Morning report: Plus – a preview of what to expect in today’s USDA reports. (Comments are updated by 7:30 a.m. Central Time.)
Corn down 7-10 cents
Soybeans down 24-27 cents; Soymeal down $3.10/ton; Soyoil down $1.92/lb
Chicago wheat down 9-15 cents; Kansas City wheat down 10-17 cents; Minneapolis wheat down 12-15 cents
*Prices as of 6:55am CDT.
Feedback from the Field updates!
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Happy WASDE day!
Here is an abbreviated preview of what to expect in today’s USDA reports. July WASDE’s are not typically significant market movers, but amid so much market volatility, today’s report could prove to be an exception. For a full preview, as well as which other outside market factors to be watching following today’s reports, you can visit my latest E-corn-omics column online for all the details!
As always, our team at Farm Futures will be providing live coverage of today’s reports. Check out our website (FarmFutures.com) or our social platforms (@FarmFutures) for real-time results and analysis following the reports’ release at 11am CDT this morning.
U.S. corn & soybean production
There isn’t a lot of variances in the pre-report trade estimates because it is widely accepted that WAOB will use NASS’s June 30, 2022 Acreage Report estimates and current yield estimates for its supply forecast.
More corn production (+60M bu.) and less soybean production (-108M bu.) are expected for the new crop supply adjustments. The boost to corn supplies likely still isn’t what the market needs to moderate prices lower and the cut to soybean production will likely trigger USDA-WAOB to cut some 2022/23 soybean usage estimates.
NASS is currently re-surveying producers in Minnesota, North Dakota, and South Dakota on acreage, so finalized acreages are not likely to be available until the August 2022 WASDE and Crop Production reports. NASS will also update yield forecasts in the August 2022 WASDE.
These dynamics are likely already priced in with the price sentiments largely neutral to bearish for corn and bullish for soybeans. To that end, demand adjustments will be more significant for potential price action than supply.
Domestic demand forecasts
USDA-NASS’s June 30 Quarterly Grains Stocks report will likely drive the majority of the usage adjustments for the July 2022 WASDE report.
For old crop corn, there are likely to be few significant demand revisions. The trade suggests that USDA-WAOB could increase ending stocks by a mere 3 million bushels, which would point to slower than forecasted ethanol or export demand. Since corn usage for ethanol has continued to record top-100 weekly volumes through most of June and weekly export volumes trailed year-ago paces by 16.5% in June 2022, I’m expecting a slight downgrade here, if USDA does in fact make any old crop corn usage revisions.
New crop corn will likely see some accelerated usage paces based on the additional 60 million bushels generated from extra acreage, according to the June 30 Acreage Report. Based on trade estimates, it seems that about 20 million extra bushels of corn will be added to the demand pipeline. I expect most of that will be allocated to exports.
Old crop soybean usage rates are expected by analysts to be pared by an average of 4 million bushels. I’m skeptical of the pre-report trade estimates on this item – basis is trading at a lofty premium for domestic soybeans and export loading paces since the beginning of March are nearly double since the same time last year, so I struggle to see where USDA will make demand cuts for old crop beans.
There is more bullish potential afoot for new crop soybeans, in my opinion. The trade is expecting that USDA will cut 108 million bushels from the 2022 soybean harvest. It will still be a record-large crop, but the loss of over 100 million bushels means that USDA-WAOB will likely be forced to pare down 2022/23 soybean usage rates.
The trade disagrees with me on this item – likely thanks to strong domestic usage rates during March 1, 2022 – June 1, 2022. Pre-report trade estimates project that USDA-WAOB will add around 25 million bushels of soybean usage to 2022/23 estimates, keeping ending stocks-to-use ratios consistent with current year values at 4.6% – between the seventh and eighth tightest stocks for soybeans in history, rapidly approaching 2008-2012 levels of supply tightness.
USDA can only add so much usage amid supply cuts before demand destruction will start to play into the soybean markets. Even if those dynamics are not specified in today’s report, be prepared for those revisions in future WASDE reports.
Wheat revisions and production forecasts
USDA finalized ending wheat stocks for the 2021/22 marketing year for wheat in its June 30 Quarterly Grain Stocks reports. Due to weakness in the export markets, I expect that USDA will cut 5 million bushels from 2021/22 wheat exports to leave the 2021/22 ending stocks volume for wheat at 660 million bushels.
That will add some supply back to 2022/23 beginning wheat stocks. USDA-NASS is also expected to add an average of 8 million bushels of 2022 production to 2022/23 supplies on strong soft red winter and other spring wheat harvests.
However, it does not seem that the market believes that USDA will make many – if any – revisions to 2022/23 wheat usage forecasts. Domestic usage is largely expected to remain steady from last year’s volumes, with some weakness expected from a declining cattle herd. Export rates could inch a couple million bushels higher but given the strengthening dollar and high global wheat prices, I am not overly hopeful for extra bullish prospects for new crop wheat demand here.
