Morning report: International demand also lifts prices with gains capped by recession fears. (Comments are updated by 7:30 a.m. Central Time.)
Corn up 9-16 cents
Soybeans up 11-16 cents; Soymeal up $3.20/ton; Soyoil up $1.01/lb
Chicago wheat up 8-9 cents; Kansas City wheat up 13-15 cents; Minneapolis wheat up 20-21 cents
*Prices as of 6:50am CDT.
Feedback from the Field updates! How does your farm’s crop conditions stack up against other farms around the country? Click this link to take the survey and share updates about your farm’s crop development. 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!
My latest FFTF column was published yesterday and highlights the increased heat and dryness across the Midwest – and the growing toll it’s taking on crops. “It’s beginning to look like 2012,” foreshadows a grower in Indiana.
Corn
It was a quiet weekend in the grain and oilseed markets after what was a wild abbreviated week last week. Corn futures traded $0.07-$0.17/bushel higher this morning as markets grow increasingly worried about corn conditions, dry weather forecasts, and diminishing soil moisture levels across the Corn Belt.
“Early July weather was good… but extended forecasts are hot and dry through the middle of July. And Europe is hot,” David Whitcomb of Peak Trading Research said of corn in a note, as reported by Reuters.
A heat wave in the European Union – especially in Spain and France – and global supply concerns ahead of tomorrow’s WASDE report also contributed to the bullish price pressure in the corn markets this morning. Crop damage in China is also increasing optimism for purchases from the world’s top grains buyer.
A demand boost also helped, as traders hinted at a possible corn and wheat purchased from South America and Australia, respectively, by the Philippines overnight. That suggests that though prices are moving higher, they are still affordable enough to keep global demand alive today.
As of last Tuesday, outside money managers had dropped their long position on corn to the lowest volume since October 2020 on growing recession fears. For the latest insights on where the hedge funds stand in the commodities markets, check out this fantastic column written by Reuters’ global grains analyst, Karen Braun.
USDA releases updated Crop Progress values today and after a week of wet weather and moderated temperatures across the Heartland, markets are likely going to expect to see an improvement in condition ratings for the corn crop through the week ending July 10.
I’m not expecting to see too significant of a ratings bump, though. Drought ratings, as reported in last Thursday’s Drought Monitor update from the University of Nebraska, have climbed at rapid rates across the Midwest over the past four weeks. That leaves both corn and soybean crops in the Midwest highly susceptible to heat stress, especially as last week’s rains pave the way for drier weather over the coming weeks during peak pollination season.
Last week’s report saw corn ratings take a larger than expected fall, dropping 3% on the week to 64% good to excellent. It was a bigger cut than markets had been expecting and helped reverse last Tuesday’s price losses through the remainder of the 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 on Friday. Farmer sales were slow across the Midwest even as futures prices rallied higher.
Soybeans
Soybean prices rose $0.11-$0.16/bushel overnight on looming drought concerns across the U.S. International demand prospects lifted prices in the soy complex overnight thanks to a favorable weekly export sales report for soybeans last Friday and hopes that China will resume large purchases.
Gains were capped by ongoing recession concerns in the financial markets and a surge of new COVID-19 cases in China that contributed to losses in the energy market this morning.
Growing conditions for soybeans could also improve in today’s Crop Progress report, thanks to plentiful rains across the Midwest last week. Again, I’m not expecting to see too significant of an increase amid intensifying drought conditions in the region. Trade estimates will be published later this morning that will provide more solid pricing information for markets ahead of today’s report.
Last week’s report found soybean ratings taking a 2% hit, falling to 63% good to excellent through the week ending July 3. Similar to corn, it was a larger reduction than the markets had been expecting so the downgrade helped to fend of bearish price action early last week.
Cash soybean bids weakened at elevator and river terminals destined for export markets last Friday, though basis was largely unchanged at crush facilities across the Midwest amid a rally in the soybean market. 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 on Friday 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
Wheat prices rose $0.09-$0.21/bushel this morning despite a stronger dollar. Robust international wheat demand and weather concerns (heat in North America and Europe, flooding in Australia) kept supply worries alive and well this morning.
Russian wheat prices are falling on the combined pressures of a bumper harvest, weakening rouble, and lower export tax. Wheat export prices dropped 4.5% on the week to $10.61/bushel FOB, according to Russian consultancy IKAR.
Another Black Sea consultancy, SovEcon, echoed similar price depreciation due to harvest pressures. Russia is expected to harvest one of its largest wheat crops on record this year since the fall of the Soviet Union.
But demand looks to be strong for the Russian crop, according to both consultancies. SovEcon reported a 36% weekly increase in export loading volumes though many buyers are increasing quality checks to avoid purchasing any Russian grain that may have been taken from Ukrainian sources.
Winter wheat harvest is likely to show favorable signs of progress across the Plains in today’s Crop Progress report. Midwestern states are likely to show signs of some delays after last week’s showers, though it likely matters little as winter wheat harvest in that regions edges closer to completion. Last week, USDA reported 54% of the crop had been harvested, up 13% from the previous week and 6% ahead of the five-year average.
