Afternoon report: The dollar rallies again on worries about Pelosi’s Taiwan visit, Ukraine’s grain flows. Plus, improving crop conditions trigger losses for soybeans, spring wheat.
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Corn
This morning, I noted that the corn market would need some bullish news today to keep nearby contract prices above the $6/benchmark. That didn’t happen during today’s trading session as corn futures fell $0.10-$0.17/bushel to the $5.90/bushel benchmark on better-than-expected condition ratings reported for U.S. crops yesterday, advancing Ukrainian grain supplies, showers across the Midwest over the next week, and broad economic concerns about U.S. House of Representatives Speaker Nancy Pelosi’s controversial visit to Taiwan.
The latter factor, paired with additional global economic health concerns, helped prop up the dollar which further limited price gains for the ag commodity markets during today’s trading session. Extended forecasts for the Midwest continue to point to hot and dry weather through the middle of the month, which helped to limit some of today’s losses.
Cash corn prices were mixed across the Corn Belt today. Elevators and processors in the Eastern Midwest narrowed basis offerings while buyers in the Western Corn Belt widened their cash bids. Falling futures prices and uncertainty about crop sizes ahead of next week’s WASDE reports deterred farmers from booking more cash sales.
The cargo vessel carrying the million bushels of corn out Ukraine that shipped early yesterday morning from the Odessa port anchored off the coast of Turkey this afternoon (U.S. time). The vessel is destined for Tripoli, Lebanon but will first be inspected for quality and safety in Turkey by U.N., Turkish, Russian, and Ukrainian officials.
Turkish officials that coordinated with the U.N. to broker the deal between Russia and Ukraine noted that only one ship a day is likely to leave Ukrainian ports, which could limit future grain flows out of the country, where approximately 25 million metric tonnes of grain were previously trapped by a Russian naval blockade.
The U.S. Treasury today imposed economic sanctions on 25 airplanes believed to be operated by Russian Airlines as well as on Alina Kabaeva, who is believed to be President Vladimir Putin’s girlfriend. Meanwhile, G7 compatriots continue to weigh blocking transportation routes for Russian oil to limit wartime revenues for Russia.
Soybeans
Soybean prices dipped $0.15-$0.24/bushel lower during today’s trading session. September 2022 futures prices hovered near the $14.10/bushel benchmark at last glance, but deferred contract months all fell below the $14/bushel benchmark during today’s trading session.
The key reason for soybean’s price decline today was an unexpected rating increase from USDA for U.S. soybean crops in yesterday’s Crop Progress report. Some spillover weakness from lower corn, wheat, and edible oils markets also factored into the day’s losses.
Falling palm oil prices also had a bearish impact on the soy complex overnight, as top exporter Indonesia raised its export volume prospects.
The soybean market is likely to be especially sensitive to any potential outcomes of Speaker Pelosi’s visit to Taiwan over the next couple days. China has threatened retaliatory countermeasures in response to Pelosi’s engagement with Taiwan. While Chinese officials have not specified with these measures will entail, based on the recent agreement China has made with Brazil to allow soymeal imports from the South American country, it seems likely that measures on soybean trade are likely on the table.
U.S. soybean exports to China have been a cornerstone for the U.S. trade deficit, which widened during the summer amid a stronger dollar and weakening global economic outlooks. In 2020 and 2021, U.S. soybean exports to China accounted for 8%-9% of all total U.S. ag export revenue volumes.
Soybean cash price movements were similar to corn today as crush facilities and elevators in the East decreased cash bids while Western soybean buyers firmed on spot soybean offerings today. Farmer movement remained light as growers wait out forecasts and lower futures prices before booking more sales.
Rising soymeal prices were the lone silver lining in the grain and oilseed markets today, trading nearly 1% higher as the meal/oil price spread shifted in favor of soymeal. Soymeal futures markets moved inversely to its cash counterpart today, as bids at railway terminals across the Midwest tumbled lower on lackluster demand and dealers rolling cash bids from August 2022 to deferred months in hopes of capturing over $55/ton value on the move.
