Afternoon report: Wheat leads corn, soybean prices higher on bargain buying, weather concerns, and calming recession fears
Good afternoon! And happy Friday!! Summer Friday was in full effect across the markets today, as little new market news surfaced and allowed grains prices to rally enough to recoup much of the past week’s losses. Which makes sense – I’ve been covering for Ben Potter during his vacation and these markets have taken me on a wild ride over the past week.
But Ben is back next week, so of course then the markets calm down when I am off double duty. Thank you, Chicago and Wall Street for taking an extra year off my life this week. If you would kindly return my 401(k) losses, I think we can call it even.
Top global investment bank Goldman Sachs issued updated commodities forecasts today. And despite the recent market selloff in the ag markets, Goldman expects that markets have recently been oversold amid recession fears.
“Precious metals and energy are the sectors on which to be overweight in the near term,” the bank said in a report. That’s great news for ag markets headed into the weekend and ahead of next week’s WASDE reports. It could provide some market stability until at least next Wednesday morning, when the U.S. Bureau of Labor Statistics releases June 2022 inflation data in the monthly Consumer Price Index (CPI) report.
Heat stress mounts
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.
“2012 here we come,” foreshadowed 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!
Corn
“What recession?” – Corn markets. Corn prices shot $0.20-0.30/bushel higher in today’s trading session, lifting December 2022 futures back above the $6/bushel benchmark and recouping all of the week’s earlier losses as markets continued to take a breather from recession and inflation fears. Dry weather concerns are also mounting for corn and soybean markets.
Peak pollination is just around the corner. Dry weather could stress the crop in the coming weeks, especially considering the Midwest’s drought ratings have accelerated significantly higher over the past four weeks. Today’s rally could be a foreshadowing of future price action over the coming weeks if a looming flash drought causes reproductive issues for the crop.
A lackluster export sales report marked the end to peak corn export season earlier this morning, though that sentiment had likely already been priced into the markets earlier this week.
Cash bids were steady to slightly weaker at a handful of ethanol plants, river terminals, and processors in the Mississippi and Illinois River regions today. Farmer sales were slow across the Midwest even as futures prices rallied higher.
Soybeans
Soybean prices rose $0.27-$0.33/bushel today on more bargain buying. New crop prices closed the week higher, earning back Monday’s losses by the time the bell rang this afternoon on waning recession worries. Export sales pointed to optimism for both old and new crop soybeans in this morning’s Weekly Export Sales report from USDA.
Cancellations of export sales in today’s report were largely reflective of Chinese and other unknown buyers cancelling previous orders booked at higher prices. Expect to see those market players back in the game soon, though, as soy/edible oil demand across the world remains high and stocks remain tight.
Cash soybean bids weakened at elevator and river terminals destined for export markets today, though basis was largely unchanged at crush facilities across the Midwest. August 2022 futures surged above $15/bushel and September 2022 futures rose past the $14/bushel benchmark, with the November 2022 contract not far behind.
But the rally could not persuade farmers to sell more bushels as cash sales were reportedly slow. In fact, many dealers began rolling cash bids from the August 2022 contract directly to the November 2022 contract.
Cash soymeal markets were mixed at soy crush facilities today and trended lower at rail terminals. Demand signals are likely increasing slightly, with dealers noting routine poultry and livestock demand today after reporting light demand earlier in the week.
Wheat
What a week in the wheat market! The dollar surged to new 20-year highs today before backing off by the end of the trading session. The currency’s depreciation helped lift wheat prices a staggering $0.54-$0.60/bushel higher today as bargain buying and retreating recession fears helped prop up the wheat complex.
Chicago, Kansas City, and Minneapolis contracts all clawed back losses to close at June 30 levels, erasing all of the losses from last Friday and this past Tuesday. Chicago futures are now trading just shy of the $9/bushel benchmark while Kansas City futures soared past that same benchmark today. Minneapolis futures were knocking on the door of the $10/bushel benchmark.
Soft red winter wheat cash offerings rose $0.05/bushel at an Indiana facility today. Cash bids for soft red winter wheat elsewhere in the Midwest were remained largely flat at a discount to futures prices.
In the Southern Plains, cash bids for hard red winter wheat firmed in Oklahoma. Strong export sales volumes for hard red winter wheat were a key driver of this dynamic, as reported in today’s Weekly Export Sales report from USDA.
