Afternoon report: Markets took a break from recession scaring, pushing grain prices 2-5% higher
Good afternoon! Our latest Feedback from the Field report pairs farmer responses to Tuesday’s Crop Progress report from USDA. Corn and soybean conditions are trending lower than the market realized, which helped to prevent further losses following yesterday’s turbulent trading session.
“It’s beginning to look like 2012,” cautioned a grower in Indiana.
You can participate in the Feedback from the Field series as often as you’d like this growing season! Just click this link to take the survey and share updates about your farm’s crop progress. I review and upload results daily to the FFTF Google MyMap, so farmers can see others’ responses from across the country – or even across the county!
E-corn-omics
My latest E-corn-omics column breaks down the key highlights from last Thursday’s Acreage and Quarterly Grain Stocks reports from USDA. Plus, I’ve created a few charts to help readers visualize the data in a more comprehensive manner (because sometimes those stocks reports are difficult to interpret).
The report was largely bullish for soybeans thanks to record third quarter usage and smaller 2022 sowings. Higher 2022 corn acreage and lower than expected Q3 usage rates hinted at bearish prospects for corn following the report’s release while wheat acreage and stocks results were met with neutral to bearish sentiments.
What does that mean for prices and farmers’ marketing plans for the rest of the summer? Check out my column for all the latest insights and analysis.
Monthly export data
The U.S. Census Bureau, in collaboration with USDA’s Foreign Ag Service (FAS), released its monthly export volumes and sales report this morning, providing the most accurate look at exports to date.
USDA-FAS has several weekly export reports that markets use as key indicators. But the Census Bureau data is widely regarded – particularly by the World Ag Outlook Board (WAOB) that publishes monthly WASDE estimates – as the gold standard for U.S. export data.
Here are the top insights from this morning’s data release, which provided the first look at May 2022 exports:
The value of total May 2022 U.S. ag exports reached $17.4 billion. It was the third largest month for export sales in the 2022 calendar year and the fifth largest monthly haul for U.S. exports on record.
Currently, calendar year to date U.S. ag exports are trending nearly 14% higher than the same time last year.
It was a record-setting month for U.S. corn export revenues. May 2022 volumes rose to just shy of $2.5 billion – topping March 2021’s volume of $2.4 billion as the largest on record.
This was due largely to high corn prices through the month, which averaged just shy of $8.82/bushel during May 2022.
But volumes were nothing to sleep on, either. May 2022 U.S. corn export volumes reached 283 million bushels – the eighth largest monthly corn export volume on record.
May 2022 soybean export volumes dropped by half from the previous month to 88.7 million bushels.
Export revenues from May 2022 soybean shipments also dropped by 35% on the month to $1.56 billion as unseasonal demand from China waned.
May 2022 export results for wheat shipments were more bearish than those of soybeans – not a surprise – due to a stronger dollar limiting demand interest from international wheat buyers.
Volumes fell 22% from the previous month to 50.0 million bushels.
Revenues dropped 22% to $585 million due in large part to falling wheat prices in May. Those prices dropped even lower in June.
Overall, the report was very bullish for corn but more neutral for soybeans and wheat prices. With prices trending lower in June, I think corn exports will need to see higher volumes to support another month of record-setting revenues. Soybeans are finally back to their seasonal lows. And wheat will need more positive signs of volumes in June to keep bullish price hopes alive.
Corn
Corn prices rose $0.06-$0.12/bushel today with several of the front-end contracts ending today’s trading session above the $6/bushel benchmark. Easing concerns about recession in the broad economy were a big driver of higher corn prices today, though higher energy prices also trickled over into the corn and soy price complexes.
Extended forecasts through next week suggest dry weather. A rapid decline in soil moisture ratings across the Midwest as announced in the weekly drought monitor update suggests that corn crops could be more susceptible to heat damage during next week’s dry spell, especially in areas that did not receive plentiful rains this week.
Cash corn prices continued higher at ethanol plants across the Midwest today. Basis bids were flat to slightly higher at processor and elevator locations while remaining largely unchanged at river terminals destined for export markets. Cash prices continue to trade at a premium to futures prices and buyers are still rolling bids to the September 2022 futures contract as the July 2022 contract approaches expiration one week from today.
Soybeans
Soybean prices rallied $0.18-$0.42/bushel higher today, spurred on by dry forecasts next week, easing recession fears, and gains in the energy market. A rally in the soyoil market was a significant factor for a more bullish trading session for soybeans relative to corn today.