South American corn and soybean forecasts
Markets are expecting USDA to make major cuts to Argentina’s 2021/22 corn crop in the July 2022 WASDE. Some of these reductions could be offset by a better-than-expected safrinha corn crop from Brazil, which is rapidly being harvest amid favorable weather conditions.
Conab, Brazil’s state ag statistics agency, expects the 2021/22 Brazilian crop to total 4.55 billion bushels. This is a slightly optimistic forecast but then again, the trade is expecting 4.59 billion bushels of Brazilian corn production for the current marketing year – a 19-million-bushel increase from USDA’s June 2022 forecast.
USDA tends to be conservative with its estimates for South American crop production, opting to wait for export data before issuing final production forecasts. So I wouldn’t be surprised with minor adjustments, though I think it could increase corn market volatility if USDA’s estimates fall too far short of trade estimates.
The markets expect USDA will make minor cuts to Brazil and Argentina’s 2021/21 soybean production estimates. But based on global supply estimates, it appears that slowing demand could raise global 2021/22 ending stocks, which would likely offset any potential bullish price prospects markets would be anticipating from even further cuts to the South American crop.
Global Outlook
Global 2021/22 corn stocks are expected to increase, largely due to Brazil’s corn crop. I suspect that some of these gains will likely come from trapped Ukrainian supplies that continue to linger in storage. I will also be watching for cuts to usage rates here, as some of Argentina’s losses could offset Brazil’s larger crop.
The loss of acreage in the U.S. this spring will most certainly take a bite out of new crop global soybean ending stocks in today’s report. Pre-report trade estimates expect USDA will cut 40 million bushels of ending stocks from 2022/23 soybean supplies. I think this will generate some bullish price action as the global edible oils market remains tight.
The most bullish potential for prices is likely to be seen in the wheat market. Usage is likely going to trim 2021/22 ending wheat stocks. But uncertainty about crop health in the U.S. and Europe paired with flooding damage in Australia and a smaller than expected Argentine wheat crop could compound with rising demand to take around 22 million bushels of wheat away from 2022/23 ending wheat stocks.
Russia is still forecast to harvest a bumper crop. It will be interesting to see if USDA moves higher on its 2022 Russian production estimates, especially as other Russian and Black Sea forecasters have been issuing much higher forecasts than USDA for the past couple months. If USDA does push this value higher, it could be a bearish omen for wheat prices.
As always, any potential changes to grain and oilseed flows in China will have significant bearing on market prices. State-sponsored auctions of soybean reserves lately suggest that supplies remain tight in China, which bodes well for U.S. harvest prospects.
Corn
Even though ratings forecasts fell short for U.S. corn in yesterday’s Crop Progress report, corn futures fell $0.07-$0.10/bushel today on forecasts for slightly higher corn stocks in today’s USDA reports as well as the dollar notching a new 20-year high overnight on a revival in recession worries.
“In addition to climatic uncertainties, economic and geopolitical risks are also present,” consultancy Agritel told Reuters. “The rise in interest rates … is pushing the euro/dollar to test the psychological threshold of parity.”
Forecasts are calling for more rain in the Midwest later this week, which could help offset some drought stress the crop has already faced this growing season.
Corn condition ratings held steady at 64% good to excellent for the second straight week in yesterday’s Crop Progress report, as last week’s showers staved off further crop stress as soil moisture in the Midwest quickly evaporates.
Markets had expected ratings would improve by at least 1% prior to the report’s release, due in large part to last week’s timely showers across the Heartland. But increasing drought ratings likely took much of the benefit of last week’s extra moisture from crop ratings, or at least sustained them for another week before more hot and dry weather settles into the Heartland in the coming weeks.
Reproductive progress remains slightly delayed on a slow start to the season as well as due to growing heat stress around the country. As of July 10, 15% of the corn crop had reached the silking phase, down 10% from the five-year average benchmark.
Soybeans
Soybean prices fell $0.20-$0.25/bushel this morning on the stronger dollar and broad recession concerns in the financial markets. The sentiments also pushed energy prices lower, which prevented soybean and corn prices from trading higher overnight. Markets are also bracing for USDA to trim new crop global ending soybean stocks in today’s report, which could help reduce the soy complex’s losses during today’s trading session.
Soybean ratings took an unexpected hit in yesterday’s Crop Progress report, despite favorable rains across the country last week. Through the week ending July 10, soybean ratings fell 1% to 62% good to excellent. Markets had been expecting ratings to rise by 1% from last week to 64% in yesterday’s report.
