Skip to main content
You are the owner of this article.
You have permission to edit this article.
Edit
Global markets showing less volatility compared to U.S. markets
top story

Global markets showing less volatility compared to U.S. markets

Rob Fronning

Rob Fronning

As far as market performance for 2021, through Sept. 1, energy has been leading the way, say Rob Fronning, vice president for insurance and commodity marketing at AgCountry Farm Credit Services.

“Energy has really taken off since the start of the year,” Fronning told producers during a September grain marketing seminar. Other commodities are up significantly this calendar year, as well.

Drought has played a big role in commodity prices this year, but from Aug. 10 to Sept. 7, the U.S. Drought Monitor has shown a softening in conditions.

“We’re still in a drought in Minnesota, but it has gotten a little bit better over the last few weeks,” he said. “Obviously we have seen a lot of rain. Is it a little too late? The crop here has already suffered and maybe it hasn’t gotten us any better, but it may have stopped the bleeding so it doesn’t get worse than where it was headed.”

But there has been issues with the rain causing problems in some crops that were dried out.

A producer at Big Iron this year spoke with Fronning about his soybeans and what the heavy rains did to the crop.

“He got a little rain and all of a sudden the beans start popping. So we have beans dropping on the ground. We were already struggling with a tough crop, and now we possibly lost some more with this late rain,” Fronning said.

Fronning hopes some of the later-variety soybeans will be able to capture some yield potential.

“It is definitely driving the markets, and here locally, as well,” he said.

Wheat

The wheat market is strong so far this fall, and the USDA small grain summary on Sept. 30 was expected to show lower wheat inputs and higher consumption.

But global numbers are largely more comfortable than the U.S. numbers, which are becoming tighter.

There has been better production in Australia, who had their third-largest crop ever. India and China have also had good wheat production.

Fronning looked at U.S. wheat stocks and the stocks-to-use ratio. For 2021, it is projected the stocks-to-use ratio is about 30 percent, which is as tight as it was in 2013. It is not as tight as it was in 2007, which was when there was $20 per bushel wheat.

“We are probably not going to get there again because back then the global supply was much, much tighter, so that is what drove those prices back then,” he said. “Wheat is going in the right direction, and this is helping it.”

He also says higher prices are cutting into exports.

“It may not be enough to raise the carryout, but we will see that continue,” he said.

While there is not a direct link between the stocks-to-use ratio and prices, Fronning says we are currently close to that 30 percent ratio. If stocks-to-use were to correlate directly with prices, the price would be about $6.60 for wheat.

“We could possibly be getting close to that,” he said.

U.S. hard red spring wheat carryout is a little tighter than all wheat.

“Our U.S. spring wheat carryout and our U.S. spring wheat stocks-to-use ratio is very similar to 2007,” Fronning said. But the difference is that in 2007, the global supply drove prices.

During wheat harvest this year, some producers who caught rains were happy and some were disappointed.

“I did hear some people had to destroy their wheat fields because of no rain. All of that is leading to our lower numbers, but we do have some spring wheat out there to sell,” he said.

The drought was not limited to just Minnesota and North Dakota. It pushed up into Canada, as well, affecting the crops and production numbers.

“At the end of the day, we are tight on spring wheat and there is a lot of support to raise more wheat,” he said.

Most farmers Fronning knows like to raise wheat.

“They don’t necessarily like the numbers and the financials of raising wheat over last 20 years, but we like to raise wheat. We get it done early in the year, so that could lead a charge with acres in 2022,” he said.

Durum stocks-to-use and carryout numbers have dropped significantly, but imports have increased.

“We saw a huge rally in that crop,” he said. “That is going to be tight and tight for a while. We don’t know if prices have hit a high, but this is one market to watch.”

However, Fronning warned it does not take a lot of acres or a lot of above average yields to flood the durum market.

As far as the world wheat market, there is increased production from India and recovery by Australia from drought. Chinese production is also increasing, although not at a rate sufficient to meet increasing demand.

Eastern Asian countries, specifically Bangladesh, have an increased preference for wheat-based products.

“The U.S. is one of the major exporters, but other countries have really taken on the production of wheat, too,” he said.

