CHICAGO, March 12 (Xinhua) -- Chicago Board of Trade (CBOT) agricultural futures were in correction this week following a sharp increase in the previous week, as the Crop and World Agricultural Supply and Demand Estimate (WASDE) reports released by the U.S. Department of Agriculture (USDA) were neutral to slightly bearish.
But as the inflation is soaring and will worsen with the Russia-Ukraine conflict creating fertilizer, energy, and food shortages, Chicago-based research company AgResource sees corrections in commodities as buying opportunities until mid-2022.
Corn futures ended firm and the new buying in the week centered on December. The market is elevated and the outlook remains bullish as the remainder of Ukrainians 2021-2022 surplus, some 550 million bushels, has been lost to the global market. South American harvests will not be completed until mid- or late summer, and over the next four months the United States will be the dominant supplier of corn to the world.
AgResource projects 2021-2022 U.S. corn exports at a record 2,800 million bushels, which draws ending stocks down to just 1 million bushels. Fair value is seen at 7.30-8.00 U.S. dollars into late spring.
The bigger risk is sharply-reduced Ukrainian exports in the 2022-2023 crop year. The ongoing conflict in Ukraine, lack of labor and inputs there, will no doubt curtail production, which will allow U.S. corn exports to reach even newer heights.
The market must encourage record planted area in South America this autumn. December corn below 6.40 dollars is undervalued, perhaps substantially depending on Northern Hemisphere summer weather. Like 2010-2012, a lasting period of lofty prices lies ahead.
U.S. wheat futures ended sharply lower this week as May CBOT was allowed to trade and profit taking dominated. A violent correction was anticipated as the market struggles on a daily basis to find fundamental fair value. AgResource suggests downside risk is limited at current levels.
Due to the Ukraine conflict, it is now assumed that the world market will not have access to Black Sea surpluses during the remainder of the 2021-2022 crop year. This places spot CBOT/Kansas fair value in a range of 10.00-12.00 dollars into late spring. It remains that the bigger risk is the loss of Russian supplies throughout 2022, which raises upside to 13.00-14.00 dollars during the second half of 2022.
Ultimately, the world's current wheat supply issue will only be solved via massive North Hemisphere winter wheat acreage expansion this autumn. Wheat values worldwide stay elevated into late year, and ongoing drought expansion across the U.S. Plains is worrisome.
Soybean futures rallied to test the contract highs in early week trade and finished the week steady. Geopolitical events along with USDA and Brazilian crop reports kept market volatile all week.
The March WASDE report further tightened the world balance sheet with a record large 9.5-million-metric-ton reduction in South American production. Smaller crops continue to be priced into the Brazilian export market as FOB premiums continue to climb. Brazilian premiums are now trading far above the 2018-2019 trade war highs, and U.S. soybeans are the cheapest supply in world trade in the foreseeable future.
The March International Trade report showed U.S. exports in January were down from a year ago at 235 million bushels. However, old and new crop sales continue to build with old crop sales last week at 81 million bushels, while cumulative new crop sales are now record large at 281 million bushels.
The soybean outlook stays bullish as U.S. and world balance sheets contract. AgResource holds that CBOT volatility will remain extreme. ■