Wheat
The stronger dollar and continued optimism surrounding Black Sea grain flows sent Chicago wheat prices tumbling 3% lower in today’s trading session. Spring wheat prices in Minneapolis moved lower on another ratings increase from USDA for spring wheat crops in the U.S. Northern Plains in yesterday’s Crop Progress report.
The day’s losses were limited by robust global demand, as several international wheat buyers are taking advantage of this week’s price downturn in the ag commodity markets.
Cash wheat prices for hard red winter wheat varieties in the Southern Plains held largely steady today, though a Texas rail terminal that feeds into the Gulf of Mexico export channel saw slightly weaker offerings today, suggesting slowing export demand. Farmer sales were slow amid falling futures prices.
Algeria issued a tender to buy approximately 24.2 million bushels of wheat today, according to European traders. Algeria’s state grains agency, OAIC, is likely to have paid around $10.45/bushel including cost and freight according to traders as OAIC does not offer further details of the trade.
Algeria’s purchase is likely to originate primarily in Europe, though the tender also contained options to source wheat from South American and Australia as well. The North African country is estimated to be the fifth largest wheat importer in the world during the 2022/23 marketing year.
There have been several other tenders issued this week as global wheat prices have trended lower amid growing momentum for Ukraine’s export volumes. Jordan snapped up 2.2 million bushels of wheat in a tender this morning. We could see more demand requests in the coming days if prices continue on this downward trend.
Inputs
Chicago-based CF Industries – a top global fertilizer producer – announced today that Russian fertilizer supplies are largely returning back to the market at pre-Black Sea Conflict levels of inventory as global trade flows have realigned since Moscow’s February 2022 invasion and ongoing occupation of Ukraine.
CF Industries noted that anhydrous ammonia remains to be an exception to that statement, with CEO Tony Will noting that “temporary demand destruction needs to happen for ammonia because there is not enough product to go every place it is desired.”
Fertilizer producer Mosaic also issued earnings reports today, noting that fertilizer usage rates in North American during the first half of 2022 trended lower due to inflation, the Black Sea conflict, a late start to the growing season, and volatile commodity prices.
Mosaic noted that farmers are first rationing phosphate and potash applications before reducing nitrogen purchases amid the soaring fertilizer price environment. The company expects that Russian potash supplies are slowly making their way back to global buyers but that Belarus and China will likely see limited export growth for their potash and phosphate, respectively, shipments over the next six months.
Fun facts
A Dutch chemical maker, DSM, that produces food additives noted earlier today that it is beginning to see consumers shift away from expensive cuts of meat and move toward cheaper poultry purchases as global inflation squeezes the pocketbooks of the global population.
DSM also took a hit in the second quarter on China’s COVID lockdowns, which led to weaker meat demand from China.
This is an important revelation because it suggests some bearish prospects for meat demand – and subsequently corn and wheat demand for feed – in the coming months as inflation continues to plague the world.
For more insights, check out this Reuters article.
Weather
Scattered showers are possible across patches of the Corn Belt today with the highest chance for accumulation in the Upper Midwest and West-Central Plains, according to NOAA’s short-range forecasts. Expected accumulation is likely to be light, though parts of South-Central Illinois and Indiana could see up to three quarters of an inch of precipitation over the next 24 hours.
Above average temperatures continue to plague NOAA’s 6- to 10-day and 8- to 14-day forecasts updated yesterday. The persistent dryness in the Heartland is expected to continue through the first half of August.
Financials
S&P 500 futures were on track to close 0.67% lower to $4,091.19 at last glance as markets remain wary of U.S. House of Representative Speaker Nancy Pelosi’s sudden visit to Taiwan. Markets are concerned that Pelosi’s visit will enflame tensions between the U.S. and China regarding China’s handling of Taiwan’s independence.
Tensions have been heightened between China and the U.S. since the trade war escalated in 2018. Chinese officials have been vocal about warning Pelosi not to meet with Taiwanese officials and have threatened to implement some sort of retaliatory measures if the Speaker follows through with these visits.
If Pelosi’s visit does not yield any diplomatic progress with both Chinese and Taiwanese officials, stock markets – as well as grain and oilseed markets – could suffer losses during the coming trading sessions.