Almost in every month of the year, wheat is harvested somewhere in the world.

“Countries don’t want their people to starve, and wheat is fairly easy to grow,” he said.

Global wheat prices show the U.S. is at the top of the wheat markets with prices.

“Export prices are more attractive in Australia, Russia, the EU and Argentina, and that is why our exports are down,” he said.

Corn

“Corn is always exciting,” Fronning said.

Hurricane Ida hit the U.S. Gulf Coast as a Category 4. The survey gauge in New Orleans detected the Mississippi River temporarily flowing backward, and that affects shipping.

During Hurricane Ida, Cargill saw damage and CHS experienced a loss of a transmission line to their terminal.

Their capacity is about 9 percent of annual exports from the U.S., and there is no real timetable on when shipping might resume.

“The river is sort of open, but it is kind of like a field of sunken barges, so shipping is slow and that could create a backlog to places getting our grain,” he said.

Regarding the rail lines to the Pacific Northwest, there are only so many lines and they can’t carry all the grain.

A lot of that rail is spoken for already, but everything is for sale for the right price.

According to Fronning, there is a strong basis for corn right now.

The Pacific Northwest is adding a higher price right now to try and attract some grain.

One producer commented on how wheat prices dropped in September by 50 cents due to a sell-off in futures, and he wondered if wheat prices would drop more if corn came in over USDA production estimates. Could corn pull wheat down with it?

“We have seen some slippage in futures for wheat. Wheat is only so strong, and yes, corn and soybeans could pull wheat down with it. But no one knows at what rate,” Fronning said. “Corn has a lot of influence on a lot of things, including energy.”

The USDA estimated a 14 percent increase in harvested corn acres in North Dakota, despite the drought. In Minnesota, there was a slight decrease in harvested corn acres, down about 2 percent.

Corn yield was increased nearly 5 percent in Minnesota, from 166 bushels to 174 bushels, and in North Dakota, up 2 percent to 108 bushels.

“We also got some rains at the end of August, and we saw the corn hold on better than what people expected,” he said. But we don’t know how much the drought affected the corn.

Now at the start of the 2021-22 marketing year, some were surprised by the projected price of corn.

“That price is reflected in your payments,” he said.

For the 2020 crop, the projected price was $4.45, and for the 2021 crop, the price was $5.45.

“Those are unfavorable for any farm payments,” he said.

Ending stocks, at 1.1 billion bushels, are also higher.

“It gives you an idea of why the markets are doing what they are doing,” he said.

But the numbers are looking tight and Fronning is bullish on the support for corn.

Soybean

The soybean numbers for yield, acres, and production are a little different than what the trade was expecting, says Fronning.

Acres in North Dakota increased a little, about 1.4 percent. Acres in Minnesota did not increase.

The USDA increased the soybean yield in North Dakota slightly from 24 bushels per acre to 25 bushels per acre, and in Minnesota from 43 bushels per acre to 47 bushels per acre, up 9 percent.

The projected soybean price came down 80 cents per bushel from August to September.

The soy oil balance sheet is affecting price from higher carry-in to lower production and lower imports.

Demand is lower for biofuels and higher for food, feed, and industrial use, but there are lower exports.

The projected price is still at 65 cents per pound for soy oil.

“Now you can see why soybean numbers are tight. We’re not back to the 2013 numbers on carryout, but we’re similar to 2011, and that’s the reason for the volatility,” Fronning said.

From 2015-20, carryout went from a low to a very high number and back down again.

“Soybeans are the volatile one. We go from short supply to excess supply and back to short supply,” he said. “A lot of that has to do with acres, an increase and decrease in acres from year to year, as well as the yield.”

However, global soybean numbers are not as volatile.

“There is a little bit of a steady increase in ending stocks, and stocks-to-use is a slowly trendline increase,” he said.

The total demand has not increased a lot. Countries go to where the price is the lowest.

“Given the proximity to historical highs, it makes sense to look at 2022 sales, but be cautious of inputs. They go up fast, but they don’t go down fast,” Fronning said. “If you are looking at locking in revenue, lock in some inputs, as well.”