An originator in Oklahoma told Reuters that the futures rally was encouraging a small volume of new farmer cash sales as basis offerings rose above the $9/bushel benchmark.
Wheat exports out of the European Union are off to a hot start at the beginning of the 2022/23 marketing year. “The EU looks like having to take a big share of the burden of replacing Ukrainian wheat this summer,” a trader told Reuters, noting a surprise Egyptian purchase of German wheat earlier this week.
Iran and African buyers have already booked a record volume of German export shipments. Algeria and Morocco have targeted early sales from France to offset traditional purchases from the Black Sea. Plus, Asian buyers are already making inquiries about E.U. wheat supplies.
Is a record export season in store for E.U. wheat producers? Not necessarily. As I noted in yesterday’s report, production prospects are a mixed bag for the E.U. this summer. Plus, Russia’s bumper crop is expected to provide stiff pricing competition, though payment and logistic issues may delay potential sales.
“The EU supply balance can’t really be stretched. So what room is there for new destinations?,” Nathan Cordier of consultancy Agritel told Reuters. “Germany’s northern export areas are looking good but nationally I think the next wheat crop estimates will be reduced,” another trader speculated.
The E.U. is the world’s second largest wheat exporter, following Russia.
Wheat harvest
Fridays are my favorite times during wheat harvest season because that is when U.S. Wheat Associates publishes its Weekly Harvest Report. Here are all the top insights from this week’s updates!
Hard red winter wheat harvest is nearly 30% complete as it moves north into the Central U.S. Harvest is largely finished in Texas and Oklahoma, with only about 13% left to go in top producer Kansas. Nebraska’s crop is 25% harvested while Colorado’s harvest is 12% complete. Test cutting will likely begin in Wyoming and South Dakota in the next week to 10 days.
Crop conditions are holding mostly steady, though heavy wind and hail in South Dakota this past week likely damaged crops. Yields in the Southern Plains continue to average between 20-30 bpa. Preliminary reports from harvest progress in Nebraska point to more favorable yields (50bpa for dryland and 100bpa for irrigated).
Soft red winter wheat harvest is nearly 85% complete, even though scattered showers have caused rain delays in the Midwest over the past week. Crop conditions are in good shape, with 57% of the crop rated as good to excellent in Monday’s Crop Progress report.
Test weights are trending higher than last year. Harvest progress should continue at a steady clip over the next week as dryness settles into the Eastern half of the country.
Soft white winter wheat crops in the Pacific Northwest are nearly completely headed. Spring crops continue to lag 2-3 weeks behind historical paces but are largely rated in good to excellent condition across Idaho, Oregon, and Washington.
Hot temperatures and widespread rain showers have been favorable for crop development. Those weather patterns are likely to continue as the white wheat crop approaches harvest.
Hard red spring wheat crop development also continues to lag behind average paces due to a slow start to spring in the Northern Plains. But even with the late start and delayed crop development, USDA reported 64% of the spring wheat crop to be in good to excellent condition last Monday. Rains in the Northern Plains through the weekend should keep those condition ratings high.
Durum crops are also developing late this year. But overall crop development remains favorable. Condition ratings in North Dakota and Montana stand at 88% and 66% good to excellent as of last Sunday. The crop received beneficial warmth and moisture this week. More rain is expected this weekend.
Weather
Rains are going to start shifting out of the Midwest over the next couple days, according to NOAA’s short-range forecasts. Heavy showers and thunderstorms are still forecast for the Great Lakes region today, with over an inch of accumulation expected in the Eastern Corn Belt over the next 24 hours.
Widespread showers are predicted across the country late this evening. By Sunday, skies should clear in most of the country except in the Northern Plains.
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 middle of July. The Eastern Corn Belt could see more moderated temperatures during that time before above average chances of heat return.
While the chances for rain in the Upper Midwest are growing increasingly slim for the second half of July, above average precipitation forecasts are being predicted for the Southeast and the Rocky Mountain Front Range (which tracks, because we just officially finished installing our sprinkler system!).
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 occur during peak pollination.
Financials
Former Japanese prime minister Shinzo Abe was assassinated overnight. Abe’s famous “Abe-nomics” saw the country’s longest-serving prime minister infuse cheap cash into the country, attempt to deregulate corporations, and enact economic measures to empower women over his tenure, lifting Japan’s economy out of years of economic dysfunction to counteract a shrinking and aging population.
