Progressive Ag Marketing Report with Lilja

I was listening to a presentation a few years ago where the speaker stated, “Free Trade Agreements. The Affordable Care Act. Anytime the government names something, read it as the opposite.” The same can now be said about “The Inflation Reduction Act.” It had the opposite effect, adding fuel to the inflation fire as the economy was starting to recover from the pandemic. Interest rates rose rapidly and now we are hearing and reading news reports about bank failures. The most ironic thing that I saw this week was former Congressman Barney Frank, who helped co-author the Dodd-Frank banking regulations following the 2008 financial crisis was a well-paid board member of the now defunct Signature Bank. Greg Becker a former board member of the San Francisco Federal Reserve was the CEO of the now defunct Silicon Valley Bank. Evidently, Mr. Becker’s Silicon Valley Bank didn’t have a chief risk officer for many months in 2022 and it wasn’t like the San Francisco Fed was doing anything about it anyhow. He’s being investigated by the Justice Department for selling his SVB bank stock prior to seizure. You can’t make this stuff up. Maybe we should rename the Federal Reserve to the Federal Indulgence.

Energy and financial markets were very volatile on nervousness from the recent bank insolvencies. Crude oil broke under $71.00 support levels and suffered steep losses on the Ides of March. This opens up more downside potential and is typically not a good sign for grain prices. The monthly report from the International Energy Agency stated that global crude oil supplies will comfortably exceed demand in the first half of 2023. They stated global supplies for January were 7.8 billion bbl, the highest in 1 ½ years. Weekly EIA data showed crude oil inventories +6.9% above the seasonal 5-year average, gasoline inventories -2.5% below the 5-year average and distillate inventories -7.8% below the 5-year average. Implied US gasoline demand was 0.4% higher than last week but was 6.2% below the 5-year average for the week.

Corn futures were positive on the week as the recent sell off saw China come in and start buying at reduced prices. USDA announced a fourth consecutive corn sale to China on St. Patricks Day in the amount of 191,000 MT. The total of the 4 sales this week was 2.11 MMT or 83 million bushels. The delayed Commitment of Traders report ending February 28th showed the funds liquidating a record 147,293 contracts that week! This is the smallest net corn long since September 2020 and clearly the funds have lost interest in holding corn contracts.

The Buenos Aires Grain Exchange cut Argentina corn estimates from 37.5 MMT to 36.0 MMT. Dr. Cordonnier cut his Argentina corn estimate by 3.0 MMT to 37.0 MMT. USDA is currently at 40.0 MMT. Brazil’s corn crop estimates from various parties are anywhere from 121.0 MMT to 126.6 MMT with USDA currently at 125.0 MMT. AgRural estimates Brazil second crop corn at 82% planted vs. 94% last year. Parana is 61% planted, well behind the 5-year average of 83% and the slowest in over 15 years.

Ukraine’s farm ministry estimates winter wheat planted area will be down 834,000 hectares (2.06 million acres) and corn down 451,000 hectares (1.1 million acres) from last year. They estimate that rapeseed, sunflowers and soybean plantings will increase as they have been more profitable and show slight total production increases from last year. Ukraine reports 26,000 hectares of spring wheat planted which is an early start.

Kansas winter wheat conditions improved +2% to 19% good to excellent, 31% fair and 50% poor to very poor. Texas winter wheat conditions improved +6% to 23% g/e, 33% fair and 44% poor to very poor. 22% of the crop is headed vs. 12% average. Oklahoma declined -1% to 29% g/e, 28% fair and 43% p/vp. 22% of the crop is jointing vs. 21% average. Colorado declined -4% to 36% g/e, 41% fair and 23% p/vp.

Progressive Ag Marketing, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Progressive Ag Marketing’s Research Department.

Tom Lilja is an employee of Progressive who writes this column for the Times-Record.