“Traders said the markets had become technically oversold following recent declines. They continue to face an uncertain supply outlook as war in Ukraine disrupts Black Sea grain exports, while U.S. crops enter crucial summer growth phases,” Tom Polansek reported for Reuters earlier this morning.
“The soybean market has looked terrible technically, but the momentum indicators are beginning to turn higher,” Tomm Pfitzenmaier, analyst for Summit Commodity Brokerage, told Reuters. “Weather uncertainty into the critical August period should support prices for the time being.”
Cash soybean prices showed signs of increasing at crush facilities, elevators, and river locations on the east side of the Mississippi River this morning while bids to the west were largely flat. The soybean market rally yesterday and today has triggered a small quantity of new farmer sales, though the volumes sold tended to be on the small side.
Cash soymeal prices were mostly flat on the truck market today due to light end user demand, but rail prices offered some price appreciation for soymeal sellers. Tight supplies are sending many dealers to roll cash bids from the August to September futures contract to take advantage of the $50/ton spread between the two. Cash prices were largely unchanged as a result.
Brazil’s state ag forecasting agency, Conab, released updated forecasts for old crop corn and soybean production. Here are the highlights:
2021/22 soybean production was cut 0.2% from previous estimates to 4.56 billion bushels. USDA’s current forecast for old crop Brazilian soy production stands at 4.63 billion bushels, so this adjustment was bullish for soybean prices.
Conab’s soybean export forecasts are incredibly more optimistic than USDA predictions. Conab pegs Brazil’s 2021/22 soybean exports at 2.76 billion bushels, while USDA’s latest estimate stands at 1.75 billion bushels.
Better than expected safrinha (second) crop production estimates found Conab increasing 2021/22 corn production by 0.3% from previous estimates to 4.55 billion bushels. USDA’s current forecast is 4.57 billion bushels, so this was largely neutral news for corn markets.
Wheat
The dollar stepped back from 20-year highs today as the markets took a break from worrying about recession and lower wheat production forecasts out of Argentina helped to bring bullish prospects back to the wheat market. Wheat prices across Chicago, Kansas City, and Minneapolis futures closed today’s trading session $0.32-$0.54/bushel higher on the prospects.
Cash prices for soft red winter wheat rose today in Ohio. Cash bids for hard red winter wheat in the Southern Plains also moved higher as buyers sought to bring more farmer-held bushels into the demand pipeline. Overall, basis offerings for hard and soft winter wheat around the country are trading at a discount to futures prices.
Egypt bought 2.3 million bushels of wheat from Germany earlier this week as wheat prices drop to pre-Black Sea conflict lows and Northern Hemisphere harvest pressure mounts. Egypt has been booking several large wheat purchases over the past week on the lower prices, booking nearly 48 million bushels of sales since July 1 from France, Germany, Russia, and Romania.
A 29.9-million-bushel purchase from France on Monday was Egypt’s largest single purchase in recent memory. The country’s General Authority for Supply Commodities (GASC) has been increasingly using direct deals instead of open-ended tenders to source its wheat supplies. Egypt is the world’s largest wheat importer.
“GASC seems to be taking its new strategy of direct purchases without tenders very intensively,” a trader observed to Reuters reporters in Egypt and Germany.
Argentina’s Buenos Aires Grains Exchange issued a lower forecast for the country’s 2022/23 wheat sowings. High input prices and dry weather have created turbulent planting conditions and ultimately sowing delays for Argentine wheat farmers, leading the exchange to shave 2% off its previous estimates to 15.3 million acres.
The exchange’s original forecast for wheat sowings was 16.3 million bushels. Argentina is the world’s sixth largest wheat exporter.
Brazil has already planted 65% of its 2022 wheat crop, which is expected to total a record-setting 331 million bushels. Conab, Brazil’s ag statistics agency, estimates Braziilan wheat growers are going to plant 7.2 million acres of wheat this summer, a 6.6% annual increase in wheat acreage and the largest Brazilian wheat sowing since 1990 (8.1M ac.).
Even with ongoing La Ni?a weather pressures, high input prices, and questionable input availability in Brazil, Conab expects wheat yields will rise 10.3% on the year. Brazil typically imports most of its wheat from Argentina. But changing global dynamics due to the Black Sea conflict could find Brazil exporting more wheat in the coming year.
Brazil is currently forecast to be the world’s 11th largest wheat exporter during the 2022/23 marketing year.
Inputs
Brazil continues to cozy up to Canadian potash producers, as potassium chloride (Kcl) volumes from Canada into Brazil soar to record heights. Ag consultancy Agrinvest Commodities found that calendar year to date Brazilian imports of Canadian potassium products are 71.2% higher than a year ago at 2.291 million metric tonnes (MMT).
