Grain Markets and Other Stuff
Joe Vaclavik and Mackenzie Johnston discuss the grain markets, the business of farming, news related to agriculture, and a variety of other topics.
Grain Markets and Other Stuff
Wheat Prices SURGE on Black Sea Export Disruptions - Row Crops Follow
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🌾 Russia Reroutes Grain After Black Sea Attacks — Russia is shifting grain shipments away from the Sea of Azov following Ukrainian strikes that disrupted a route responsible for roughly a quarter of its grain exports. Wheat futures spiked to multi-week highs as traders weigh the risk of further Black Sea supply chain chaos! 📈
🔥 Heat Wave Threatens South Dakota Spring Wheat — Triple-digit temps and warm overnight lows are stressing the state's spring wheat crop, especially in drier regions without last week's rainfall boost. With temps running nearly 6°F above normal and more heat on the way, grain fill and crop quality are on watch. 🌡️🌱
🚢 Brazil Debuts Ethanol-Powered Cargo Ship — Brazil just launched its first ethanol-powered container vessel, setting sail for China and opening the door to a potential biofuel revolution in global shipping. If ethanol captures just 5% of the marine fuel market, corn demand could jump by 1.5 billion bushels—a massive opportunity for ag producers! ⛴️🌽
💵 Inflation Cools More Than Expected in June — Annual inflation slowed to 3.5%, well below forecasts, while monthly prices posted their biggest drop in six years thanks to falling energy costs. The Fed is still expected to hike in September, but easing prices have softened the odds. 📉
⚓ Strait of Hormuz Tensions Ripple Beyond Oil — Escalating US-Iran tensions threaten fertilizer, sulfur, aluminum, and helium supplies—not just crude. Trump has dropped his proposed 20% toll on Hormuz shipments after pushback from Gulf allies, opting instead for future investment deals. 🛢️⚠️
Black Sea Exports - Wheat Rally
SPEAKER_01Morning guys. It's Wednesday, July 15th, 5 24 a.m. Central Time. Grain markets trade higher to sharply higher to start the day. December corn futures up six at 466 and a half. November soybeans up six and a half at 11.97 and a half. September Chicago wheat up 22.5 cents at 667.5. September Kansas City wheat up 25.5 cents at 703.5. September spring wheat up 18 and a quarter at 676 and a quarter. Wheat futures clearly leading the complex higher this morning. We've got some news out of the Black Sea to start this morning.
SPEAKER_00So Russia is preparing to reroute grain shipments from the Sea of Azov after last week's Ukrainian attacks disrupted shipping along a route that handles about a quarter of the country's grain exports. According to Russia's Ag Ministry, the disruption is not expected to affect export volumes or domestic food supplies, as grain shipments can be redirected through alternative ports. Grain exporters said that cargoes could instead be shipped through Black Sea or Baltic Sea terminals if needed. Nonetheless, wheat futures moved higher on Tuesday amid concerns over shipping disruptions in the Black Sea.
