Morning report: Soybeans fall on lower energy prices, looming recession fears. (Comments are updated by 7:30 a.m. Central Time.)
Corn up 1-5 cents
Soybeans down 7-13 cents; Soymeal down $0.80/ton; Soyoil down $0.63/lb
Chicago wheat up 5-6 cents; Kansas City wheat up 1-5 cents; Minneapolis wheat up 2-3 cents
*Prices as of 7:00am CDT.
Good morning! There will be no daily reports on Monday as the markets will be closed in celebration of Independence Day. We will be back on Tuesday with all of the market’s latest and greatest insights. Have a happy and healthy holiday!
On a fun and personal note, today is my husband and my first wedding anniversary! I want to give him a shout out this morning because without his continuous daily support, eagerness to hear about what is going on in the markets, curiosity about farming, and literally kicking me out of bed in the morning to get this report written and published, I would not be able to help provide meaningful insights to producers and agribusiness professionals. His added humor and perspective on the markets truly helps me to enjoy the entire process of this job and helps me to be a better person outside of work as well.
Supportive partners are truly one of the best gifts that life has to offer. And after our first year of marriage, I am blown away at the sheer luckiness/joy/gratefulness of finding a partner that is so unconditionally supportive while still juggling more than his share of work and life responsibilities.
So this weekend, I encourage you all to find a way to show gratitude to your supportive partners, whoever they may be. We are all working for our families, so let’s not get too bogged down with the markets this weekend to forget who we are doing all of this work for and show them how much they matter!
But really quick…let’s get bogged down in the markets! I hope you’ve all recovered from yesterday’s reports. I’ll be sprinkling insights from the Acreage Report and Quarterly Grain Stocks report throughout today’s newsletter and likely publishing an E-corn-omics column about the results either today or Tuesday. Enjoy!
Ahead of the holiday
The current labor agreement between West Coast shippers and dockworkers is set to expire today, writes my colleague Tim Hearden from Western Farm Press. Talks between the union and the Pacific Maritime Association have been ongoing since May to improve wages and operating and automation technologies at the Long Beach and Los Angeles ports, which were ranked last in the 2021 World Bank’s Container Port Performance Index.
Talks have been stalled for several weeks now. The potential closure of West Coast port facilities due to a strike would likely increase shipping volumes at port facilities across the Gulf and East Coasts in very short order, at a time when supply chain issues continue to persist and fuel inflationary pressures around the world.
“With how tight most supply chains are, I think it would not be overstating to say it would be catastrophic,” Andrew Bower, sales director in the liquid logistics division at OEC Group in Galveston, Texas, a major logistics provider, told Hearden. “In the very immediate term, I think what we’d see is a demand shift from importers in terms of how they book cargo.”
“Instead of Shanghai to LA, they’d immediately start looking at coming into Houston and doing whatever it takes to avoid the West Coast,” he said. “It would be a real imbalance for other ports in the United States. We’d immediately see higher demand for imported goods.”
“We have so many challenges already – trucking shortages, congestion on ports, congestion on rail,” he said. “It would be one more imbalance that’s going to drive prices up and create further shortages in port cities.”
The International Longshore and Warehouse Union represents 22,000 works at 29 ports. The Pacific Maritime Association represents 70 shipping and logistics companies that operate through the ports, bringing in the lion’s share of $150 billion in 2021 profits.
For more, Hearden’s story can be found here – at Western Farm Press.
Corn
Corn prices recouped some of yesterday’s losses as the bargain buyers took advantage of yesterday’s post-USDA report selloff. Futures prices traded $0.02-$0.05/bushel higher this morning, though the nearby July 2022 contract – which will expire in the next two weeks – traded $0.11/bushel higher to $7.5475/bushel this morning which could represent some favorable cash selling opportunities to growers who may need to start considering emptying bins ahead of fall.
Corn acreage
USDA’s June 30 Acreage report released yesterday morning found corn taking back the title of the largest crop produced in America in 2022. USDA raised 2022 acreage expectations for corn by 431,000 acres from the March 31 Prospective Plantings report. Markets pared some of their earlier morning’s losses on the news following the report’s release, though a volatile trading session ultimately saw December 2022 futures close $0.3325/bushel lower to $6.1975/bushel.
USDA’s March 31 Prospective Plantings report had projected higher soybean acreage relative to corn for only the third time in U.S. history. But yesterday’s report puts corn back at the top of the food chain.
It was a bit of a surprise to see corn markets greet the extra acreage with such heavy losses following the report’s release. I think the losses may be more of a function of demand and current weather forecasts because the extra acreage is only slated to provide an additional 43 million extra bushels of corn to 2022/23 production estimates.
With as tight as global corn supplies currently are forecasted, I’m not sure that that extra production value is enough to cause a bearish price reaction. Those 43 million bushels could very quickly be exported or processed domestically.
