Morning report: Grains lightly mixed heading into Thursday’s session. (Comments are updated by 7:30 a.m. Central Time.)
Overnight trends:
Corn: Down 1 to 2 cents
Soybeans: Down 11 cents
Wheat: Down 3 to 4 cents
Volatility has been a mainstay in the grain markets over the past few weeks, thanks to the push and pull of various factors that continue to swirl. Even so, the occasional “quiet” session has been possible, and today may prove to be such an occasion if overnight trends hold steady. Corn prices eased slightly, while soybeans and wheat were mixed as analysts finally move beyond the bearish July WASDE report and continue to monitor ongoing weather trends.
Overseas stock markets were mostly lower. Japan’s Nikkei index closed with gains of more than 0.5%, while other Asian markets trended slightly lower. European markets saw 0.5% losses in midday trading. On Wall St., Dow futures slumped 320 points to 30,438 on ongoing inflation woes and speculation that the Federal Reserve will increase interest rates again later this month.
Energy futures were in the red overnight. Crude oil sank 2.25% lower to $94 per barrel amid ongoing global demand concerns. Diesel dropped nearly 2%, while gasoline lost more than 3%. The U.S. Dollar firmed moderately.
The latest 72-hour precipitation map from NOAA shows a better chance for rains in parts of the Midwest between today and Sunday – some Iowa, Wisconsin, Illinois and Indiana could gather another 1″ or more during this time. Official 6-to-10-day forecasts show widespread hotter-than-normal weather for almost the entire country between July 19 and July 23, with seasonally dry conditions likely for the Midwest and Plains.
On Wednesday, commodity funds were net buyers of corn (+6,500), soybeans (+4,500) and soymeal (+5,000) contracts but were net sellers of soyoil (-3,000) and were roughly even when trading CBOT wheat contracts yesterday.
Corn
Corn prices saw a seasonal peak in late April and have struggled for the most part since then, with the occasional “win” drowned out by multiple shifts lower. Hot, dry forecasts could prove supportive, but the market is otherwise stuck in a bearish pattern for now. Overnight losses of around 0.25% offer a hint that Thursday won’t bring additional dramatic changes, however.
Corn basis bids were steady to firm on Wednesday after climbing 2 to 25 cents higher across four Midwestern locations.
Ethanol production spilled moderately lower this past week, dropping from 1.044 million barrels per day a week ago down to 1.005 million barrels per day through July 8. This also marked the eighth consecutive week that production stayed above the 1-million-barrel-per-day benchmark. Stocks firmed fractionally to 23.6 million barrels.
Ahead of this morning’s export report from USDA, analysts think the agency will show corn sales ranging between zero and 27.6 million bushels for the week ending July 7.
South Korea purchased 5.3 million bushels of animal feed corn, likely sourced from South America or South Africa, in an international tender that closed earlier today. The grain is for arrival in late October.
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“Fundamentals are always going to reign supreme when it comes to price discovery in the ag markets,” according to Farm Futures grain market analyst Jacqueline Holland. “But more importantly, it’s brought numerous outside influences into the commodity markets which farmers don’t typically monitor.” Holland serves up a fresh round of analysis in her latest E-corn-omics blog – click here for details.
The preliminary report from the CBOT showed daily futures volume drop to 325,167, with open interest also down 9,310. Options volume tumbled to 121,007 and still moderately favors calls (78,496) over puts (42,511). Implied volatility for near-the-money September contracts eased slightly to 43.6% with another 42 days until expiration.
Soybeans
Soybean prices have been struggling in recent sessions, although overnight trading suggests there is still high demand for old-crop supplies. July futures soared 4.5% higher, while September futures trended more than 0.5% lower heading into Thursday’s session. Expectations are relatively low for the next round of USDA export sales data, which could create further price shifts later this morning.
On Wednesday, soybean basis bids were steady to soft after weakening 5 to 12 cents at three Midwestern locations.
Analysts are expressing some doubt over what export sales will look like in this morning’s export sales report from USDA, offering trade guesses ranging between net reductions of 3.7 million bushels and net sales of 18.4 million bushels for the week ending July 7.
Amid already volatile prices, assessing drought and other risks this summer means “making a mistake is robust,” according to Matt Bennett, commodity analyst with AgMarket.net. “If you’re in this situation [of drought], making physical sales is not only hard to process but it’s risky,” he notes. “Given the wild swings in the market, producers who have been oversold in the past certainly don’t want to make that mistake again.” Bennett offers additional analysis and advice in the latest Ag Marketing IQ blog – click here to learn more.
The preliminary report from CBOT showed daily futures volume sliding moderately lower to 144,772 with open interest also down 2,757. Options volume fell to 42,405 and moderately favor calls (24,566) over puts (17,839). Implied volatility for near-the-money August contracts increased to 33.7% and expire a week from today.
Wheat
Wheat prices continue to face pressure from harvest progress across the Northern Hemisphere, which is rapidly replenishing global stocks. While the markets should probably be more concerned about Ukraine’s ongoing production and export challenges, that is not a major price factor at this time. Winter wheat prices eased moderately lower overnight, while spring wheat prices firmed slightly.
Prior to this morning’s export report from USDA, analysts expect the agency to show wheat sales ranging between 7.3 million and 18.4 million bushels for the week ending July 7.
Did you know that China is the world’s No. 1 wheat producer? The country is expected to increase its harvest this season by 1%, reaching 4.988 billion bushels. The increase is attributed to swapping out some cotton acres, along with higher per-acre yields.
Meantime, drought in Argentina has the country’s wheat production on a downward slide. The Rosario Stock Exchange is now estimating the 2022/23 wheat harvest will bring in 1.301 billion bushels, falling 4.3% below the group’s prior projection.
South Korea purchased 2.4 million bushels of feed wheat from Australia in an international tender that closed earlier today. The grain is for shipment between September 13 and October 5.
The preliminary report from CBOT showed daily SRW volume ease slightly to 91,933, with open interest trending 2,630 higher. Options volume moved to 18,329 and favors calls (10,147) over puts (8,182). Implied volatility for September near-the-money options moved to 45.0% and expires in 42 days.
Volume in HRW wheat moved to 36,315, with open interest trending 1,222 higher. Options volume is at 1,694 and heavily favors calls (1,307) versus puts (387).
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