Wheat futures market in the US rose to $6.4 per bushel, moving further away from the over-two-year low of $5.9 touched on May 30th as the destruction of a dam in Ukraine is set to impact the crops.
A blast at the Kakhovska hydroelectric dam will cut the water supply that is essential for agriculture in the southern part of the country.
Besides directly destroying agriculture, the developments heighten geopolitical concerns and grim the possibility that Russia will extend the deal guaranteeing seaborne grain exports out of Ukrainian ports.
While Most of Ukraine’s winter grain crops are in good condition but the recent turn to hot and dry weather could reduce winter grain yields by 20% if it continues, according to APK-Inform consultancy service.
StoneX revised upward its 2022-23 Brazilian corn production forecast by another 1.2 million metric tons to 133.8 million. Last year’s crop was 113.1 million.
The pipeline to transport ammonia from Russia to Ukraine’s Odessa port, which Russia insists must be reopened to renew the grain corridor deal, has been damaged in the northeast area of Ukraine (the Kharkiv oblast).
Brazil has finished a US$386 million investment to open a new corn ethanol plant in Mato Grosso. The company now has capacity to produce 2 billion liters of corn-based ethanol/year.
The war in the Bread Basket of the World is escalating. Ukraine is attacking more targets within Russia and Russia is attacking Ukraine’s big cities again. Perhaps worse yet, Poland is trying to pick a fight with its neighbor to the east, Belarus. Ever since Poland became a NATO member, they have become the neighborhood bully.
However, this is exactly what you need to say to your prospective buyers of your new crop corn, wheat and beans market:
As you know, the high futures price is usually before the size of the crop is known and I want to have a shot at catching a price near the top on 100% of my expected production.
we are looking for a merchandiser who will allow me to engage in a HTA contract for 100% of my expected production before I know for certain what my production will actually be.
You can make that possible for me if you will let me contract on a HTA 100% of my expected production. If I come-up short on bushels, I want to be able to roll the delivery of those bushels to the next crop year. I will take the risk on the spread from one crop year to the next. I fully realize the market may inverted. That is at my risk, not yours.
Another reason farmers do not sell enough of their production at a profitable price is because farmers want to have more grain to sell if the price continues higher. Eventually, no matter how high the price goes, the price will peak, then fall like a rock and all us farmers still have a lot of unpriced bushels.
I am seeking a merchandiser who will buy put options for me and attach them to my HTA, just like you do calls now. If the market firms after I price the HTA and I buy put options, I can make the money on the way down I did not make on the way up. I will never exercise a put; I will either have you sell the puts or I will let them expire worthless.
If I buy corn puts at strike prices 30 cents apart and bean puts at strike prices 40 cents apart, my market plan will probably capture the top of the market without any stress on me or you.
Will you buy corn puts at 25 cents and bean puts at 40 cents for me and attach to the HTA delivery contract?
As Still wheat market, strong output elsewhere limited the rise in prices. A bumper harvest in Russia raised foreign sales forecasts to nearly 50 million tonnes despite Moscow’s recent increase in grain export duties.
Sellers in the world’s top exporter have shaven-off prices as the current record-high harvest raised inventories to unsustainable levels.