CUTLINE: Rob Fronning

Global markets showing less volatility compared to US markets

By SUE ROESLER, Farm & Ranch Guide

As far as market performance for 2021, through Sept. 1, energy has been leading the way, say Rob Fronning, vice president for insurance and commodity marketing at AgCountry Farm Credit Services.

“Energy has really taken off since the start of the year,” Fronning told producers during a September grain marketing seminar. Other commodities are up significantly this calendar year, as well.

Drought has played a big role in commodity prices this year, but from Aug. 10 to Sept. 7, the U.S. Drought Monitor has shown a softening in conditions.

“We’re still in a drought in Minnesota, but it has gotten a little bit better over the last few weeks,” he said. “Obviously we have seen a lot of rain. Is it a little too late? The crop here has already suffered and maybe it hasn’t gotten us any better, but it may have stopped the bleeding so it doesn’t get worse than where it was headed.”

But there has been issues with the rain causing problems in some crops that were dried out.

A producer at Big Iron this year spoke with Fronning about his soybeans and what the heavy rains did to the crop.

“He got a little rain and all of a sudden the beans start popping. So we have beans dropping on the ground. We were already struggling with a tough crop, and now we possibly lost some more with this late rain,” Fronning said.

Fronning hopes some of the later-variety soybeans will be able to capture some yield potential.

“It is definitely driving the markets, and here locally, as well,” he said.

Wheat

The wheat market is strong so far this fall, and the USDA small grain summary on Sept. 30 was expected to show lower wheat inputs and higher consumption.

But global numbers are largely more comfortable than the U.S. numbers, which are becoming tighter.

There has been better production in Australia, who had their third-largest crop ever. India and China have also had good wheat production.

Fronning looked at U.S. wheat stocks and the stocks-to-use ratio. For 2021, it is projected the stocks-to-use ratio is about 30 percent, which is as tight as it was in 2013. It is not as tight as it was in 2007, which was when there was $20 per bushel wheat.

“We are probably not going to get there again because back then the global supply was much, much tighter, so that is what drove those prices back then,” he said. “Wheat is going in the right direction, and this is helping it.”

He also says higher prices are cutting into exports.

“It may not be enough to raise the carryout, but we will see that continue,” he said.

While there is not a direct link between the stocks-to-use ratio and prices, Fronning says we are currently close to that 30 percent ratio. If stocks-to-use were to correlate directly with prices, the price would be about $6.60 for wheat.

“We could possibly be getting close to that,” he said.

U.S. hard red spring wheat carryout is a little tighter than all wheat.

“Our U.S. spring wheat carryout and our U.S. spring wheat stocks-to-use ratio is very similar to 2007,” Fronning said. But the difference is that in 2007, the global supply drove prices.

During wheat harvest this year, some producers who caught rains were happy and some were disappointed.

“I did hear some people had to destroy their wheat fields because of no rain. All of that is leading to our lower numbers, but we do have some spring wheat out there to sell,” he said.

The drought was not limited to just Minnesota and North Dakota. It pushed up into Canada, as well, affecting the crops and production numbers.

“At the end of the day, we are tight on spring wheat and there is a lot of support to raise more wheat,” he said.

Most farmers Fronning knows like to raise wheat.

“They don’t necessarily like the numbers and the financials of raising wheat over last 20 years, but we like to raise wheat. We get it done early in the year, so that could lead a charge with acres in 2022,” he said.

Durum stocks-to-use and carryout numbers have dropped significantly, but imports have increased.

“We saw a huge rally in that crop,” he said. “That is going to be tight and tight for a while. We don’t know if prices have hit a high, but this is one market to watch.”

However, Fronning warned it does not take a lot of acres or a lot of above average yields to flood the durum market.

As far as the world wheat market, there is increased production from India and recovery by Australia from drought. Chinese production is also increasing, although not at a rate sufficient to meet increasing demand.

Eastern Asian countries, specifically Bangladesh, have an increased preference for wheat-based products.

“The U.S. is one of the major exporters, but other countries have really taken on the production of wheat, too,” he said.

Almost in every month of the year, wheat is harvested somewhere in the world.

“Countries don’t want their people to starve, and wheat is fairly easy to grow,” he said.

Global wheat prices show the U.S. is at the top of the wheat markets with prices.

