Keynote details markets, outlook at Sorghum U/Wheat U 

Matt Hines has worked in about every facet of the grain industry. So, who better to give the keynote and outlook for wheat and grain sorghum at the recent Sorghum U/Wheat U event Aug. 13 in Wichita, Kansas? 

From large grain companies to small co-ops, from loading barges, rail cars and trucks to sweeping bins, boot pits and places in between, Hines, a principal and licensed commodity broker with Loewen and Associates in Manhattan, Kansas, has been consulting with grain and livestock producers and commercial consulting clients for nearly two decades.  

Hines talked about events that impact the grain markets and changes that took place during the past few years, and he gave an analysis. He got the bad news—lower grain prices—out of the way immediately.  

“I’m sure everybody’s already checked, but as of 11a.m., beans were still lower. They were 20 cents lower, corn and wheat five to six cents lower,” he said, then touched briefly on livestock prices. “Feeders are actually coming back a little bit steady on some of the deferreds, a little bit higher for August and September. And fat cattle were steady as well. So hopefully that’s the only bad news, right?” 

Hines said that he doesn’t have a crystal ball, and that he learned a long time ago about trying to predict the market.  

“You will go broke, but you can help risk management,” he said.  

Trading has changed quite a bit from people on the floor of the Chicago Board of Trade calling in orders. Now a bank of servers facilitates trades at the speed of light. 

Rain makes grain

Weather impacts the market, he said, in noting on Aug. 13 that the cumulative rainfall expectation for the week ahead had a familiar theme.  

“That’s probably been the key term of this year throughout the Midwest and Corn Belt. It’s just not threatening,” he said. 

Hines said the U.S. Department of Agriculture called the Illinois corn yield average at 225 bushels an acre on Aug. 12. That could also mean there might be 280- to300-bushel dryland corn in Illinois. Maps show rain coming, however. 

“That’s amazing, right?” he said. 

The farther out the maps forecast and predict, the more the forecast is going to change because weather is unpredictable, he said. He gave an example of using a Plinko board to predict winter weather.  

“We start at the top, and we could be anywhere from five days out, and we don’t know if it’s going to be 2 feet of snow or an inch,” he said. “So don’t tell me that 30 day, 60-day, 90-day weather has that much impact on these markets. This is what impacts.” 

Other influences

American and foreign politics also affect the global marketplace. 

“Markets are very chaotic, of course, because we have thousands of things that hit these markets every second,” he said. “Politics, of course, for an election year. War in Russia/Ukraine, of course, China, with their stocks, with their usage, huge impacts on these markets every day.” 

Disease outbreaks and, recently, the COVID-19 pandemic affected markets, he said. 

Hines held up his smartphone and said that on his device he has access to news from anywhere in the world. Twenty years ago, this was not possible.  

Funds and management of them are something risk managers “like to cuss,” he said, and they question why they’re short and keep driving prices down.  

Funds can drive prices higher or lower than what fundamentals indicate, but he said they can help provide a risk management strategy for producers.  

The U.S. dollar impacts trade, too. A lower dollar means products are cheaper compared to other countries, and a higher U.S. dollar hurts exports.  

Hines said crude oil also impacts grain markets, citing the negative futures price for crude oil in 2020.  

“So, yes, commodities can actually go (low),” he said. “Crude oil right now, we’re trading the $70, $80/barrel range. Pretty choppy, yet pretty flat here, actually, for the past year, year and a half.” 

When looking at the September Kansas City wheat, a spike in May didn’t have to do much with the crops in the U.S. It had a lot to do with conditions overseas. 

“When we were looking at Europe, Ukraine, Russia, a lot of fears, a lot of chatter about frost damage, concern that they were going to produce considerably less,” he said. “(That) rallied and spiked our crop, and funds started getting on board and buying.” 

When May did roll around, many farmers in the central part of Kansas said by general consensus their wheat was “better than expected,” Hines said, and prices changed again. 

“We had a pretty good May, especially in western Kansas, pretty good May for the east. And really, that’s what started the collapse,” he said. “The funds jumped back on board. They start shorting the market, and they’re short still today, the contract low, down to $5.35 and a half.” 

The Chicago soft red winter wheat is what often gets hedged against. It, too, saw a spring spike similar to Kansas City and Minneapolis contacts. 

“The contract low actually happened in early July instead of late July,” he said. “Based off USDA numbers here on Monday, they considerably cut the spring and durum crop back, so we have hopefully started to at least test the nearby resistance levels.” 

Sorghum

The U.S. Department of Agriculture report that came out Aug. 12—a balance sheet for U.S. sorghum—showed decreased planted acres at 9.3 million acres. 

“The biggest cut, and one of the biggest that I’ve seen from USDA, was yield, down to 52.9” Hines said. “That is a drop of 16 bushel per acre from what they thought a month ago.” 

USDA also dropped production from 373 million bushels down to 279 million bushels, he said, and speculated that was so “that we are not going to run out at the end of the year.” 

“USDA had to adjust domestic usage and also exports,” he said. 

Ending stocks for sorghum were down to 23 million bushels. 

“And really that’s as tight as USDA ever wants to get. We’re getting down to the low 20s,” he said. “The biggest thing from that, we should see some considerably better basis numbers on U.S. grain sorghum. It may not be the price because it has a lot of other factors really based off the corn price, but the basis should at least have a chance to improve. That’s a massive cut that USDA made on Monday.” 

Wheat

On the wheat balance sheet, planted and harvested acres were decreased, but they brought wheat yield up to 52.2 bushels per acre. Production was down versus a month ago—under 2 billion bushels for the entire U.S. wheat crop. 

“Most of that was a cut in spring wheat and durum. Hard red winter was actually increased,” he said, adding there was a minor adjustment to food usage. 

Ending stocks were lower at a “friendly” 828 million bushels. 

“But 828 million bushels is still quite a bit of wheat on hand, right?” he said. “You see a stocks to use ratio over 40%. That’s somewhat burdensome.” 

On the grain sorghum side for world production and trade, world production right now is around 60 million metric tons.  

“We’re consistently in that 10% to 15% range of production,” he said. “This past year, 318 million bushels, 8 million metric tons. That’s right at 14%.” 

Nigeria normally comes in second with about 10 to 11%, followed by Brazil, India and Mexico. 

“Our export sales for last year, 235 million bushels, and almost all of it goes to China,” Hines said. “211 million bushels of sales so far on the books. This marketing year is almost over. Out of the 235 that USDA says we’re going to ship, a little bit goes into China, of course, Mexico, and then into central Africa as well.” 

He’s still concerned with China’s lack of commodities on the books. Only 4.5 million bushels of grain sorghum, 20 million for soybeans and no sales of corn to China were reported.  

“We have zero corn sales on the books, which now a lot of that could be political. There is an election coming. China likes to play games, right?” Hines said. “They still want to feed their people, but they could be holding out to see what happens here in November.” 

Kylene Scott can be reached at 620-227-1804 or [email protected].