Milling & Baking News - May 31, 2022 - 24

TUES | 05 31 202 2
exports are down. We're closely watching
Australia, where there's been too much
rain. What is the import buyer going to
actually buy? The main thing is that nobody
knows how high is high. To me, going into
the fourth quarter, $13 Chicago wheat and
$14 KC and Minneapolis wheat is too low. "
Mr. Lapp said tight supplies would have
futures trading in a wide range.
" We're going to stay elevated and volatile
over the last half of the calendar
year, so you can see both $11 and $15 as
possibilities, " he said. " A wide range like
that would be more common rather than
unprecedented in a tight stocks year. A
wide range is very possible. "
With no apparent break in wheat prices
on the horizon, what strategies can bakers
and other flour product users employ?
" Those that don't have any coverage in
the last half of the year, or 20% coverage
at current price levels, then if that's the
high of the year, then, OK, you can buy
the other 80%, " Mr. Freed said. " But you
need something. Most people believe the
basis levels will go up simply because of
logistics. The railroads are trying their
best to perform, but it's not the best performance,
or efficiency. With a smaller
crop and rail logistical problems, the basis
will just go up. So they have to deal with
futures going up and the basis going up at
the same time. "
The time for third-quarter coverage is
now, Mr. Lapp said.
" The baker has got to get ahead of this
and certainly should have Q3 covered,
and if not, do it now, " he said. " Even into
Q4, any kind of breaks we have. You
might ordinarily look for prices to fall to
a certain percentile or a gap to be filled
in the futures, a 10% break in the market.
Take advantage of down days, maybe a
5% down, which is a full 70¢. Got to take
advantage of those and add coverage
because just when we think this is over, it
may not be. "
Mr. Harris also advised bakers to be
cognizant of basis.
" Everybody's so focused on the futures
board right now, but what nobody's
talking about is that basis numbers are
down around $2 a bu from the highest
point, " he said. " That is very impactful
on your bag cost or net mill cost, so make
sure you're focusing on all components.
There is probably also going to be some
good opportunities as these markets
finally do start to peak to get your midds
done for Q4 and looking into Q1. With
grain prices this high, midds stay elevated,
they're not going to be up there
forever. "
SOYBEAN AND CORN PRICES SOAR
Conditions in the Upper Midwest delaying
spring wheat planting progress also
are delaying planting of corn, soybeans
and other crops, giving that region an
outsized impact on determining wheat,
corn and soybean supplies and values in
the year ahead. While corn and soybean
planting was " catching up " nationally
with the average pace in late May, cool
and wet conditions have delayed planting
of most crops in the Upper Midwest and
parts of the Canadian Prairies. The USDA
in its Crop Progress report said corn
planting as of May 22 in the 18 largest-producing
states was an aggregate 72% completed,
modestly behind 79% as the 2017-21
average for the date but much better than
just a couple weeks earlier. But planting in
Minnesota was only 60% completed (86%
as the average) and in North Dakota was
just 20% completed (66% as the average).
Corn emergence in the 18 states was at an
aggregate 39% compared with 51% as the
average. Emergence in Minnesota was
at 24% (51% as the average) and in North
Dakota was only 1% (21% as the average).
Soybean planting in the top 18 states was
50% completed by May 22 compared with
55% as the average, with Minnesota at 32%
(68% average) and North Dakota at 7% (47%
average). Soybean emergence was at 21%
in the 18 states (26% as the average) with
Minnesota at 7% (22% average) and North
Dakota at zero (8% average).
What farmers decide to do in the next
few weeks in the Upper Midwest will be
critical for all of the United States if not
for the world.
Ukraine's position as the world's
Scouts saw dry, cracked soil
and poor stands in many
western Kansas wheat fields
during the Hard Winter Wheat
Tour May 17-19.
24 MILLING & BAKING NEWS
fourth largest exporter of corn certainly
has played a role in rising corn values.
Increased demand for biofuels, both ethanol
from corn (and sugar in Brazil) and
renewable diesel from soybean and other
oils, also has been supportive of corn and
soybean prices. And increased demand for
biofuels largely has been fueled by crude
oil prices pushed above $100 per barrel due
to the loss of crude oil exports from Russia
bakingbusiness.com
US DEPARTMENT OF AGRICULTURE AND SOSLAND PUBLISHING CO.
http://www.bakingbusiness.com
Milling & Baking News - May 31, 2022

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