“Export prices are more attractive in Australia, Russia, the EU and Argentina, and that is why our exports are down,” he said.

Corn

“Corn is always exciting,” Fronning said.

Hurricane Ida hit the U.S. Gulf Coast as a Category 4. The survey gauge in New Orleans detected the Mississippi River temporarily flowing backward, and that affects shipping.

During Hurricane Ida, Cargill saw damage and CHS experienced a loss of a transmission line to their terminal.

Their capacity is about 9 percent of annual exports from the U.S., and there is no real timetable on when shipping might resume.

“The river is sort of open, but it is kind of like a field of sunken barges, so shipping is slow and that could create a backlog to places getting our grain,” he said.

Regarding the rail lines to the Pacific Northwest, there are only so many lines and they can’t carry all the grain.

A lot of that rail is spoken for already, but everything is for sale for the right price.

According to Fronning, there is a strong basis for corn right now.

The Pacific Northwest is adding a higher price right now to try and attract some grain.

One producer commented on how wheat prices dropped in September by 50 cents due to a sell-off in futures, and he wondered if wheat prices would drop more if corn came in over USDA production estimates. Could corn pull wheat down with it?

“We have seen some slippage in futures for wheat. Wheat is only so strong, and yes, corn and soybeans could pull wheat down with it. But no one knows at what rate,” Fronning said. “Corn has a lot of influence on a lot of things, including energy.”

The USDA estimated a 14 percent increase in harvested corn acres in North Dakota, despite the drought. In Minnesota, there was a slight decrease in harvested corn acres, down about 2 percent.

Corn yield was increased nearly 5 percent in Minnesota, from 166 bushels to 174 bushels, and in North Dakota, up 2 percent to 108 bushels.

“We also got some rains at the end of August, and we saw the corn hold on better than what people expected,” he said. But we don’t know how much the drought affected the corn.

Now at the start of the 2021-22 marketing year, some were surprised by the projected price of corn.

“That price is reflected in your payments,” he said.

For the 2020 crop, the projected price was $4.45, and for the 2021 crop, the price was $5.45.

“Those are unfavorable for any farm payments,” he said.

Ending stocks, at 1.1 billion bushels, are also higher.

“It gives you an idea of why the markets are doing what they are doing,” he said.

But the numbers are looking tight and Fronning is bullish on the support for corn.

Soybean

The soybean numbers for yield, acres, and production are a little different than what the trade was expecting, says Fronning.

Acres in North Dakota increased a little, about 1.4 percent. Acres in Minnesota did not increase.

The USDA increased the soybean yield in North Dakota slightly from 24 bushels per acre to 25 bushels per acre, and in Minnesota from 43 bushels per acre to 47 bushels per acre, up 9 percent.

The projected soybean price came down 80 cents per bushel from August to September.

The soy oil balance sheet is affecting price from higher carry-in to lower production and lower imports.

Demand is lower for biofuels and higher for food, feed, and industrial use, but there are lower exports.

The projected price is still at 65 cents per pound for soy oil.

“Now you can see why soybean numbers are tight. We’re not back to the 2013 numbers on carryout, but we’re similar to 2011, and that’s the reason for the volatility,” Fronning said.

From 2015-20, carryout went from a low to a very high number and back down again.

“Soybeans are the volatile one. We go from short supply to excess supply and back to short supply,” he said. “A lot of that has to do with acres, an increase and decrease in acres from year to year, as well as the yield.”

However, global soybean numbers are not as volatile.

“There is a little bit of a steady increase in ending stocks, and stocks-to-use is a slowly trendline increase,” he said.

The total demand has not increased a lot. Countries go to where the price is the lowest.

“Given the proximity to historical highs, it makes sense to look at 2022 sales, but be cautious of inputs. They go up fast, but they don’t go down fast,” Fronning said. “If you are looking at locking in revenue, lock in some inputs, as well.”

Farm & Ranch Guide Weekly Update

* I understand and agree that registration on or use of this site constitutes agreement to its user agreement and privacy policy.

Related to this story

Most Popular

Find the equipment you're looking for

Get up-to-the-minute news sent straight to your device.

Topics

Breaking News