Bank failures trip up grain markets (Grain Marketing)

(Editor”s note: John Hall is a professional commodities analyst.)

The grain markets got hit by another outside joker last week when two banks failed in California: Silicon Valley Bank and Signature Bank. It was reported on March 15 that additional regional players such as First Republic and even a big one, Credit Suisse, were being discussed with concern. Hopefully these concerns will be resolved by the time you read this. I understand some local banks have also seen concerns from their patrons. The stock market immediately reacted and hopefully will regain confidence by the time you read this.
Our president has assured us that everything is under control.
The second joker in the markets is the Black Sea grain deal.
This deal allows Ukraine to export grains through Russian controlled waters. In an article entitled: “Uncertainty Over Black Sea Grain Initiative Extension Continues to Impact Market” compiled by Keith Good and released March 16 at farmdoc, it was reported that Russia wants a 60-day extension rather than a long term deal. There are concerns that a short term deal will cause logistical issues. A short-term deal will also create continued chaos and potential volatility in our grain markets going forward.
Although Ukraine’s exports have fallen in part due to Russia’s land grab and war destruction, their exports are significant in that part of the world. The chart to the right shows this.
The third market influencer I have discussed are planting intentions for 2023. Allendale just released their survey that went to all of their nationwide clients and it tells a similar story. Their survey indicated that corn acres would increase 1.835 million acres to 90.414 million; bean acres would increase 0.318 million to 87.768 million acres and wheat acres will increase 2.968 million acres to 48.706 million.
As we all know, acres planted does not mean much if we do not get the rains to support the crop.
The National Oceanic and Atmospheric Administration released its three-month forecast which covers planting. Unfortunately it was released after my deadline. Their previous forecast suggested moisture suitable for trend line yield.
Pay attention here: If we reach trend line yields with additional acres, expect prices to fall. Have you done your marketing?
You may have heard that China bought corn last week. It was reported Chinese buyers bought 50.4 million bushels of corn in two separate sales. Rumors of Chinese buying had been noted for two weeks.
Their year-to-date buying totals 5.8 million tonnes. This is positive, however they are well behind their buys of 12.1 and 23.2 million tonnes at this same time the past two years. Allendale writes that these two sales are good news. However, they are not convinced our old crop export sales concerns are over. Allendale fears we will fall short of budgeted export sales which will cause ending stocks to grow and increase inventory carried forward into the new crop balance sheet.
On March 16, March corn futures closed at $6.29 and new crop December futures closed at $5.56. November beans futures were $13.23 and July wheat was trading at $7.09. Have you locked in any prices yet?
In other news, there appears to be concern that the African Swine flu is back in China. Huachuang Securities released a report showing ASF infections were up sharply after their Lunar New Year. Since we seldom get accurate information, I have not seen a source that indicates the location of these outbreaks. I did see that China has invested millions in mega hog farms. I cannot imagine the losses if one of these farms was infected. Huge hog losses would impact their corn needs.
(Note: I research material from Allendale, DTN, USDA, University Land Grants and other credible sources in compiling this article. It is not merely my opinion, but rather a consensus of experts in the trade. Looking for a marketing coach or someone to discuss strategies with? Contact me at jehgrain@gmail.com, or call 410-708-8781.)