NCI Market Update Webinar Series | Featuring Luke Swenson

Luke Swenson, VP of Trading Technology at Bushel.

The Northern Crops Institute (NCI) hosted another monthly Market Update on September 21st, 2022. This month’s webinar featured speaker Luke Swenson, VP of Trading Technology at Bushel. During his presentation, Swenson offered insight into global commodity markets while stating what factors will impact them going forward.

Swenson began his presentation by discussing the U.S. economic situation. As of the start of last quarter, the U.S. officially dipped into a recession, due to two consecutive quarters of GDP shrinkage. Savings rates are down, spurred by the nation’s exit out of the COVID-19 pandemic and the financial aid that many citizens received due to said pandemic. Household debt is also on the rise, as is homeowner equity and commercial deposits in banks.

U.S. inflation levels over the last 100 years.

Despite all this, the U.S. remains one of the strongest economies in the world. With that said, this is mostly due to economic uncertainty in other parts of the world from events that are transpiring (ex. Russia-Ukraine Crisis). Additionally, inflation remains a critical threat to the U.S. economy and commodity markets. By reaching historic highs recently, that has put a damper on the prosperity of the U.S. economy.

From there, Swenson pivoted to discussing what he referred to as “market snapshots.” He started with corn stocks which, as he explained, show that estimated worldwide ending stocks for 2022 are slightly lower than 2021 but higher than 2020, but for the U.S. specifically, the estimated ending stocks are below both that of 2020 and 2021. For soy, estimated ending worldwide stocks were higher than those in 2021 but slightly lower than 2020, and estimated U.S. stocks were, once again, lower than both 2021 and 2020. Wheat’s estimated 2022 ending stocks were lower than both 2021 and 2020’s numbers in both situations – in both cases, 2020 was the highest in that three-year span.

Places in the U.S. where each of the three main commodities are grown.

Swenson then shifted to the idea of reshaping domestic demand for commodities. The ongoing drought continues to be an issue impacting commodity markets, and is set to for quite some time yet. According to the drought and demand maps that Swenson showed, the areas with the most demand are where the drought conditions seem to be the worst. Additionally, the corn basis is, in most areas, .00 or higher, which is unusual, according to Swenson. (Usually, this number for most of the U.S. should be as low as -.71 this time of year.)

He also shared some insight into renewable energy production, specifically ethanol and other biodiesels in the U.S. Iowa continues to lead the pack for production of this commodity, with Texas and Missouri coming in second and third, respectively. North Dakota only has two plants that are capable of producing this commodity, and the state with the most plants is, once again, Iowa. This is set to continue expanding, though, as the demand for ethanol and other renewable energy sources continues to grow and policies continue to be put in place by the government to support this growth.

Brazil as an economic and farming power.

Something else that also is impacting markets in a big way are trade wars and how they’re reshaping global agriculture. Swenson specifically pointed to the U.S./China trade war, which he believes is severe enough that the U.S. and China will never return to being primary partners. Because of this, China has steadily been seeking out alternative partners, including Brazil. Brazil’s crop acreage has grown year after year and this, as a result, has made it hard for North America to stay price competitive in the market.  Swenson also added that the Ukraine War is, in a sense, helping to relieve this issue. By seeing an opportunity and taking it, the U.S. is able to capitalize on specialty market prices and acreage to alleviate this pressure from Brazil and other countries.

Speaking of the Russia-Ukraine conflict, that was the final issue that Swenson provided some insight into that is set to continue strongly affecting commodity markets around the world. As a result of initiating this conflict, Europe is set to respond to Russia in the same way that China responded to the U.S. during the start of the trade war mentioned earlier: with sanctions and restrictions that will hurt their economy. This has already started, and will likely continue for quite some time. On the flip side, efforts are being undertaken to support the Ukraine economy during this difficult time.

The Northern Crops Institute greatly appreciates Luke Swenson’s involvement and input in this webinar. At NCI, we continue to work towards fulfilling our mission to support regional agriculture and value-added processing by conducting educational and technical programs that expand and maintain domestic and international markets for northern grown crops. All of this wouldn’t be possible without the innovative ideas of guest speakers like Swenson.

For more information about future webinars offered at NCI, click here.

To watch the recording, click the video below.