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3 Big Things Today, February 2, 2022

Soybeans Surge in Overnight Trading; Wheat Futures Ease, Still Have Room to Run.

1. Soybean Futures Jump in Overnight Trading

Soybean futures surged in overnight trading amid renewed concerns about South American crops and rising cooking oil prices globally.

Brazilian consultancy AgRural said it now expects soybean production in the South American country to come in at 128.5 million metric tons, down from the prior outlook for 133.4 million tons.

The U.S. Department said last month that it sees Brazilian soybean output at 139 million metric tons, which was down from a December outlook for 144 million tons.

Also boosting futures are rising prices for cooking oils globally.

The price of palm oil, a direct competitor with soybean oil on the global market, has continued to hit fresh record highs in recent days amid strong demand.

Malaysian palm oil futures are up almost 60% year-over-year.

That’s pushed up prices for soybean oil, in turn boosting soybean futures.

Soybean futures for March delivery jumped 22¾¢ to $15.51¼ a bushel overnight on the Chicago Board of Trade. Soymeal was up $4.80 to $440.80 a short ton and soybean oil futures gained 0.77¢ to 66.6¢ a pound.

Corn futures for March delivery gained 2½¢ to $6.37¼ a bushel.  

Wheat for March delivery added 2¢ to $7.71 a bushel, while Kansas City futures rose 3¢ to $7.89¼ a bushel.

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2. Wheat Backs Off Highs Amid Easing Russia-Ukraine Tensions

Wheat futures have backed off their highs in recent days as tensions between Russia and Ukraine seemed to have eased a bit.

Prices on January 25 surged to the highest level in almost two months after Russia sent more than 100,000 troops to its border with Ukraine.

Global government leaders condemned the buildup and said if Russia were to attack Ukraine, sanctions would be imposed against Moscow, according to media reports.

Since then, however, talks between U.S. and Russian diplomats in a bid to avoid a physical war have progressed. The countries traded barbs at a recent meeting of the United Nations Security Council, but for the moment at least, it seems that war has been avoided.

The declining prices in the past week negated most of the price gains made since the middle of January, Commerzbank said.

“It seems that the market now believes this risk to be low,” Commerzbank economist Carsten Fritsch said in a note to clients.

Still, the conflict is not over and talks haven’t been going especially well, so there’s still a good possibility prices will rebound amid ongoing tensions between Russia and Ukraine. That means wheat futures may return to their lofty levels soon.

It wouldn’t be surprising to see wheat exports affected by the conflict considering Russia is the world’s largest exporter of wheat, and Ukraine is the third-biggest, U.S. Ag Department data show.

Russia is forecast to export 35 million metric tons of the grain this year and Ukraine is expected to export 24.2 million tons, according to the USDA. The U.S. is projected to be the fourth-largest shipper at 22.5 million metric tons.

“In an extreme scenario, up to 16 million tons of wheat shipments from Russia and Ukraine could be affected,” Commerzbank’s Fritsch said. “The options to source this quantity from other suppliers are limited. This risk, which cannot be ruled out completely, points to a higher wheat price in the coming weeks.”

Fritsch said in the note to clients that he expects wheat futures to climb to $8.50 a bushel in Chicago, which would be a 10% increase from Wednesday morning’s prices.

When the conflict ends – as long as it does without an actual war starting – prices likely will fall back to about $7.50 a bushel in Chicago, the analyst said.

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3. Winter-Storm Warnings Stretch From New Mexico to Vermont

Winter-storm warnings have been issued from New Mexico through the southern Midwest all the way northeast into Vermont, according to maps from the National Weather Service.

In southwestern Kansas and the Oklahoma panhandle, heavy snowfall with accumulations up to 8 inches are expected, the NWS said in a report early this morning.

A winter-storm warning in the area remains in effect until 6 a.m. tomorrow morning.

In central Illinois, meanwhile, the same warning has been issued and will remain in place until 6 p.m. tomorrow night, the agency said. Up to 16 inches of snow and 0.25 inch of sleet are expected.

Winds are forecast to gust up to 40 mph.

In northern Ohio, mixed precipitation is forecast with snow accumulations of up to a foot of snow possible. Ice accumulations of up to 0.10 inch also are expected.

Travel is expected to be difficult in all the affected areas, the NWS said in its report.

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