SPEAKER_01To visualize this, um, I was able to pull this map, and the Sea of Azov accounts for ballpark 25% of Russian wheat exports. And Russia is the world's top wheat exporter, projected to account for 22% of all global wheat exports this year. So the idea is that they're gonna move uh grain, I guess, back east or south to like where that blue dot is, the port of something I can't pronounce, and they're gonna export wheat out of that um kind of uh Black Sea coast there. So if they're gonna reroute a whole bunch of shipments, it's gonna take time. Here's the fresh news overnight Odessa port retaliation. In direct response to the shipping bottlenecks, Russia launched a deadly missile and drone barrage against Ukraine's southern coast, hitting port infrastructure in Odessa and elsewhere. And those Odessa ports make up for there's three of them, approximately 90% of Ukraine's total um ag exports. So to go back to this, you've got Russian wheat exports at risk. To what degree, uh, we don't know, although premium subs kind of know. Um, and then Ukraine accounts for like another six or seven percent of global wheat exports, and now you've got a Ukraine risk. So the wheat market is reacting uh quickly and very furiously to all of that this morning. Let's look at some wheat charts. Here's HRW Wheat SEP 26, highest trade since May 22nd overnight. Here's SRW wheat, the uh SEP 26 contract, also highest trade since May 22nd, and even spring wheat finally joining the party, uh highest trade since June 2nd overnight. So this is uh considered to be a big time escalation. During the last uh call it two and a half years, most of these rallies associated with the Black Sea have been have been selling opportunities. Um the the rallies have all been sold since like the mid part of 2023, uh maybe even before that. Um in yesterday's premium video, we had a fantastic guest, Andre Sizov from Sovieton. He's uh Russian, but he's in Spain, and he does nothing but cover Black Sea uh grain movement. And he told us exactly what was going on and kind of what to expect in the marketplace. It was super
US Spring Wheat Problems / Weather / Row Crop Prices
SPEAKER_01timely and um extremely interesting. I would highly recommend that you guys check that out. We are going to stick with the uh wheat topic this morning.
SPEAKER_00Extreme heat is raising concerns for South Dakota's spring wheat crop. Northern and northeastern parts of the state received beneficial rainfall last week, which should help the crop withstand this week's intense heat. However, drier areas across the state are likely to experience greater crop stress as temperatures are expected to climb into the triple digits, accompanied by windy conditions that will further increase moisture loss. Overnight temperatures are also expected to remain unusually warm, limiting the crop's ability to recover from the daytime heat. As a result, signs of heat stress are likely to emerge, potentially reducing grain fill and hurting overall crop quality.
SPEAKER_01For those of you guys watching overseas, or perhaps you're not in tune with U.S. wheat production, we grow winter wheat crops and spring wheat crops in the United States. Our winter wheat crop isn't we're in the process of wrapping up harvest with regard to winter wheat. Spring wheat, uh, we are in production mode. We're kind of mid-season right now. And um, North Dakota is the country's biggest spring wheat producer, uh, I believe. We've also got spring wheat in South Dakota, Minnesota, Montana, into Idaho, and the Pacific Northwest. Over the last seven days, U.S. spring wheat areas have run 5.8 degrees above normal on average. So the heat has already happened and is very real. To look at the forecasts this morning, U.S. spring wheat areas projected to be 5.9 degrees above normal on average over the next seven days. That's the GFS. The Euro version says 5.8 degrees above normal. So this uh heat is absolutely going to stick around at least for a week. I believe those forecasts will probably end up being pretty accurate. You go out further than that, 8 to 14, and it cools off a little bit, um, but not really for spring wheat areas. For corn areas, it cools off, but spring wheat's still 4.2 degrees above normal, even during the 8 to 14, based on the GFS, 8 to 14 day euro is a little bit cooler, and there is some Euro versus GFS kind of divergence here this morning that I'll get to uh more in the precipitation section. So the spring wheat market has been kind of dull up until this morning, and we've heard from a number of our premium subscribers, Joe, the spring wheat, it's gonna be really hurt by the heat. And uh, I think that that's that's not why we're higher this morning. We're higher on the Russia-Ukraine stuff, but this heat is uh certainly going to be kind of a friendly factor, I think, as we move forward. Precipitation over the next seven days, U.S. corn areas expected to see only 54% of normal rainfall. Um, and that's the GFS version. The euro merk the Euro version is even drier, only 41% of normal rainfall expected. The 8 to 14 day is where we've got the big disparity between the Euro and GFS. The GFS is trending much drier, only 52% of normal rainfall expected uh during the 8 to 14 day period. The euro is much wetter by comparison, almost no normal rainfall expected. So I'll be curious to see how those two models um kind of uh come into agreement or don't come into agreement uh for that eight to fourteen day period. I think that the um the dryness and the heat in the forecast and kind of the re-emergence of this hot dry pattern, we've been flip-flopping in weather forecasts, you know, four times a day. But I think it's it probably has a little bit to do with the strength in row crops this morning. I think it has more to do with wheat, but December corn futures are back up in the mid-460s. 469 and a quarter, 469 and a half. That's your key resistance area. That's the line in the sand. If we can trade above that, close above that level in D scorn this morning. I think you'll uncover some short covering, uh speculative buying, and uh maybe you see another leg higher
Ethanol for Cargo Ships??