Similar to corn, reproductive stages are several percentage points off historical averages due to spring delays and heat stress – which may be taking a larger toll on the crop than previously thought, based on yesterday’s soybean ratings shortfall. Through last Sunday, 32% of the crop had reached the blooming phase, 6% behind the five-year average.
With drought conditions increasingly widening across the Midwest, I think there is going to be some very real concerns through peak pollination season about heat stress for both soybean and corn crops in the coming weeks. That could add more bullish pressure to the grains and oilseeds complex, especially if the heat is severe enough to stunt the crops’ reproductive development.
Wheat
Wheat prices fell $0.09-$0.14/bushel this morning on the dollar’s new highs amid broad recession worries in the financial markets. Ongoing discussions between Russia and Ukraine in Turkey today could push prices even lower if both countries are able to reach an agreement on Black Sea grain shipping accessibility, though it does not seem likely at this point.
Wheat likely has the most potential for price volatility in today’s report, as heat waves in the U.S. and Europe, paired with rising stock volumes in Ukraine, could further disrupt global trade flows for the wheat market.
With well over half of the U.S. winter wheat harvest complete, expect market focus to increasingly shift to other international wheat production figures and U.S. spring wheat production in the coming weeks. As of July 10, 63% of the U.S. winter wheat crop had been harvested, up 9% from the previous week and 2% ahead of the five-year average.
Harvesting rates lagged slightly behind previous weeks’ progress this year in yesterday’s report, as showers in the Midwest caused delays for soft red winter wheat harvesting over the past week. It also fell well short of the pre-report estimate of 68% complete for the week. But harvest is rapidly approaching a close in the Southern Plains and moving north as quickly as possible.
Spring wheat conditions were about the only item in yesterday’s Crop Progress report that actually exceeded pre-report market expectations. Analysts had been expecting USDA to rate 67% of the crop in good to excellent condition, but USDA raised ratings 4% from the previous week to 70% good to excellent through July 10.
Showers in the Northern Plains over the past week have clearly benefited spring wheat crops in the region. But with a larger than expected Canadian spring wheat crop this year, Minneapolis wheat prices will likely rely on shortfalls for other varieties to maintain its price advantages.
Weather
Skies across the Heartland will clear briefly this morning before giving way to scattered showers and thunderstorms in the Great Lakes and Western Plains tonight, according to NOAA’s short-range forecasts. Precipitation is expected to be light in both regions.
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.
Financials
Stock prices fell overnight, with the S&P 500 shedding 0.52% to $3,836.50 as the dollar climbed to new 20-year highs on growing concerns that the world is slipping into a recession.
“There is going to be a recession, but we’re not there yet,” Philip Saunders, co-head of multi-asset growth at Ninety One, an asset manager based in the U.K. and South Africa, told the Wall Street Journal this morning. “The key thing that is going on is that financial liquidity is retracting.”
What else I’m reading this morning on our website, FarmFutures.com:
