Commodity advisor offers insights on 2022

by Courtney Llewellyn

Cory Bratland, chief grain strategist with Kluis Commodity Advisors, said he’s often been asked how he sleeps at night with the current grain markets. “My answer is ‘Like a baby – I wake up screaming and crying every two hours,’” he joked.

Bratland presented “Successful Farming Talk: Marketing Strategies for Success in 2022” at this year’s Commodity Classic, and he was excited about it because “This year we are finally getting to talk about much higher prices.”

There are four factors that rallied the grain markets, according to Bratland: the record demand from China for soybeans and corn; the dry weather pattern that reduced South American crops; the war in Ukraine; and investors are buying commodities as an inflation hedge.

“It’s either a supply-driven market or a demand-driven market, and we’re still in the demand drive,” he said. La Niña led to the dry, hot weather in South America – and a 12% to 13% reduction in supply. We don’t know how much lower this will go, but investors are looking at the long term.

Commodity advisor offers insights on 2022

“We can expect a major high by June, and a drop by October – but we have never dealt with a war between two major crop exporters before,” Cory Bratland, Kluis Commodity Advisors, said of grain prices. Photo by Courtney Llewellyn

The key factors this year include one of the biggest issues facing farmers in Ukraine – fuel (or the lack thereof). As of the end of March, they’re looking at a 25% to 50% reduction in their crops. Farmers and sellers also need to continue to follow the weather in South America, particularly Brazil, and their final crop sizes. Spring and summer weather and total global grain production are also key factors this year.

The food vs. fuel battle may reduce biofuel demand in 2022, and a global recession will eventually affect commodity demand too.

Circling back, Bratland emphasized the importance of Ukraine, which is about the size of Texas.
“One of the biggest wild cards this year is do they have access to grain?” he said of other countries trying to get to Ukraine’s supplies. The country produces 1.6 billion bushels of corn and exports 81% of them. In comparison, Bratland noted Minnesota grows 1.4 billion bushels but only exports 18% of theirs. Ukraine exports about twice what Minnesota and Iowa combined probably export, which means planting problems in Ukraine would have a greater impact on exports than problems in those two states.

It’s a similar story with wheat. Ukraine produces 1.2 billion bushels of wheat and exports 73% of them; the U.S. grows 2.7 billion bushels, but only exports 37% of that.

For the U.S., that paints a very friendly picture up front, but it will become negative eventually, Bratland noted.

As for America, he thinks we’re going to see 322 million acres of our 12 major crops planted this year (two million more than 2021). He estimated corn will be down (due to fertilizer shortages and expenses), soy will be up (due to lower fertilizer and input expenses) and wheat will be up (if the weather cooperates). Farmers could potentially could see more double cropping this year as well.

Bratland said the key weeks to watch for a change in corn trends are May 13, June 20 and July 10. The key weeks to watch for a change in soy trends are April 22, May 13 and June 20.

“The volatility is not going away any time soon,” he said, “but there are great opportunities for this year.” He said grain prices may go higher into May and June, with the caveats that producers are still likely to have a seasonal low at harvest, that 2022 may looks a lot like 2008 and that producers need to stay disciplined.

“If we compare it to 2008, we can expect a major high by June, and a drop by October – but we have never dealt with a war between two major crop exporters before,” Bratland concluded.

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