Mike Krueger, Market Advisor & Commodities Broker.

The Northern Crops Institute (NCI) hosted another monthly Market Update on October 19th, 2022. This month’s webinar featured speaker Mike Krueger, cash grain trader, market advisor, commodities broker, and founder of The Money Farm. During his presentation, Krueger offered insight into the global commodity markets for corn, soybeans, and wheat while stating what factors will impact them going forward.

Krueger led off by discussing some of the impacts the Russia-Ukraine War is having. As the Ukraine is the 3rd largest corn exporter in the world, Russia/Ukraine combined export 60% of the world’s sunflower oil, and Russia/Ukraine combined also export 30% of the world’s wheat, this conflict is having a major impact on these markets. Logistics in the Black Sea region are also facing difficulties, as this conflict and other factors are making it challenging for the smooth import and export of commodities to occur.

September & October WASDE report ending stocks for commodities.

During the WASDE report overview two weeks ago, the USDA offered a look at the October Crop Production Estimates for corn and soybeans. Both were ever so slightly lower than the estimates for September. Additionally, the WASDE report estimated ending stocks for corn, soybeans, and wheat for October. Compared to the WASDE report for September, the October report is, once again, slightly lower for corn and wheat (soybean stocks remain unchanged from month to month).

China’s ending stocks for wheat and corn followed a close average compared to the last five years or so. The stocks for wheat were greater than those of corn by about 150,000 MMT’s. Corn production for the world is, unfortunately, slightly less than the year’s usage, representing a discrepancy. This discrepancy and other characteristics of the crop has resulted in what Krueger referred to as a market “tightness,” and one that hasn’t been so tight since the beginning of the preceding decade. For the U.S. specifically, Krueger forecasted this this trend of market tightness would continue, and perhaps become even tighter over the next year.

This is part of the larger picture that is the outlook for corn in a global sense. As was mentioned prior, the world’s exportable supply of corn is extremely tight, meaning that free supplies are not readily available. U.S. ethanol demand is stronger than ever, driven largely by high gas prices. U.S. ending supplies are declining, due to smaller acres and bigger exports. The drought in the European Union cut corn production by 25%, and China is feeling a similar need for corn amidst challenging growing conditions and the USDA’s cut of China corn imports from 29 to 23 MMT’s. The Ukraine is managing to continue exporting corn – though the ongoing conflict remains a threat to this – and, while Brazil’s crop is smaller than expected, their export number have remained at record highs.

Moving on to soybeans, production and usage follows a similar path to corn. That is, in six of the last seven years, production has fallen short of consumption for the commodity (this year is the exception). Soybean production in Brazil is at record highs, though the U.S.’s ending stocks remain critically low. Despite this, the world ending stocks for soybeans have begun to recover and are at acceptable levels. Finally, China (one of the largest markets for soybeans) has seen high import/export levels over the last decade, and that is expected to continue despite new COVID lockdowns in the country and other threats.

Finally, the market outlook for wheat. With a 25% cut of hard red winter wheat in the U.S. due to drought, this year’s crop didn’t flourish as much as in prior years. Russia saw a record crop this year, though questions remain as to if they can effectively ship the excess crops or not. In Australia, the wheat crop shows signs of promise for another large crop like last year, however concerns are starting to arise around if sufficient rainfall will occur this year or not. India’s crop was smaller than expected, and with bans on imports and exports for wheat, the ending stocks for the country are extremely tight. In the Northern Plains and Canada, spring wheat crops rebounded this past summer and have resulted in a very good test crop.

As with the other two commodities, usage of world wheat exceeds production totals, and has done so for the last few years. In addition, world ending stocks for wheat overall are lower than they have been in prior years. The U.S. in particular has seen a steady decline in ending wheat stocks since 2016. And, in relation to this, these ending stocks have also lagged behind wheat exports since the 2019/2020 season. Factors such as the weather, crop yields, financial markets, inflation, and numerous others are primary influencers of this and the other commodity markets.

Vegetable feed stock requirements for ethanol & RWD production capacity.

Krueger also made mention of something that he referred to as “the rush to crush.” This refers to the exploding production for biofuels and biodiesels, which is expected to increase eight times what it’s currently at by 2030. Demand for these alternative fuels remains historically high, as consumers look to explore other options for transportation fuel besides gasoline. However, this increase in demand and production means that exports of soybean meal must increase significantly, more soybean and canola acres must be planted, and competition for oil seeds between export and domestic markets will likely become much tougher, among other effects.

The Northern Crops Institute greatly appreciates Mike Krueger’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 Krueger.

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

To watch the recording, click the video below.

NCI Market Update Webinar Series | Featuring Mike Krueger

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