After starting the morning out wobbly, U.S. equity indices closed today’s trading session up 8.96 points (0.22%) to $3,912.82 – a new one-week high as recession concerns abate – slightly.
A better-than-expected jobs report this morning appeared to boost investor sentiment on the surface. But the monthly jobs report did not appear to show any hiring slowing which would be a key indicator of slowing inflation. Rising unemployment would be a key signal that the Federal Reserve’s inflation easing policies (i.e. interest rate hikes) are working and that the Fed would back off further interest rate increases.
No hope there today, which could make for a very volatile trading week after the U.S. Bureau of Labor Statistics releases June 2022 inflation data in the monthly Consumer Price Index (CPI) report next Wednesday morning.
Get your ducks in a row now, if you need. Next week will likely be another wild ride for markets.
What else I’m reading this morning on our website, FarmFutures.com:
The top highlights from Friday morning’s weekly Export Sales report from USDA.
My latest E-corn-omics column breaks down the key highlights from last Thursday’s Acreage and Quarterly Grain Stocks reports from USDA with a few fun graphs.
Have ag prices landed on firm footing after the recent commodity selloff? Naomi Blohm predicts whether or not prices could drop another leg lower.
AgMarket.Net’s Brian Splitt highlights lessons from 2012 to forecast what markets may do heading into 2023.
Roger Wright explains how put options can complement futures contracts.
Closing Ag Commodity Prices – 7/8/2022
Contract
Units
High
Low
Last
Net Change
% Change
JUL ’22 CORN
$ / BSH
7.81
7.44
7.7825
0.3125
4.18%
SEP ’22 CORN
$ / BSH
6.3575
6.09
6.3525
0.2625
4.31%
DEC ’22 CORN
$ / BSH
6.26
5.9725
6.255
0.2925
4.91%
MAR ’23 CORN
$ / BSH
6.3125
6.035
6.3075
0.2875
4.78%
MAY ’23 CORN
$ / BSH
6.34
6.07
6.335
0.28
4.62%
JUL ’23 CORN
$ / BSH
6.3175
6.05
6.3075
0.2675
4.43%
SEP ’23 CORN
$ / BSH
5.94
5.7225
5.9375
0.215
3.76%
DEC ’23 CORN
$ / BSH
5.805
5.59
5.8025
0.2125
3.80%
MAR ’24 CORN
$ / BSH
5.875
5.68
5.87
0.2
3.26%
JUL ’22 SOYBEANS
$ / BSH
16.35
15.9625
16.35
0.4375
2.75%
AUG ’22 SOYBEANS
$ / BSH
15.165
14.7375
15.165
0.3125
2.10%
SEP ’22 SOYBEANS
$ / BSH
14.165
13.755
14.1525
0.3225
2.33%
NOV ’22 SOYBEANS
$ / BSH
13.9875
13.5775
13.9875
0.3325
2.44%
JAN ’23 SOYBEANS
$ / BSH
14.0325
13.6275
14.015
0.3125
2.28%
MAR ’23 SOYBEANS
$ / BSH
13.9425
13.5625
13.93
0.285
2.09%
MAY ’23 SOYBEANS
$ / BSH
13.925
13.5625
13.925
0.285
2.09%
JUL ’23 SOYBEANS
$ / BSH
13.8875
13.535
13.8675
0.2675
1.97%
AUG ’23 SOYBEANS
$ / BSH
12.5
#N/A
13.625
0.29
0.00%
SEP ’23 SOYBEANS
$ / BSH
13.11
#N/A
13.1225
0.2975
0.00%
NOV ’23 SOYBEANS
$ / BSH
12.8725