Federal Reserve officials also released comments today that suggested that rate hikes would continue as inflationary pressures remain high across the economy. The comments helped exacerbate some of today’s stock market losses.
What else I’m reading this afternoon on our website, FarmFutures.com:
Advance Trading’s Brian Basting explores the accuracy of USDA’s August yield estimates vs. final harvest estimates published in January 2023.
Here are the top highlights from yesterday’s weekly Crop Progress report from USDA.
Bryce Knorr explains how the weather, dollar, and technical signs could point to an early summer bottom for grain prices.
Darren Frye offers three tips to help farm owners lead others through change.
KCoe Isom’s Davon Cook walks farmers though the lifecycle of a family business to help growers manage growth and make better decisions.
Closing Ag Commodity Prices – 8/2/2022
Contract
Units
High
Low
Last
Net Change
% Change
SEP ’22 CORN
$ / BSH
6.0525
5.8925
5.9
-0.17
-2.80%
DEC ’22 CORN
$ / BSH
6.075
5.925
5.93
-0.1675
-2.75%
MAR ’23 CORN
$ / BSH
6.14
6
6.005
-0.1625
-2.63%
MAY ’23 CORN
$ / BSH
6.18
6.0425
6.05
-0.1575
-2.54%
JUL ’23 CORN
$ / BSH
6.185
6.055
6.065
-0.1475
-2.37%
SEP ’23 CORN
$ / BSH
5.885
5.7775
5.785
-0.1275
-2.16%
DEC ’23 CORN
$ / BSH
5.7775
5.675
5.685
-0.095
-1.64%
AR2 ’24 CORN
$ / BSH
5.85
5.7525
5.7525
-0.1025
-1.75%
MAY ’24 CORN
$ / BSH
5.88
#N/A
5.8075
-0.0825
0.00%
AUG ’22 SOYBEANS
$ / BSH
16.075
15.65
15.65
-0.2925
-1.83%
SEP ’22 SOYBEANS
$ / BSH
14.38
14.0375
14.1
-0.22
-1.54%
NOV ’22 SOYBEANS
$ / BSH
14.08
13.7725
13.8225
-0.2375
-1.69%
JAN ’23 SOYBEANS
$ / BSH
14.1575
13.8425
13.8975
-0.235
-1.66%
MAR ’23 SOYBEANS
$ / BSH
14.145
13.84
13.9025
-0.2175
-1.54%
MAY ’23 SOYBEANS
$ / BSH
14.13
13.8275
13.89
-0.2125
-1.51%
JUL ’23 SOYBEANS
$ / BSH
14.0875
13.7975
13.8575
-0.2025
-1.44%
AUG ’23 SOYBEANS
$ / BSH
13.7225
13.6725
13.645
-0.1575
-0.58%
SEP ’23 SOYBEANS
$ / BSH
13.2375
13.21
13.1675
-0.1475
-0.58%
NOV ’23 SOYBEANS
$ / BSH
13.1675
12.945
12.9675
-0.1725
-1.31%
AN2 ’24 SOYBEANS
$ / BSH
13.16
13.025
13.04
-0.1325
-0.09%
AUG ’22 SOYBEAN OIL
$ / LB
66.91
64
65.2
-1.03
-1.48%
SEP ’22 SOYBEAN OIL
$ / LB
63.9
61.6
62.31
-1.78
-2.78%
AUG ’22 SOY MEAL
$ / TON
495.2
486.5
488.6
1.6
0.33%
SEP ’22 SOY MEAL
$ / TON
440
427.9
433.7
4
0.93%
OCT ’22 SOY MEAL
$ / TON
409.9
399.6
405.5
3.3
0.82%
DEC ’22 SOY MEAL
$ / TON
406.4
395.7
402.4
3.1
