drought of 2012, but rather in 2008. How- ever, the continuous front-month Chicago wheat futures chart already cruised past its previous all-time high of $13.34 1/2 a bushel in February 2008. Friendly fundamentals that are keeping grain futures prices supported It is the combination of tight U.S. grain carryout out, smaller than expected crops in South America, and the Ukraine war, which has spurred prices this high so far, should keep prices supported as we head into summer. Last fall I alerted you to the fact that there were nine U.S. grain and oilseed com- modities, which had ending stock supplies substantially reduced from just two years prior. While it is normal to have cuts to ending stocks here and there throughout history, it is not normal to have nine com- modities with tight ending stocks all at the same time. Corn, soybeans, winter wheat, spring wheat, canola, cotton, barley, oats and sor- ghum all have tight ending stock supplies due to a combination of strong demand over the past two years and imperfect crop grow- ing conditions last year. When ending stocks get smaller, or are perceived to be getting smaller, commod- ity prices have a tendency to rally. With ending stocks tight for grains in the U.S., with little relief in sight, grain and oilseed commodity prices look to remain well supported for the time being. Global ending stocks of corn and soy- beans are also trending lower as we head into summer of 2022. The world needed abundant production of South American corn and soybean crops. We now know this was not the case, with South Ameri- can soybean supplies nearly 15% lower than the potential it had, which justified the price spike higher for grains during late January and early February. This also resulted in global ending stocks of corn and soybeans being adjusted lower as well in subsequent U.S. Department of Agri- culture reports. Looking at the northern hemisphere as we head into summer, the world needs Europe, Canada, U.S., China and Russia to have large crops this summer during the growing season. However, cue the threat of a large portion of the Ukraine crops not getting planted, and the world is teetering on edge of dramatically lower ending stocks into 2023. Therefore, there pressure is on for the U.S. to have a record crop of nine grain and oilseed commodities this upcoming produc- tion season. Every weather forecast, satellite imagery, and USDA report will be scruti- nized from now through summer. The next fundamental grain update from the USDA The May USDA World Agriculture Supply and Demand report, scheduled for May 12, will have the next update on the 2021-22 crop year, but also will show the first glimpse of the 2022-23 data sheet. It will be interesting to note how global demand and supplies will be accounted for with the ongoing war in Ukraine. Right now, trade is assum- ing that two-thirds of that Ukraine crop will be planted, if that ends up not being the case, then the world will continue to turn its attention to the U.S. growing sea- son, and other northern hemisphere crop areas to make sure that perfect growing conditions exist. There is no room for error this year for crop production. None. Not here in the U.S. or around the world. Editor's note: Naomi Blohm is a mar- keting advisor with Total Farm Marketing by Stewart-Marketing and she is a regular contributor to the Iowa PBS series "Market to Market." She can be reached at naomi@ totalfarmmarketing.com.
Market Outlook
Naomi Blohm
Storms fan fires, create tornadic conditions
By Kylene Scott and Dave Bergmeier Farmers, rancher and rural communities continue to deal with impact of wildfires, high winds and tornadoes and on the bull's- eye were New Mexico, Nebraska and Kansas. New Mexico The incident maps on https:// inciweb.nwcg.gov show that the majority of the reported wildfires are in the western United States. New Mexico has nearly a dozen fires listed on the map, with one fire-the Calf Canyon/Hermit's Peak fire recently being combined. Together this fire has burned nearly 60,000 acres as of April 26 and has only reached 12% con- tainment. The Calf Canyon fire began early afternoon April 19, approximately 18 miles northwest of Las Vegas, New Mexico, while the Hermit's Peak began April 6 about 12 miles from Las Vegas. In the April 26 updates online about the fire, officials believe the fire containment won't be achieved until late July. Pine trees with heavy dead presence are fueling the fire. The live plants are still in dormancy and aren't aiding suppression efforts. According to the report, fuels are fully available due to lack of win- ter precipitation and unseasonably warm, dry and windy conditions. On April 25, elevated fuel moisture kept the fire behavior in check. Burnouts produced the most fire behavior with moder- ate backing and flanking. Weather forecasts are expecting light snow flurries and lower temperatures along the area, with lower tem- peratures. A slight chance of thun- derstorms enters the forecast on April 27, and critical fire weather conditions make their return April 28, persisting through April 30. According to the New Mexi- co governor's office press release, April 25, Gov. Michelle Lujan Grisham was joined on a call with federal officials. Also on the call were Sen. Martin Heinrich, Sen. Ben Ray Lujn, and Congress- woman Teresa Leger Fernndez. Also present were leaders from the White House, the U.S. Depart- ment of Agriculture, the U.S. For- est Service, the Department of Interior and the Federal Emer- gency Management Agency, as well as New Mexico State Forester Laura McCarthy and New Mexico Department of Homeland Secu- rity and Emergency Management Deputy Secretary Kelly Hamilton. Lujan Grisham requested 25 additional federal support per- sonnel to coordinate emergency response and recovery efforts. The governor and State Forester McCarthy emphasized the need for additional ground resources, particularly in advance of anoth- er severe wind event expected later in the week. McCarthy also underscored the need for a comprehensive interagency post-wildfire response, includ- ing addressing potential flooding caused by monsoons. Four Fire Management Assis- tance Grants have been declared for New Mexico wildfires so far- federal officials also highlighted new funding for wildfire preven- tion made available by the Biparti- san Infrastructure Law. Heinrich, Lujn, and Leger Fernndez reiterated their sup- port for delivering additional federal resources and under- scored the deeply personal rami- fications of wildfires for historic communities throughout New Mexico that are most often with- out resources for recovery. The delegation members also empha- sized the importance of ensur- ing that national and regional resources are appropriately avail- able and disbursed throughout affected states and communities. The governor and members of the congressional delegation jointly reiterated their agreement on the crit- ical importance of prescribed burns and fuel reduction, but stressed the need to mitigate the risks of federal prescribed burns during the state's spring windy season. In a press release April 26, Lujan Grisham announced All Together NM Fund is collecting donations for New Mexicans impacted by wildfires burning across the state. The funds will be distributed to affected New Mexico communities in coordination with local organizations for emergen- cy shelter, food and water distribution, and access to medical support. "It's no surprise that New Mexi- cans from around the state have been reaching out asking how to support their neighbors-that's the spirit of our state and our compassion for our communities," Gov. Lujan Grisham said. According to the release, the program was launched by the gov- ernor in collaboration with the See Wild fires , page 13
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