“Canada only supplies potassium chloride to Brazil,” Jeferson Souza, an Agrinvest analyst, told Reuters. “But the volume of Kcl imported by Brazil in the first half was so large that Canada became its second largest supplier of overall fertilizers in the period.”
Russia continues to be Brazil’s primary potassium supplier despite Western banking sanctions, while imports from China represent the third largest imported potassium volumes into Brazil. Brazil relies heavily on imports for its fertilizer supplies.
The good news? Brazilian growers are expected to have more than enough potash supplies on hand for its planting season this fall which could boost yields and help reduce global inflationary pressures.
From this morning:
It’s no secret there is a growing mismatch between wholesale and retail fertilizer prices. And as global money managers liquidate long positions on commodities as the Federal Reserve battles inflation, fertilizer companies have also suffered stock losses as revenue prospects from farmer sales suddenly shrink.
“Investors and analysts are trying to decide now whether fertilizer stocks got swept up in the broad market selloff and could reverse course, or if they were bid up too high in the panic after Russia invaded Ukraine and have farther to fall,” writes reporter Pia Singh in a Wall Street Journal article published this morning.
The article points out that before the recent hedge fund liquidation, fertilizer producers Mosaic and CF Industries were among the top performers in the S&P 500. “Competitors Nutrien Ltd., Corteva Inc. and CVR Partners LP have traded in similar arcs,” observes Singh.
While some on Wall Street may be growing bearish on fertilizer companies, Tracey Allen, a commodity strategist at JPMorgan Chase & Co. thinks there are still good reasons to be long on fertilizers. Even as inventories stockpile ahead of fall application season, farmer demand is likely to remain strong as food and fertilizer supplies around the world remain tight and fuel prices remain high.
“Fertilizer prices are going to be a very important driver of agricultural prices going forward,” Allen told the WSJ.
Russia and Ukraine
Check out this Reuters report for all of the latest insights regarding the Russian occupation in Ukraine. Ukraine’s export volumes continue to struggle to even come close to matching year-ago volumes as Black Sea terminals remain inaccessible. Russian officials continued to spit barbs against the West overnight. And the E.U. continues to scramble for fuel alternatives in case Russian natural gas deliveries are interrupted.
Weather
More rains and some cooler temperatures are forecast for the Heartland today, according to NOAA’s short-range forecasts. Once again, heavy showers and thunderstorms will continue to stretch from the Plains through the Eastern Corn Belt, dropping up to an inch of precipitation along the way over the next 24 hours.
Regions including Western Illinois, Northeast Missouri and Eastern Iowa could see rainfall totals up to 2 inches during that time. Skies are not likely to clear across the Heartland until Saturday afternoon, providing heat-stressed crops a favorable reprieve just ahead of peak reproductive season.
Recent rains across the Heartland weren’t enough to offset growing dryness across the country, according to the latest update from the University of Nebraska Drought Monitor. Through the week ending July 5, abnormally dry to exceptional drought regions in the U.S. increased 1.44% to cover 70.09% of the country due in no small part to increasing dryness in the Midwest.
It is the driest condition soil moisture levels have seen since late March of this year. Of more significant concern is how quickly that soil moisture is evaporating in the Midwest. In less than a month, dry/drought ratings in the nation’s top crop producing region have spiked from a measly 9.44% to a staggering 50.94%.
Such an extreme increase in dryness is concerning for crop conditions, as the heat stress could limit yield potential and result in lower production volumes. As global crop supplies remain tight, any additional crop stress is likely to add bullish pressure to grain and oilseed prices.
NOAA’s 6- to 10-day and 8- to 14-day forecasts updated this morning continue to trend on the warm side to the west of the Mississippi River during the second week of July. The Eastern Corn Belt could see more moderated temperatures during that time.
While the chances for rain in the Upper Midwest are growing increasingly slim, above average precipitation forecasts are being predicted for the Southern Plains and Southeast.
But that’s not all bad news – that is right around the time that corn pollination will begin so the dry weather will actually be a welcome weather event for corn growers across the country. Of course, that condition will only be met if the Midwest receives substantial rainfall this week and no other unfortunate weather events during peak pollination.
Financials
Have you been following the spilled tea on British Prime Minister Boris Johnson’s resignation this morning? I kind of have been following, but only so I can say “spill the tea” in this newsletter. What a great phrase.