12.5225
12.8675
0.28
2.22%
JUL ’22 SOYBEAN OIL
$ / LB
64.24
63.23
64.07
0.9
1.69%
AUG ’22 SOYBEAN OIL
$ / LB
63.12
61.21
62.72
1.1
1.79%
JUL ’22 SOY MEAL
$ / TON
482.5
471.7
481.1
11.1
2.36%
AUG ’22 SOY MEAL
$ / TON
433
420.9
432.2
8.7
2.05%
SEP ’22 SOY MEAL
$ / TON
413.8
398.3
412.1
11.1
2.77%
OCT ’22 SOY MEAL
$ / TON
404.1
388.3
403.1
11.8
3.02%
DEC ’22 SOY MEAL
$ / TON
405
388.6
404.5
12.7
3.24%
JUL ’22 Chicago SRW
$ / BSH
8.7225
8.4175
8.7925
0.5475
5.79%
SEP ’22 Chicago SRW
$ / BSH
8.9475
8.3825
8.9325
0.5675
6.78%
DEC ’22 Chicago SRW
$ / BSH
9.095
8.54
9.085
0.5675
6.66%
MAR ’23 Chicago SRW
$ / BSH
9.22
8.7
9.215
0.5625
6.50%
MAY ’23 Chicago SRW
$ / BSH
9.255
8.795
9.245
0.535
6.14%
JUL ’23 Chicago SRW
$ / BSH
9.0775
8.63
9.075
0.505
5.89%
SEP ’23 Chicago SRW
$ / BSH
8.9875
8.5375
8.96
0.4725
5.57%
JUL ’22 Kansas City HRW
$ / BSH
9.5
9.14
9.5
0.59
6.62%
SEP ’22 Kansas City HRW
$ / BSH
9.4825
8.8925
9.4675
0.575
6.47%
DEC ’22 Kansas City HRW
$ / BSH
9.56
9.0075
9.545
0.57
6.35%
MAR ’23 Kansas City HRW
$ / BSH
9.595
9.0625
9.575
0.555
6.15%
MAY ’23 Kansas City HRW
$ / BSH
9.59
9.055
9.5775
0.5525
6.12%
JUL ’23 Kansas City HRW
$ / BSH
9.3875
8.8025
9.375
0.5225
5.90%
SEP ’23 Kansas City HRW
$ / BSH
9.23
8.8525
9.23
0.485
5.55%
JUL ’22 MLPS Spring Wheat
$ / BSH
0
#N/A
9.13
0
0.00%
SEP ’22 MLPS Spring Wheat
$ / BSH
9.945
9.38
9.905
0.56
5.99%
DEC ’22 MLPS Spring Wheat
$ / BSH
10.045
9.5225
10.0175
0.555
5.87%
MAR ’23 MLPS Spring Wheat
$ / BSH
10.1425
9.65
10.125
0.5425
5.66%
MAY ’23 MLPS Spring Wheat
$ / BSH
10.2025
9.7275
10.2025
0.5425
5.62%
JUL ’23 MLPS Spring Wheat
$ / BSH
10.2325
9.8
10.21
0.535
5.53%
SEP ’23 MLPS Spring Wheat
$ / BSH
9.84
9.4475
9.84
0.4525
4.82%
SEP ’21 ICE Dollar Index
$
107.615
106.64
106.815
-0.144
-0.13%
AU ’21 Light Crude
$ / BBL
105.24
101.51
104.94
2.21
2.15%
SE ’21 Light Crude
$ / BBL
101.97
98.4
101.65
2.4
2.42%
AUG ’22 ULS Diesel
$ /U GAL
3.7042
3.5411
3.6736
-0.0003
-0.01%
SEP ’22 ULS Diesel
$ /U GAL
3.6237
3.4712
3.5944
0.0005
0.01%
AUG ’22 Gasoline
$ /U GAL
3.4818
3.3481
3.4433
0.0229
0.67%
SEP ’22 Gasoline
$ /U GAL
3.3094
3.1869
3.2806
0.0347
1.07%
AUG ’22 Feeder Cattle
$ / CWT
173.6
171.525
171.825
-0.65
-0.38%
SEP ’22 Feeder Cattle
$ / CWT
176.65
174.45
174.8
-1.25
-0.71%
AU ’21 Live Cattle
$ / CWT
135.15
133.8
133.925
-0.625
-0.46%
CT2 ’21 Live Cattle
$ / CWT
140.4
138.825
138.825
-1.025
-0.73%
JUL ’22 Live Hogs
$ / CWT
113.325
112.6
112.8
-0.45
-0.40%
AUG ’22 Live Hogs
$ / CWT
109.875
107.925
109.025
-0.475
-0.43%
JUL ’22 Class III Milk
$ / CWT
22.79
22.64
22.77
0.13
0.57%
AUG ’22 Class III Milk
$ / CWT
21.97
21.68
21.78
-0.06
-0.27%
SEP ’22 Class III Milk
$ / CWT
22.33
22.16
22.29
0.09
0.41%
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