SPEAKER_01here. November soybeans look uh again, this chart looks really good to me. 1207 and a quarter up to 1214 is going to be kind of your next um upside target.
SPEAKER_00Brazil launched its first container ship powered by Brazilian-made ethanol yesterday. The vessel can operate on ethanol, methanol, or conventional bunker fuel and is sailing from Brazil to China. If adopted more widely, ethanol-powered ships could create a major new market for biofuel producers worldwide while helping reduce global shipping emissions. The International Maritime Organization's upcoming net zero framework for shipping could encourage broader use of alternative marine fuels such as ethanol. However, broader adoption will depend on evolving global shipping regulations as current EU rules exclude corn and sugar cane-based ethanol.
SPEAKER_01I asked our friend Pete Meyer about this story because I'm no biofuel expert, but he is our resident biofuel expert. He said this reducing maritime emissions through the use of ethanol presents a major opportunity for corn and sugar producers worldwide. Asia has been leading the way with emission regulations, met with either biofuels or carbon credits, both wins for farmers. The only issue is the adaptation of large ships from bunker fuel to ethanol. There are only roughly 450 ships worldwide that can run on ethanol, but more are coming. The other issue for global shipping lines is believe it or not, ethanol supply. An interesting statistic is that if just 10% of the global cargo fleet changed to ethanol, they would consume Brazil's entire production. Maritime ethanol use gets very little attention here in the U.S., but it does have the markings of a new frontier. So, Pete, uh kind of optimistic perhaps about using ethanol in cargo ships, you got a million hurdles you got to jump through, but uh that's another potential demand opportunity, and you guys should be yelling at the lobbies to uh start pushing that along with SAF and E15 and other things because you you heard the statistic that Pete rattled off. Like you get that thing going, and you've got yourself a whole new world of uh demand for corn and ethanol.
SPEAKER_00If you guys have not checked out our premium content, you sure need to do so. Joe, can you tell our viewers about some of our recent premium videos?
SPEAKER_01Again, Andre Sezov was on yesterday to talk about the wheat situation. He had some some really great specific information about Russia, everything from fuel shortages in Russia as it relates to farmers and uh the ongoing winter wheat harvest to uh the export situation, to the port situation. Super interesting stuff from kind of a boots on the ground source. Krista Swanson was on Friday last week. And if you guys did not watch this video about the um US versus Brazil production cost, Brazilian cost of production, corn and soybeans, much, much, much cheaper than uh here in the U.S. But there's a million little details and nuances to discuss. And uh we ran through kind of the why of all of that. Ryan Moe and I discussed overnight temperatures and corn yields. Uh, Crop Profit gave us some excellent data regarding uh overnight temperatures and how they correlate to corn yields, and it was like 40 years worth of data. It's absolutely fantastic stuff. Uh, Ryan's a cash market guy, and he talked a lot about cash, spreads, basis, all that stuff. If you want to see the premium stuff, go to standardgrain.com. You can sign up this morning. In today's premium video, Matt Bennett will join me for a 20 questions mailbag segment. Uh, premium subscribers send us in mailbag uh questions. They're mostly all about grain marketing, and it's all going to be stuff that applies to you guys. Um, it's it's very specific. I looked through them this morning. They're very good. If you want to see the premium stuff, uh, go to standardgrain.com.
Inflation Moderates
SPEAKER_01You can sign up this morning. This is a $50 per month subscription. You can cancel anytime, no other fee, no other obligation. Nobody tried to sell you anything else. I'll give that deal a shot this morning, guys.