Don’t throw the baby out with the bathwater just yet. Supplies are still tighter than the market would typically prefer, so there is still upward price potential lingering in these markets. I think yesterday’s round of price action is likely to be short-lived and that the markets will quickly return to trading on weather forecasts by the end of the holiday weekend.
Corn usage
USDA revised March 1, 2022 stock volumes to reflect an additional 94.1 million bushels of consumption between December 1, 2021 and March 1, 2022. While that left March 1 – June 1 (Q3) usage rates slightly lower than pre-report expectations, total stock volumes still came in right at the pre-report analyst average.
But that adjustment also negated any potential price gains in the corn futures market yesterday, as the delayed demand reporting didn’t offer any current positive demand prospects. At 3.4 billion bushels of corn usage in Q3 2021/22, yesterday’s volume update was not only smaller than the previous quarter, but it also marked the smallest Q3 volume since 2019/20.
This goes to show that robust ethanol production may not be enough alone to keep demand strong for higher corn prices. A strong dollar and high prices are creating challenges for export markets – though tight domestic supplies mean that global buyers may look elsewhere for more affordable corn. And drought, combined with limited and costly feedstuffs, are driving liquidation in the cattle markets – which typically accounts for corn’s largest buyer.
To be sure, yesterday’s corn stocks reading was largely neutral overall. But I think the underlying message here is largely that strong ethanol production in Q2 will keep supplies very tight and put an upward limit on usage rates through the end of the 2021/22.
That will likely limit demand growth in the cattle market. Peak corn export season typically tapers off in June, so increases the likelihood that any international buyers may not be able to get a good deal on old crop corn, especially if any sudden shift in the weather forecast disrupts new crop production prospects.
For farmers, any new sign of demand revival via the export, ethanol, or food processing markets will likely be rewarded with upward price shifts. Some continued spillover effects are also likely from new crop corn markets as summer 2022 forecasts and production estimates shift.
Soybeans
Falling energy prices paved the way for losses in the soy market overnight, even though yesterday’s USDA data for soybeans was largely bullish from both the acreage and stocks reports. Recession concerns continue to be the chief driver of the energy market selloff.
Soybean prices dipped $0.07-$0.12/bushel this morning, further aided by a weekend filled with rain forecasts for the Heartland, which should help improve yield prospects. The cessation of an Argentine truckers strike yesterday also alleviated some of the supply constraints in the global soy market overnight.
Soybean acreage
But the big surprise following a cold and wet spring that caused severe planting delays was the sudden acreage shrink for soybeans. USDA shaved 2.6 million acres from the March 31 soybean planting estimate, dropping it to 88.3 million acres. It now trails 2017 (90.2M ac.) and 2018 (89.2M ac.) as the third largest U.S. soybean crop on record.
Combined corn and soybean acreage dropped 2.2 million acres lower than earlier Prospective Planting estimates, primarily on smaller soybean acres, with much of that acreage going to hay, durum, cotton, sorghum, and barley acreage.
Soybean usage
Even though March 1, 2022 – June 1, 2022 (Q3 2021/22) usage rates were slightly smaller than the trade had been anticipating, the June 1 stocks reading of 971 million bushels still meant that Q3 2021/22 set a new record high for all-time Q3 soybean consumption, which totaled 960 million bushels.
Stock volumes improved considerably over last year, thanks to a record 2021 soybean crop. But that doesn’t mean that supplies are any less tight. These high usage rates suggest that domestic soybean supplies may be in short order this summer, especially after China’s unseasonal buying spree this spring following South American crop shortfalls over the winter.
While this could make for a challenging summer for domestic crush plants looking to maintain production schedules – or international buyers desperate for oilseeds – it’s good news for producers because it increases the likelihood of originators keeping cash bids high until harvest begins this fall.
Wheat
Overnight forecasts for a smaller-than-expected European Union wheat crop helped support this morning’s gains, ranging between $0.01-$0.06/bushel, in the U.S. wheat complex. Bargain buying was likely a driving factor in this morning’s trade, especially after Chicago futures hit a four-month low during yesterday’s trading session.
Yesterday’s USDA reports were largely bearish for wheat. The Quarterly Grain Stocks report showed higher than expected volumes, which means that Q4 usage rates were less than what the market was expecting.
Also, spring wheat acreage came in higher than expected, especially after such a slow start to the 2022 growing season. Total wheat acreage is still the fifth-smallest on record since USDA began keeping record of wheat sowings in 1919.
Weather
Rains and cooler temperatures are on the way to the Corn Belt over the weekend, according to NOAA’s short-range forecasts. Expect showers to stretch along the Heartland through the holiday weekend. Up to half an inch of rain is likely over the next 24 hours for most of the Central Plains and Eastern Corn Belt, with more on the way over the next couple days.