0.78%
JAN ’23 SOY MEAL
$ / TON
404.7
395
400.3
2.2
0.55%
SEP ’22 Chicago SRW
$ / BSH
7.9575
7.7275
7.74
-0.2625
-3.28%
DEC ’22 Chicago SRW
$ / BSH
8.145
7.9125
7.93
-0.26
-3.17%
MAR ’23 Chicago SRW
$ / BSH
8.2925
8.0875
8.1175
-0.2525
-3.02%
MAY ’23 Chicago SRW
$ / BSH
8.3825
8.1825
8.215
-0.2475
-2.92%
JUL ’23 Chicago SRW
$ / BSH
8.38
8.1575
8.1775
-0.2475
-2.94%
SEP ’23 Chicago SRW
$ / BSH
8.405
8.19
8.2
-0.2475
-2.93%
DEC ’23 Chicago SRW
$ / BSH
8.465
8.235
8.2725
-0.215
-2.53%
SEP ’22 Kansas City HRW
$ / BSH
8.6075
8.385
8.4
-0.265
-3.06%
DEC ’22 Kansas City HRW
$ / BSH
8.685
8.465
8.475
-0.265
-3.03%
MAR ’23 Kansas City HRW
$ / BSH
8.7425
8.525
8.535
-0.26
-2.96%
MAY ’23 Kansas City HRW
$ / BSH
8.715
8.5475
8.565
-0.25
-2.84%
JUL ’23 Kansas City HRW
$ / BSH
8.645
8.4475
8.48
-0.215
-2.47%
SEP ’23 Kansas City HRW
$ / BSH
8.6
8.405
8.49
-0.16
-1.85%
DEC ’23 Kansas City HRW
$ / BSH
8.6275
8.47
8.505
-0.16
-1.85%
SEP ’22 MLPS Spring Wheat
$ / BSH
8.9625
8.7225
8.7225
-0.2525
-2.81%
DEC ’22 MLPS Spring Wheat
$ / BSH
9.09
8.855
8.855
-0.2475
-2.72%
MAR ’23 MLPS Spring Wheat
$ / BSH
9.1975
8.98
8.995
-0.2225
-2.41%
MAY ’23 MLPS Spring Wheat
$ / BSH
9.2575
9.07
9.075
-0.225
-2.42%
JUL ’23 MLPS Spring Wheat
$ / BSH
9.2
9.1375
9.1375
-0.1875
-2.01%
SEP ’23 MLPS Spring Wheat
$ / BSH
8.93
8.88
8.885
-0.14
-1.55%
DEC ’23 MLPS Spring Wheat
$ / BSH
8.98
8.98
8.98
-0.1225
-1.35%
SEP ’21 ICE Dollar Index
$
106.1
104.92
106.01
0.674
0.64%
SE ’21 Light Crude
$ / BBL
96.47
92.59
94.61
0.72
0.77%
OC ’21 Light Crude
$ / BBL
95.09
91.11
93.35
0.96
1.04%
SEP ’22 ULS Diesel
$ /U GAL
3.4533
3.33
3.3889
-0.0511
-1.49%
OCT ’22 ULS Diesel
$ /U GAL
3.4031
3.2876
3.3478
-0.0431
-1.27%
SEP ’22 Gasoline
$ /U GAL
3.1115
2.9403
3.0538
0.0557
1.86%
OCT ’22 Gasoline
$ /U GAL
2.8386
2.6998
2.7807
0.0377
1.37%
AUG ’22 Feeder Cattle
$ / CWT
180.15
177.9
178.15
-1.5
-0.83%
SEP ’22 Feeder Cattle
$ / CWT
183.85
181.275
181.4
-1.7
-0.93%
AU ’21 Live Cattle
$ / CWT
136.975
136.4
136.6
-0.175
-0.13%
CT2 ’21 Live Cattle
$ / CWT
142.625
141.875
142.15
-0.475
-0.33%
AUG ’22 Live Hogs
$ / CWT
120.7
119.625
119.975
-0.475
-0.39%
OCT ’22 Live Hogs
$ / CWT
97.075
95.375
96.175
-0.65
-0.67%
JUL ’22 Class III Milk
$ / CWT
22.53
22.52
22.53
0
0.00%
AUG ’22 Class III Milk
$ / CWT
20.51
20.26
20.47
0.01
0.05%
SEP ’22 Class III Milk
$ / CWT
20.5
20.14
20.38
-0.12
-0.59%
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