MARION, Iowa – The unfolding crisis in Ukraine was a major factor in today’s corn trade, while the soybean market remains fixed on harvest progress in South America. Today’s analyst is owner of Ag Management Services Rich Balvanz.
The key thing is that the corn market has fears about whether or not Ukraine will over the longer term be able to fulfill its export commitments, and whether that amount of corn, now that Ukraine is one of the top exporters in the world, will essentially be held off the market for a time or whether it will continue to move into global market channels. It’s really too early to know that for certain, but risk premium is being added into the corn market at this point, simply over that concern, and we’re seeing the same thing in a more dramatic way in the wheat market, which is up more than 30 cents today.
The soybean market is finding itself in a follower role today, rather than a leadership role. It’s not nearly to any degree affected by the Ukrainian news as much as corn and then wheat is. You’d have to say soybeans really have essentially no impact from this particular piece of news.
Still we do have the harvest, of course it’s moving along, about 50% done now in Brazil, but we still have concerns about some weather damage to the crop in the northern part of the country.
All in all, the key thing for soybeans is that we’ve seen is private estimates of the size of the crop decline over the last couple of weeks and if those prove to be accurate then we don’t have quite as burdensome of a supply as South American soybeans to deal with as we once thought.
The cattle market just keeps soaring higher in the front contracts; the beef market has been strong; the anticipation of smaller numbers has helped the market out over the last several weeks. The very cold weather conditions, I think, have also contributed to it, and we have a market that is really just trying to find its peak here at this point. I would point out, though, that the April cattle has actually been trading a bit lower, and they are officially the front contract as far as the trade is concerned. So we may be nearing a top on this market at this point but certainly the front end of it looks very strong in the February contract, which is now expired.
We had about a $6 or $7 spread between where February went off the board and where April is trading, and I think the key thing now is “Will we find those two coming together at some point?” Right now, we’d have to question whether that’s likely.
The hog market’s in somewhat the similar situation, in which we see very good demand up close, and the prospect of numbers not being overly burdensome.
I think there is a real question out there, though, as to whether or not this disease issue is a big a factor as what the market has played it up to be. We’re seeing slaughter numbers above a year ago levels still and have for several weeks. So if those don’t start to cut back here pretty soon, we’ll have to question whether the hog inventory numbers are quite up to accurate from what they were portrayed earlier.
But all in all, still a very sound market there. Truthfully I was a bit surprised that we didn’t see a little more weakness in some of these months in hogs today, since some of the recent rally has been based on the idea that we’d be seeing a significant amount of pork sales taking place this month into Russia. Whether or not those sales will be threatened or not is still an issue; I would say probably not at this point, unless the political tensions [between Russia and Ukraine] worsen to a much greater degree than they have at this point.
But that is certainly something to remain aware of, is that Russia does have an impact on our pork market, and we’ll have to watch that closely going forward.