NOAA’s 6- to 10-day and 8- to 14-day forecasts updated yesterday continue to trend on the warm side for the Heartland during the first two weeks of July. But both forecasts are showing above average chances for moisture during that time in the Corn Belt, which should help to advance crop development over the next couple weeks. However, dryness is slated to creep back into the Western U.S. by mid-July, which will continue to exacerbate drought conditions.
Financials
The S&P 500 ended the first half of the 2022 fiscal year trading 21% lower than the start. It was the worst first half-year performance for U.S. stocks since 1970. Only up from here, right? Right??
All future early retirement plans aside, stocks continued their descent this morning as the S&P 500 shed 0.46% overnight, falling to $3,772.25 at last glance. The U.S. economic output shrank 1.6% in Q1 according to revisions released by the Bureau of Economic Analysis, which was a higher value than originally reported. Markets are bracing for more interest rate hikes and economic contraction in the second half of the year,
Finally – the Big 10 is letting in USC and UCLA now? Can we talk about what a volleyball superpower the Big 10 is going to be next year?! I mean, they already were before, but like financial and commodity markets, this is just gonna be bananas for another year….
What else I’m reading this morning on our website, FarmFutures.com:
Naomi Blohm has the latest insights on how to manage price volatility this summer.
Our team’s coverage of Thursday’s USDA Acreage and Quarterly Grain Stocks reports!
On Wednesday, Agriculture Secretary Tom Vilsack announced the application deadline for the $10 billion Emergency Relief Program from 2020 and 2021 is near and encourage affected producers who have not applied to do so soon.
AgMarket.Net’s Jim McCormick expects the commodity price run from inflation is about to end as the Fed raises interest rates to curb inflation. That means prices will rely more heavily on supply news and traditional demand to keep bullish sentiments alive.
Advance Trading’s Larry Shonkwiler takes a look at the factors impacting 2021/22 U.S. corn exports including the Ukrainian war and Brazilian drought.
Bryce Knorr ponders the end of corn’s bullish run and what the market needs to go higher following last week’s selloff in the grain markets.
Last week, the Commerce Department found that UAN imports from Russia and Trinidad and Tobago were dumped onto the market at unfairly subsidized rates. However, the Commerce Department will not announce if duties will be placed on these imports until later this summer.
Independence Day is this weekend and cookout costs are 17% higher than last year due in large part to higher burger prices.
Morning Ag Commodity Prices – 7/1/2022
Contract
Units
High
Low
Last
Net Change
% Change
JUL ’22 CORN
$ / BSH
7.55
7.4375
7.5475
0.11
1.48%
SEP ’22 CORN
$ / BSH
6.3675
6.225
6.345
0.0575
0.91%
DEC ’22 CORN
$ / BSH
6.27
6.12
6.24
0.0425
0.69%
MAR ’23 CORN
$ / BSH
6.33
6.1875
6.3025
0.04
0.64%
MAY ’23 CORN
$ / BSH
6.3625
6.2225
6.3375
0.04
0.64%
JUL ’23 CORN
$ / BSH
6.3425
6.205
6.32
0.045
0.72%
SEP ’23 CORN
$ / BSH
6.03
5.9225
5.9925
0.02
0.33%
DEC ’23 CORN
$ / BSH
5.905
5.8
5.89
0.05
0.86%
MAR ’24 CORN
$ / BSH
5.97
5.8725
5.9575
0.05
0.85%
JUL ’22 SOYBEANS