For more on the winter wheat harvest progress as well as overall crop conditions for wheat, check out my special section below about harvest updates.
Spring wheat condition improvements were the top mover of last week’s Crop Progress report. Through the week ending July 3, 66% of the crop was in good to excellent condition – up 7% from the previous week.
The Northern Plains enjoyed showers through the weekend, so there is a strong likelihood those ratings could increase today as well. That’s a bit of a mixed bag for spring wheat pricing, as Minneapolis futures struggled to match the gains of its Chicago and Kansas City counterparts late last week amid the more favorable crop yield prospects.
Soft red winter wheat cash offerings rose $0.05/bushel at an Indiana facility on Friday. 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 last Friday’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 a report late last week, 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
Weekend rains and thunderstorms across the Heartland will continue shifting east out of the Corn Belt over the next 24 hours, according to NOAA’s short-range forecasts. Light showers will leave up to a half inch of accumulation in the Great Lakes region and Eastern Corn Belt during that time.
NOAA’s 6- to 10-day and 8- to 14-day forecasts updated yesterday are looking very hot and very dry for the Heartland for the second half of July. While the chances for rain in the Upper Midwest are growing increasingly slim, above average precipitation forecasts are being predicted for the Central and Southern Rocky Mountains.
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 received substantial rainfall over the past week and no other unfortunate weather events occur during peak pollination.
Japan’s weather bureau issued updated La Ni?a forecasts overnight, increasing the likelihood of the weather event through the end of harvest season to 60% from 40% predicted last month. While there is a 40% chance global weather conditions could moderate this summer, those odds have decreased by about 20% from last month’s forecasts.
La Ni?a generally increases flooding and drought risk as it drops ocean temperatures in the equatorial Pacific to below-average temperatures. In the U.S., 2022 marks the third year La Ni?a weather patterns have dominated forecasts, exacerbating drought conditions to the West of the Mississippi River.
Financials
Earnings season is about to heat up on Wall Street and markets aren’t too optimistic about it. Market watchers will be looking to Q2 2022 earnings reports to show signs of weakening consumer sentiments and a continuation of higher prices that would revive recession fears that slightly abated last week. PepsiCo, Delta Air Lines, and many major investment banks will be releasing earnings reports this week.
That will likely make for another volatile week of trading in the financial markets this week, following last week’s 2% rally for the S&P 500 on easing recession worries. But last Friday’s jobs report was a mixed bag – higher jobs, but also no signs that the Federal Reserve’s interest rate hikes are having a meaningful impact on cooling inflation.
“We’re in a backdrop where central banks are going to continue raising interest rates and the underlying market narrative continues to be one of potentially rising recession risks. We’re going to see markets react to different data points, react to earnings,” Laura Cooper, a macro strategist at BlackRock, told the Wall Street Journal. “That sets us up for quite a volatile period ahead.”
What else I’m reading this morning on our website, FarmFutures.com:
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.
Morning Ag Commodity Prices – 7/11/2022