SPEAKER_00Consumer prices eased in June amid declining energy costs. Annual inflation slowed to 3.5%, which was below economist expectations of 3.8%. On a monthly basis, consumer prices fell 0.4%, marking the largest decline in more than six years and exceeding expectations for a 0.2% drop. The decline was mainly driven by a sharp drop in energy prices, with the energy index down 5.7% in June, but still up 15.7% from a year ago. Traders are still expecting the Fed to raise interest rates in September. Although the odds for a hike were lowered following the report, renewed hostilities between the U.S. and Iran could once again drive oil prices higher, potentially reigniting inflationary pressures in the coming months.
SPEAKER_01Here is uh CPI annualized monthly change. The uh peak so far as it relates to the situation in the Middle East was 4.2%. Annualized consumer inflation last month. The number dropped sharply to 3.5% this month. Believe it or not, the actual index, the actual index, the actual index of the basket of the goods and services actually declined um in June versus the prior month, which is very rare. It doesn't happen very often where you actually see prices decline. But when you see gas prices drop in the way that they did, uh you're gonna see a decline. It's kind of a rare situation. Um let's skip to this. Here's Charlie Ballello on X. Uh price changes over the last year in the June CPI report. Fuel oil up 43%, gasoline up 27%, electricity up 4%, apparel up 3.9%, overall CPI again up 3.5%, food away from home up 3.4%, transportation up 3.4%, shelter up 3.3%, gas utilities up 3%, medical care up 2.9%, food at home up 2.7%, new cars up half a percentage point, used cars actually declined, believe it or not, down uh 1.8%. When you look at inflation over the last seven years, uh pound of coffee, which again is a big input cost on this show, up 127%, ground beef up 79%,
US/Iran/Commodities
SPEAKER_01dozen eggs up 72%, everything drastically, drastically more expensive than it was in the uh pre-COVID times, as I would put it.
SPEAKER_00The latest U.S. Iran escalation is disrupting more than oil, threatening key commodities used in agriculture, manufacturing, and technology. As seen earlier in the conflict, fertilizer and sulfur shipments are particularly vulnerable to disruptions, while supplies of aluminum and helium could also be affected. Meanwhile, President Trump said Tuesday that he is dropping plans to impose a 20% toll on cargo shipments through the Strait of Hormuz after Gulf allies urged him to reconsider. Instead, he said the expected revenue would be replaced by future investments from the U.S. and Gulf states, though he did not provide further details.
SPEAKER_01Did you say helium?
SPEAKER_00I did say helium.
SPEAKER_01Like the stuff we put in in balloons at the birthday parties?
SPEAKER_00Yes.
SPEAKER_01Is that a concern for us?
SPEAKER_00Yes, that is a concern. I read about everything it goes into, and we need helium. And like you said, birthday parties. I don't let this US Iran deal ruin birthday parties.
SPEAKER_01Uh, I've got a big, actually hosting a big birthday party for my son who's turning 11 at my house tomorrow. And I think we're gonna have to cancel because of the helium costs. I don't know. Um, so Bloomberg Commodity Index has dropped 9.4% from the peak in May, which is kind of your uh Middle East peak, but it's on the rise again. And the Strait of Hormuz is closed-ish, open-ish. I don't know. Traffic has dropped off. We don't know how the situation is going to resolve, but uh certainly worth watching. What did cattle do yesterday?
SPEAKER_00Cattle futures were sharply lower, live cattle were a buck 60 to 330 lower, feeder saw losses ranging from 555 down to 635, boxed beef prices were also lower. Choice was down a buck 66 at 373.95, and select was down 76 cents at 364.41.
SPEAKER_01Even though uh Kevin Walsh had some kind of hawkish comments following the CPI numbers yesterday. The stock market has acted just fine. The SP is higher this morning. Uh, treasuries are off a little bit. Crude oil is up 78 cents in the August WTI at 80 12. Have a great day, guys. Back on Thursday.