$ / BSH
16.8325
16.54
16.735
-0.015
-0.09%
AUG ’22 SOYBEANS
$ / BSH
15.7325
15.3375
15.5675
-0.0375
-0.24%
SEP ’22 SOYBEANS
$ / BSH
14.885
14.485
14.695
-0.06
-0.41%
NOV ’22 SOYBEANS
$ / BSH
14.7075
14.295
14.4875
-0.0925
-0.63%
JAN ’23 SOYBEANS
$ / BSH
14.7525
14.34
14.53
-0.0925
-0.63%
MAR ’23 SOYBEANS
$ / BSH
14.6475
14.26
14.4475
-0.0875
-0.60%
MAY ’23 SOYBEANS
$ / BSH
14.61
14.23
14.415
-0.09
-0.62%
JUL ’23 SOYBEANS
$ / BSH
14.5675
14.1825
14.3775
-0.075
-0.52%
AUG ’23 SOYBEANS
$ / BSH
12.5
#N/A
14.1825
0
0.00%
SEP ’23 SOYBEANS
$ / BSH
13.475
13.475
13.475
-0.185
-1.35%
NOV ’23 SOYBEANS
$ / BSH
13.4525
13.17
13.2875
-0.0775
-0.58%
JUL ’22 SOYBEAN OIL
$ / LB
69.63
69.3
69.3
-0.63
-0.90%
AUG ’22 SOYBEAN OIL
$ / LB
67.01
65.05
66.47
-0.54
-0.81%
JUL ’22 SOY MEAL
$ / TON
470.1
465
469.1
-0.8
-0.17%
AUG ’22 SOY MEAL
$ / TON
436.9
431
436.3
0.8
0.18%
SEP ’22 SOY MEAL
$ / TON
417.7
411.5
414.8
-1.3
-0.31%
OCT ’22 SOY MEAL
$ / TON
407
400.7
404.7
-1
-0.25%
DEC ’22 SOY MEAL
$ / TON
408.1
401.5
405.2
-1.5
-0.37%
JUL ’22 Chicago SRW
$ / BSH
8.78
8.6175
8.6175
-0.07
-0.81%
SEP ’22 Chicago SRW
$ / BSH
8.9625
8.7075
8.88
0.04
0.45%
DEC ’22 Chicago SRW
$ / BSH
9.1275
8.88
9.0425
0.0375
0.42%
MAR ’23 Chicago SRW
$ / BSH
9.2175
8.985
9.1525
0.0425
0.47%
MAY ’23 Chicago SRW
$ / BSH
9.2775
9.0475
9.205
0.0475
0.52%
JUL ’23 Chicago SRW
$ / BSH
9.1325
8.8975
9.0725
0.055
0.61%
SEP ’23 Chicago SRW
$ / BSH
9.0325
8.7925
8.9725
0.05
0.56%
JUL ’22 Kansas City HRW
$ / BSH
9.5525
9.505
9.5475
0.06
0.63%
SEP ’22 Kansas City HRW
$ / BSH
9.6175
9.4125
9.53
0.0125
0.13%
DEC ’22 Kansas City HRW
$ / BSH
9.695
9.505
9.615
0.0075
0.08%
MAR ’23 Kansas City HRW
$ / BSH
9.73
9.565
9.695
0.0275
0.28%
MAY ’23 Kansas City HRW
$ / BSH
9.6725
9.5675
9.63
0.005
0.05%
JUL ’23 Kansas City HRW
$ / BSH
9.3725
9.275
9.3325
0.0125
0.13%
SEP ’23 Kansas City HRW
$ / BSH
9.1725
9.0625
9.0625
-0.085
-0.93%
JUL ’22 MLPS Spring Wheat
$ / BSH
9.5825
#N/A
9.8775
0
0.00%
SEP ’22 MLPS Spring Wheat
$ / BSH
9.9825
9.88
9.9425
0.0425
0.43%
DEC ’22 MLPS Spring Wheat
$ / BSH
10.1125
10.01
10.0775
0.045
0.45%
MAR ’23 MLPS Spring Wheat
$ / BSH
10.2325
10.1675
10.19
0.0175
0.17%
MAY ’23 MLPS Spring Wheat
$ / BSH
10.3075
10.2475
10.2475
0
0.00%
JUL ’23 MLPS Spring Wheat
$ / BSH
10.29
10.27
10.29
-0.005
-0.05%
SEP ’23 MLPS Spring Wheat
$ / BSH
9.88
9.7975
9.82
-0.06
-0.61%
SEP ’21 ICE Dollar Index
$
104.945
104.515
104.925
0.461
0.44%
AU ’21 Light Crude
$ / BBL
108.63
104.56
108.61
2.85
2.69%
SE ’21 Light Crude
$ / BBL
105.85
101.94
105.83
2.73
2.65%
AUG ’22 ULS Diesel
$ /U GAL
4.0118
3.8136
3.987
0.1565
4.09%
SEP ’22 ULS Diesel
$ /U GAL
3.9347
3.7433
3.9108
0.1459
3.88%
AUG ’22 Gasoline
$ /U GAL
3.6244
3.5075
3.5956
0.0593
1.68%
SEP ’22 Gasoline
$ /U GAL
3.4858
3.3716
3.4716
0.0697
2.05%
AUG ’22 Feeder Cattle
$ / CWT
0
#N/A
173.6
0
0.00%
SEP ’22 Feeder Cattle
$ / CWT
0
#N/A
176.225
0
0.00%
AU ’21 Live Cattle
$ / CWT
0
#N/A
132.575
0
0.00%
CT2 ’21 Live Cattle
$ / CWT
0
#N/A
138.775
0
0.00%
JUL ’22 Live Hogs
$ / CWT
0
#N/A
109.125
0
0.00%
AUG ’22 Live Hogs
$ / CWT
0
#N/A
102.1
0
0.00%
JUL ’22 Class III Milk
$ / CWT
22.67
22.48
22.48
-0.05
-0.22%
AUG ’22 Class III Milk
$ / CWT
22.7
#N/A
22.82
0
0.00%
SEP ’22 Class III Milk
$ / CWT
22.95
22.91
22.91
-0.07
-0.30%
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