Anyway, here is what you need to know about Johnson’s resignation. And former Theranos president Sunny Balwani was also found guilty of fraud for misleading investors about the viability of the now-infamous blood-testing startup. Disclaimer: this isn’t pivotal marketing information. I just love some good gossip every now and then!
S&P 500 futures are slated to close today’s trading session up a staggering 63.27 points (1.65%) to $3,908.35 as financial markets take a breather from recession fears.
“Investors widely expect economic data to weaken as the Federal Reserve continues raising interest rates in an effort to rein in inflation. What will be key, analysts say, is how quickly or slowly the data worsen. Many are hoping that central bank policy will pull inflation back from multidecade highs without tipping the U.S. into recession,” Chelsey Dulaney and Akane Otani observed this afternoon in the Wall Street Journal.
Mortgage rates dropped for a second straight week, settling at 5.3% on recession fears. U.S. crude (West Texas Intermediate) climbed back above the $100/barrel benchmark today, with bargain buying accounting for the some of the rally. Natural gas inventories are 12% lower than year ago volumes, pushing prices nearly 14% higher in today’s trading session and pulling the rest of the energy complex higher with its gains.
What else I’m reading this morning on our website, FarmFutures.com:
Advance Trading’s JJ Keske uncovers three reasons why farmers don’t use options to manage risk.
Are you playing the grain market blame game? Bryce Knorr has helpful insights for farmers who may have been surprised by higher corn acres in last week’s USDA report.
The latest Purdue University-CME Ag Economy Barometer finds that farmers’ expectations of the future are weakening amid rising input costs and uncertainty about the future.
Looking to expand your farm? Darren Frye has three questions farmers should answer before they pull the trigger on expansion plans.
Commstock’s Matthew Kruse expects yield will become a more critical factor in determining ending stocks in the future, limiting any potential U.S. acreage expansion in the future.
Naomi Blohm has the latest insights on how to manage price volatility this summer.
Closing Ag Commodity Prices – 7/7/2022
Contract
Units
High
Low
Last
Net Change
% Change
JUL ’22 CORN
$ / BSH
7.635
7.4
7.45
0.0075
0.10%
SEP ’22 CORN
$ / BSH
6.235
6.0125
6.0925
0.095
1.58%
DEC ’22 CORN
$ / BSH
6.0875
5.865
5.9675
0.1175
2.01%
MAR ’23 CORN
$ / BSH
6.1425
5.925
6.025
0.1125
1.90%
MAY ’23 CORN
$ / BSH
6.175
5.9575
6.0625
0.1125
1.89%
JUL ’23 CORN
$ / BSH
6.16
5.95
6.0475
0.1025
1.72%
SEP ’23 CORN
$ / BSH
5.82
5.645
5.73
0.0775
1.37%
DEC ’23 CORN
$ / BSH
5.6875
5.525
5.5975
0.06
1.08%
MAR ’24 CORN
$ / BSH
5.7525
5.615
5.67
0.0525
0.93%
JUL ’22 SOYBEANS
$ / BSH
16.2
15.89
15.9075
0.105
0.66%
AUG ’22 SOYBEANS
$ / BSH
14.9675
14.4875
14.835
0.37
2.56%
SEP ’22 SOYBEANS
$ / BSH
13.9325
13.43
13.83
0.42
3.13%
NOV ’22 SOYBEANS
$ / BSH
13.7275
13.2525
13.6475
