Ukraine Export Corridor questioned.
Grain futures took an about-face overnight, reversing sharply Friday’s grain price slump celebration of the Ukrainian Export Corridor signing as Russia was launching missile strikes on Saturday morning into the Odessa grain ports, claiming there were ships there with US military munitions on board. After declining for 60 days since the whisper of Ukrainian grain that could leave their ports to the tune of 5 MMTs of grain/month, now the onus is to perform with only 120 days in length for this agreement to take place. It’s very difficult to get insurance on carriers to sail into a port still experiencing military operations.
Some estimates say it will require at least two weeks for the Ukraine export corridor to open and will require another week for the 50+ vessels that are stranded at three ports to be led through openings in the minefields in the Black Sea to exit. This means it will be mid-August before one can measure how much grain exits the corridor. Also, the 20 MMTs of grain to be exported still must be moved to the three nominated Black Sea ports, and with bridges out and truck transit very difficult, a lot of the supply is still far away from the ports.
To further complicate matters, the Kremlin is complaining that sanctions on its own grain are not removed, and it’s unknown whether the execution of the agreement will allow for Ukraine grain export corridors to be opened. Russia would like Ukrainian farmers to financially struggle so that future war resistance is diminished.
The opening of the Ukrainian grain exports has been the main driver of the grain price collapse over the past 60 days, with recession fears number two on the list and the hope of improving rainfall for the Western corn belt number three. After declining precipitously for 60 days, now we must deal with the reality of Ukraine exports under-performing, the recession hard to find on the radar, and the Western corn belt continuing to lose prospects of trendline yield potential.
The weather in Iowa, Nebraska, Minnesota, and the Dakotas has soil moisture in fast retreat, and rainfall is immediately needed. This area looks to be void of rain for the next 10-12 days, with heat returning around August 5. This area needs to be closely watched since the Plains area has already experienced yield cuts. Sub-trendline yields cannot be tolerated this crop year out of Iowa for corn and soybeans. Rains look to fall this week from Kansas into Kentucky, with the 10-day totals measured at .50-2.50”. The heavy rains look to extend southward into Tennessee, Arkansas, and northern Mississippi. The EU model has dryness and heat for the NW Midwest in the Plains developing at the end of this week into August 9. Such dryness for the NW Iowa area cash corn light late pollination and fill in the soybean crop in its most yield-sensitive podding stage.
The cattle trade is called steady to lower with feeders .50-1.00 lower after futures closed last Friday at the highest levels in weeks, while the COF report was considered slightly negative on the placement side. The beef cows and calf crop numbers were slightly above expectations but still reflect an overall lower cattle supply trend. Also released on Friday was a cold storage report that had total beef stocks at 129% of a year ago and a record large for June at 516 Mil pounds. This marked the third consecutive decline in be stocks and confirms that a seasonal high was reached in March. Stocks are expected to decline well into 2023.