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3 Big Things Today, December 1, 2021

Wheat Futures Higher Overnight; Growers Face Questions as Fertilizer Prices Rise.

1. Wheat Futures Higher in Overnight Trading

Wheat futures rebounded in overnight trading Wednesday on signs of strong global demand and concerns about world supplies.

Egypt, the biggest importer of the grain, bought 600,000 metric tons of wheat from international supplies for delivery in January, according to the country’s General Authority for Supply Commodities (GASC).

The North African nation bought 240,000 metric tons of Romanian wheat, 240,000 tons of Russian wheat, and 120,000 tons of Ukrainian wheat, GASC said.

Excessive rainfall in Australia and ongoing export levies in Russia are threatening global supply.

Rainfall is expected to increase in the eastern third of Australia next week, which will continue to slow the harvest and may result in quality problems, Commodity Weather Group said in a report yesterday.

Russian wheat has risen for six straight weeks due to strong demand, according to a report this morning from the Agriculture and Horticulture Development Board (AHDB).

Prices last week were at about $340 per metric ton, up $6 a ton from the previous week, the AHDB said, citing data from consultancy IKAR and Refinitiv.

The Russian export levy is scheduled to rise today to $80.80 from $78.30 per ton, AHDB said in its report.

Soybeans and corn also were higher in overnight trading, rebounding from double-digit losses on Tuesday.

Wheat futures for December delivery gained 6¼¢ to $7.93½ a bushel overnight on the Chicago Board of Trade, while Kansas City futures added 5½¢ to $8.27¾ a bushel.

Corn futures for December delivery were up 4½¢ to $5.72 a bushel.

Soybean futures for November delivery added 9½¢ to $12.26¾ a bushel. Soymeal rose $1.60 to $343.40 a short ton, while soy oil gained 0.62¢ to 55.83¢ a pound.

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2. Farmers Face Tough Questions as Fertilizer Prices Rise

Growers are facing some difficult decisions this year as nitrogen fertilizer prices have been rising in recent weeks.

Anhydrous ammonia prices in mid-November were at $1,343 a ton in Illinois, up $138 per ton from two weeks earlier, according to data from the USDA.

Since July, prices are up 84% and in the past year have more than tripled, according to a report this morning from economists at the University of Illinois and Ohio State University.

Urea prices rose $55 to $866.67 a ton in the two weeks through Nov. 18, the USDA said. Liquid nitrogen prices are now at $563 a ton, up $37.50 from the start of November.

“One item is certain: from an economic standpoint, almost all farmers should be reducing nitrogen application rates in 2022," said economists Gary Schnitkey, Krista Swanson, Nick Paulson and Jim Baltz from the University of Illinois and Carl Zulauf from Ohio State University, who outlined strategies farmers can use to mitigate the increasing cost of nitrogen fertilizers.

For one, producers can increase soybean acreage while reducing corn area as far less nitrogen is used to grow soybeans than in corn production.

“The downside to this strategy is that, while uncertainty over 2022 market conditions remains high, some profitability projections for corn are currently above those for soybeans,” the report said.

A study done by the economists show if corn prices are at $5.20 a bushel and bean prices are at $12 a bushel, corn is much more profitable. If corn is at $5 a bushel, however, and soybeans remain at $12 a bushel, then profitability tilts in favor of the beans.

As it stands, prices for fall delivery in 2022 are now at $5.25 a bushel for corn and $12 for soybeans.

“At those prices, corn-minus-soybean return is $41 per acre, giving the advantage to corn,” the economists said.

Another strategy, they said, is to apply in the fall. While conditions haven’t been ideal in some areas – Illinois, for example – a window may be opening.

Farmers who bought nitrogen below $1,000 a ton should apply in the fall for the price to be “effective,” the report said.

The other option is to split applications, which allows producers to manage risk by pricing fertilizer several times throughout the season.

One scenario, the economists said, is to apply 75% of the maximum return-to-nitrogen rate and using the rest after planting.

“This strategy would allow for pricing at two points: once in the fall and once after planting,” they said. "Moreover, the second application after planting could be skipped or reduced if plant conditions suggest that additional nitrogen will have limited impacts on yields or nitrogen fertilizer prices continue to be high.”

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3. Wind Advisories Issued For Parts of Northern Plains

Wind advisories have been issued for much of western North Dakota today, according to the National Weather Service.

Sustained winds are forecast up to 35 mph with gusts of 55 mph expected, the NWS said in a report early this morning.

The advisories will take effect at 11 a.m. Central and last through 6 p.m., the agency said.

In South Dakota, meanwhile, westerly winds are expected to be sustained up to about 20 mph with gusts as high as 35 mph, which will result in extreme fire hazards.

“People are urged to exercise extreme care with respect to outdoor activities that could cause grass fires,” the NWS said. “Avoid equipment that can cause sparks near dry grass or brush. Do not toss cigarettes on the ground. Report new fires quickly to the nearest fire department or law enforcement office.”

In central and eastern Oklahoma, some thunderstorms are expected to fire up later this week into the weekend, which will be followed by a cold front starting next week.

Rain chances in the area also will increase into the weekend before giving way to cooler temperatures, the agency said.

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