0.42
3.18%
JAN ’23 SOYBEANS
$ / BSH
13.77
13.3
13.685
0.4125
3.11%
MAR ’23 SOYBEANS
$ / BSH
13.7
13.25
13.62
0.3975
3.01%
MAY ’23 SOYBEANS
$ / BSH
13.7
13.2625
13.6125
0.385
2.91%
JUL ’23 SOYBEANS
$ / BSH
13.6675
13.235
13.5725
0.3725
2.82%
AUG ’23 SOYBEANS
$ / BSH
12.5
#N/A
13.335
0.3225
0.00%
SEP ’23 SOYBEANS
$ / BSH
12.8625
12.8125
12.8125
0.2275
1.81%
NOV ’23 SOYBEANS
$ / BSH
12.725
12.395
12.5625
0.175
1.41%
JUL ’22 SOYBEAN OIL
$ / LB
60.73
60.73
63.17
2.95
0.85%
AUG ’22 SOYBEAN OIL
$ / LB
62.2
58.56
61.67
3.11
5.31%
JUL ’22 SOY MEAL
$ / TON
474
467.4
470
7.4
2.44%
AUG ’22 SOY MEAL
$ / TON
429
415.2
422.6
7
1.68%
SEP ’22 SOY MEAL
$ / TON
404.1
391
400.9
9.7
2.48%
OCT ’22 SOY MEAL
$ / TON
393.3
379.3
390.8
11.5
3.03%
DEC ’22 SOY MEAL
$ / TON
393.9
379.7
391.4
11.9
3.14%
JUL ’22 Chicago SRW
$ / BSH
8.2525
8.16
8.245
0.3225
4.01%
SEP ’22 Chicago SRW
$ / BSH
8.46
8.0775
8.3775
0.3325
4.13%
DEC ’22 Chicago SRW
$ / BSH
8.62
8.2325
8.5325
0.3175
3.86%
MAR ’23 Chicago SRW
$ / BSH
8.7675
8.3925
8.6775
0.3075
3.67%
MAY ’23 Chicago SRW
$ / BSH
8.8125
8.46
8.725
0.29
3.44%
JUL ’23 Chicago SRW
$ / BSH
8.65
8.3025
8.5925
0.285
3.43%
SEP ’23 Chicago SRW
$ / BSH
8.54
8.2675
8.4875
0.26
3.07%
JUL ’22 Kansas City HRW
$ / BSH
8.935
8.7225
8.9075
0.415
4.89%
SEP ’22 Kansas City HRW
$ / BSH
8.96
8.5375
8.895
0.38
4.46%
DEC ’22 Kansas City HRW
$ / BSH
9.0325
8.625
8.975
0.375
4.36%
MAR ’23 Kansas City HRW
$ / BSH
9.065
8.705
9.03
0.375
4.33%
MAY ’23 Kansas City HRW
$ / BSH
9.08
8.7775
9.0275
0.3575
4.12%
JUL ’23 Kansas City HRW
$ / BSH
8.89
8.525
8.8575
0.3625
4.27%
SEP ’23 Kansas City HRW
$ / BSH
8.7675
8.58
8.76
0.375
4.47%
JUL ’22 MLPS Spring Wheat
$ / BSH
0
#N/A
8.805
0
0.00%
SEP ’22 MLPS Spring Wheat
$ / BSH
9.4175
8.895
9.405
0.5425
6.12%
DEC ’22 MLPS Spring Wheat
$ / BSH
9.5375
9.04
9.52
0.4975
5.51%
MAR ’23 MLPS Spring Wheat
$ / BSH
9.65
9.165
9.65
0.495
5.41%
MAY ’23 MLPS Spring Wheat
$ / BSH
9.72
9.3325
9.72
0.46
4.97%
JUL ’23 MLPS Spring Wheat
$ / BSH
9.75
9.415
9.75
0.4625
4.98%
SEP ’23 MLPS Spring Wheat
$ / BSH
9.31
9.14
9.31
0.33
3.67%
SEP ’21 ICE Dollar Index
$
107.05
106.53
106.925
0.027
0.03%
AU ’21 Light Crude
$ / BBL
104.48
96.57
102.7
4.17
4.23%
SE ’21 Light Crude
$ / BBL
100.78
93
99.28
4.3
4.53%
AUG ’22 ULS Diesel
$ /U GAL
3.7086
3.3701
3.6829
0.2723
7.98%
SEP ’22 ULS Diesel
$ /U GAL
3.6294
3.3094
3.6036
0.257
7.68%
AUG ’22 Gasoline
$ /U GAL
3.4855
3.21
3.4189
0.1823
5.63%
SEP ’22 Gasoline
$ /U GAL
3.3141
3.067
3.2422
0.1517
4.91%
AUG ’22 Feeder Cattle
$ / CWT
173.775
171.6
172.55
-0.75
-0.43%
SEP ’22 Feeder Cattle
$ / CWT
177.375
175.525
176.075
-1
-0.56%
AU ’21 Live Cattle
$ / CWT
135.725
134.1
134.75
0.25
0.19%
CT2 ’21 Live Cattle
$ / CWT
141.05
139.225
140.05
0.1
0.07%
JUL ’22 Live Hogs
$ / CWT
113.575
112.675
113.225
0.075
0.07%
AUG ’22 Live Hogs
$ / CWT
111.75
109
109.55
0.35
0.32%
JUL ’22 Class III Milk
$ / CWT
22.66
22.32
22.66
0.27
1.21%
AUG ’22 Class III Milk
$ / CWT
22.28
21.5
21.81
0.37
1.73%
SEP ’22 Class III Milk
$ / CWT
22.28
21.94
22.21
0.67
3.11%