Contract
Units
High
Low
Last
Net Change
% Change
JUL ’22 CORN
$ / BSH
8
7.8325
7.95
0.1675
2.15%
SEP ’22 CORN
$ / BSH
6.67
6.48
6.505
0.1725
2.72%
DEC ’22 CORN
$ / BSH
6.585
6.38
6.41
0.175
2.81%
MAR ’23 CORN
$ / BSH
6.6275
6.43
6.4525
0.165
2.62%
MAY ’23 CORN
$ / BSH
6.65
6.4525
6.4775
0.16
2.53%
JUL ’23 CORN
$ / BSH
6.61
6.425
6.44
0.1475
2.34%
SEP ’23 CORN
$ / BSH
6.16
6.0225
6.0225
0.0875
1.47%
DEC ’23 CORN
$ / BSH
5.98
5.8475
5.8625
0.07
1.21%
MAR ’24 CORN
$ / BSH
6.04
5.9325
5.9375
0.0675
1.15%
JUL ’22 SOYBEANS
$ / BSH
16.3025
#N/A
16.3025
0
0.00%
AUG ’22 SOYBEANS
$ / BSH
15.5275
15.26
15.3
0.1675
1.11%
SEP ’22 SOYBEANS
$ / BSH
14.55
14.2975
14.3375
0.195
1.38%
NOV ’22 SOYBEANS
$ / BSH
14.385
14.11
14.1525
0.1875
1.34%
JAN ’23 SOYBEANS
$ / BSH
14.4225
14.15
14.19
0.1775
1.27%
MAR ’23 SOYBEANS
$ / BSH
14.33
14.06
14.095
0.16
1.15%
MAY ’23 SOYBEANS
$ / BSH
14.2975
14.0375
14.0775
0.16
1.15%
JUL ’23 SOYBEANS
$ / BSH
14.2575
13.985
14.035
0.16
1.15%
AUG ’23 SOYBEANS
$ / BSH
0
#N/A
13.625
0
0.00%
SEP ’23 SOYBEANS
$ / BSH
13.2
#N/A
13.1225
0
0.00%
NOV ’23 SOYBEANS
$ / BSH
13.09
12.93
12.9825
0.125
0.97%
JUL ’22 SOYBEAN OIL
$ / LB
0
#N/A
64.07
0
0.00%
AUG ’22 SOYBEAN OIL
$ / LB
64.75
63.21
63.63
1.04
1.66%
JUL ’22 SOY MEAL
$ / TON
485.1
#N/A
478.4
0
0.00%
AUG ’22 SOY MEAL
$ / TON
440
433.5
435.9
4.6
1.07%
SEP ’22 SOY MEAL
$ / TON
421.6
415.1
417.2
4.9
1.19%
OCT ’22 SOY MEAL
$ / TON
412
405.4
406.5
3.7
0.92%
DEC ’22 SOY MEAL
$ / TON
412.9
406
407.2
3.5
0.87%
JUL ’22 Chicago SRW
$ / BSH
0
#N/A
8.7925
0
0.00%
SEP ’22 Chicago SRW
$ / BSH
9.4025
8.985
9.005
0.09
1.01%
DEC ’22 Chicago SRW
$ / BSH
9.54
9.1375
9.1575
0.0925
1.02%
MAR ’23 Chicago SRW
$ / BSH
9.66
9.26
9.285
0.0925
1.01%
MAY ’23 Chicago SRW
$ / BSH
9.6925
9.2925
9.33
0.095
1.03%
JUL ’23 Chicago SRW
$ / BSH
9.525
9.13
9.1375
0.075
0.83%
SEP ’23 Chicago SRW
$ / BSH
9.415
9.075
9.075
0.105
1.17%
JUL ’22 Kansas City HRW
$ / BSH
0
#N/A
9.5075
0
0.00%
SEP ’22 Kansas City HRW
$ / BSH
9.9825
9.575
9.6
0.1425
1.51%
DEC ’22 Kansas City HRW
$ / BSH
10.1
9.66
9.6775
0.1425
1.49%
MAR ’23 Kansas City HRW
$ / BSH
10.0875
9.7
9.7075
0.1325
1.38%
MAY ’23 Kansas City HRW
$ / BSH
10.0725
9.7275
9.7325
0.1575
1.64%
JUL ’23 Kansas City HRW
$ / BSH
9.875
9.49
9.5025
0.1275
1.36%
SEP ’23 Kansas City HRW
$ / BSH
9.68
#N/A
9.25
0
0.00%
JUL ’22 MLPS Spring Wheat
$ / BSH
0
#N/A
9.6825
0
0.00%
SEP ’22 MLPS Spring Wheat
$ / BSH
10.445
10.1
10.1275
0.21
2.12%
DEC ’22 MLPS Spring Wheat
$ / BSH
10.5625
10.215
10.245
0.21
2.09%
MAR ’23 MLPS Spring Wheat
$ / BSH
10.645
10.2
10.3725
0.2375
2.34%
MAY ’23 MLPS Spring Wheat
$ / BSH
10.6725
10.445
10.445
0.2375
2.33%
JUL ’23 MLPS Spring Wheat
$ / BSH
10.4975
10.46
10.46
0.265
2.60%
SEP ’23 MLPS Spring Wheat
$ / BSH
10.0625
9.855
10.0625
0.195
1.98%
SEP ’21 ICE Dollar Index
$
107.585
106.685
107.58
0.759
0.71%
AU ’21 Light Crude
$ / BBL
105.05
101.68
102.36
-2.43
-2.32%
SE ’21 Light Crude
$ / BBL
102
98.65
99.35
-2.18
-2.15%
AUG ’22 ULS Diesel
$ /U GAL
3.803
3.6274
3.7552
0.0823
2.24%
SEP ’22 ULS Diesel
$ /U GAL
3.7171
3.5465
3.6697
0.0754
2.10%
AUG ’22 Gasoline
$ /U GAL
3.4608
3.3764
3.4101
-0.037
-1.07%
SEP ’22 Gasoline
$ /U GAL
3.2936
3.2118
3.2443
-0.0381
-1.16%
AUG ’22 Feeder Cattle
$ / CWT
0
#N/A
171.725
0
0.00%
SEP ’22 Feeder Cattle
$ / CWT
0
#N/A
174.725
0
0.00%
AU ’21 Live Cattle
$ / CWT
0
#N/A
133.95
0
0.00%
CT2 ’21 Live Cattle
$ / CWT
0
#N/A
138.95
0
0.00%
JUL ’22 Live Hogs
$ / CWT
0
#N/A
112.85
0
0.00%
AUG ’22 Live Hogs
$ / CWT
0
#N/A
109.175
0
0.00%
JUL ’22 Class III Milk
$ / CWT
22.86
22.8
22.82
0.03
0.13%
AUG ’22 Class III Milk
$ / CWT
21.78
21.75
21.75
0
0.00%
SEP ’22 Class III Milk
$ / CWT
22.19
#N/A
22.29
0
0.00%
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