Bryce Knorr predicts that average crops and lower inventories could help ease the storage crunch at harvest.
Commstock’s Matthew Kruse reflects on how derecho became a household name.
My recent 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.
Morning Ag Commodity Prices – 7/12/2022
Contract
Units
High
Low
Last
Net Change
% Change
JUL ’22 CORN
$ / BSH
7.8525
7.7475
7.8025
-0.01
-0.13%
SEP ’22 CORN
$ / BSH
6.4175
6.2275
6.275
-0.095
-1.49%
DEC ’22 CORN
$ / BSH
6.3425
6.135
6.1875
-0.1025
-1.63%
MAR ’23 CORN
$ / BSH
6.3875
6.1825
6.2325
-0.1025
-1.62%
MAY ’23 CORN
$ / BSH
6.4
6.2
6.2525
-0.1
-1.57%
JUL ’23 CORN
$ / BSH
6.3575
6.1575
6.215
-0.095
-1.51%
SEP ’23 CORN
$ / BSH
5.905
5.8225
5.8225
-0.0825
-1.40%
DEC ’23 CORN
$ / BSH
5.7425
5.61
5.66
-0.0725
-1.26%
MAR ’24 CORN
$ / BSH
5.805
5.73
5.7425
-0.0675
-1.16%
JUL ’22 SOYBEANS
$ / BSH
16.56
16.4
16.4
-0.01
-0.06%
AUG ’22 SOYBEANS
$ / BSH
15.335
14.855
14.955
-0.265
-1.74%
SEP ’22 SOYBEANS
$ / BSH
14.3625
13.88
13.9725
-0.2625
-1.84%
NOV ’22 SOYBEANS
$ / BSH
14.18
13.6925
13.795
-0.255
-1.81%
JAN ’23 SOYBEANS
$ / BSH
14.215
13.74
13.84
-0.2575
-1.83%
MAR ’23 SOYBEANS
$ / BSH
14.13
13.6775
13.76
-0.2625
-1.87%
MAY ’23 SOYBEANS
$ / BSH
14.0975
13.6675
13.745
-0.2575
-1.84%
JUL ’23 SOYBEANS
$ / BSH
14.0425
13.64
13.72
-0.24
-1.72%
AUG ’23 SOYBEANS
$ / BSH
0
#N/A
13.7075
0
0.00%
SEP ’23 SOYBEANS
$ / BSH
0
#N/A
13.1975
0
0.00%
NOV ’23 SOYBEANS
$ / BSH
12.985
12.655
12.77
-0.17
-1.31%
JUL ’22 SOYBEAN OIL
$ / LB
51
#N/A
65.21
0
0.00%
AUG ’22 SOYBEAN OIL
$ / LB
64.14
61.6
61.85
-1.87
-2.93%
JUL ’22 SOY MEAL
$ / TON
480.5
480
480
-2.9
-0.60%
AUG ’22 SOY MEAL
$ / TON
435.8
427.5
429.6
-3.3
-0.76%
SEP ’22 SOY MEAL
$ / TON
414.2
405.3
408
-3
-0.73%
OCT ’22 SOY MEAL
$ / TON
403.7
394.7
396.7
-3.5
-0.87%
DEC ’22 SOY MEAL
$ / TON
404.5
395.3
397.2
-3.7
-0.92%
JUL ’22 Chicago SRW
$ / BSH
8.35
8.35
8.35
-0.0875
-1.04%
SEP ’22 Chicago SRW
$ / BSH
8.695
8.355
8.43
-0.135
-1.58%
DEC ’22 Chicago SRW
$ / BSH
8.8525
8.51
8.59
-0.135
-1.55%
MAR ’23 Chicago SRW
$ / BSH
8.9925
8.6625
8.74
-0.1175
-1.33%
MAY ’23 Chicago SRW
$ / BSH
9.045
8.715
8.785
-0.1275
-1.43%
JUL ’23 Chicago SRW
$ / BSH
8.915
8.5625
8.6375
-0.1175
-1.34%
SEP ’23 Chicago SRW
$ / BSH
8.775
8.49
8.5475
-0.125
-1.44%
JUL ’22 Kansas City HRW
$ / BSH
9.1
9.1
9.1
-0.1025
-1.11%
SEP ’22 Kansas City HRW
$ / BSH
9.255
8.955
8.995
-0.1575
-1.72%
DEC ’22 Kansas City HRW
$ / BSH
9.315
9.035
9.0825
-0.15
-1.62%
MAR ’23 Kansas City HRW
$ / BSH
9.2925
9.1025
9.1425
-0.1275
-1.38%
MAY ’23 Kansas City HRW
$ / BSH
9.315
9.115
9.1525
-0.12
-1.29%
JUL ’23 Kansas City HRW
$ / BSH
9.135
8.8825
8.9
-0.1725
-1.90%
SEP ’23 Kansas City HRW
$ / BSH
9.0025
#N/A
8.9475
0
0.00%
JUL ’22 MLPS Spring Wheat
$ / BSH
0
#N/A
9.4175
0
0.00%
SEP ’22 MLPS Spring Wheat
$ / BSH
9.65
9.4025
9.5325
-0.105
-1.09%
DEC ’22 MLPS Spring Wheat
$ / BSH
9.745
9.52
9.6275
-0.1375
-1.41%
MAR ’23 MLPS Spring Wheat
$ / BSH
9.86
9.65
9.685
-0.1925
-1.95%
MAY ’23 MLPS Spring Wheat
$ / BSH
9.78
9.78
9.78
-0.175
-1.76%
JUL ’23 MLPS Spring Wheat
$ / BSH
9.9175
#N/A
9.94
0
0.00%
SEP ’23 MLPS Spring Wheat
$ / BSH
9.3875
9.3875
9.3875
-0.1325
-1.39%
SEP ’21 ICE Dollar Index
$
108.42
107.8
108.01
0.181
0.17%
AU ’21 Light Crude
$ / BBL
103.49
98.4
99.18
-4.91
-4.72%
SE ’21 Light Crude
$ / BBL
100.57
95.6
96.44
-4.77
-4.71%
AUG ’22 ULS Diesel
$ /U GAL
3.7815
3.644
3.662
-0.1061
-2.82%
SEP ’22 ULS Diesel
$ /U GAL
3.6943
3.56
3.5766
-0.1072
-2.91%
AUG ’22 Gasoline
$ /U GAL
3.4586
3.2721
3.303
-0.1592
-4.60%
SEP ’22 Gasoline
$ /U GAL
3.305
3.1284
3.159
-0.1513
-4.57%
AUG ’22 Feeder Cattle
$ / CWT
0
#N/A
174.875
0
0.00%
SEP ’22 Feeder Cattle
$ / CWT
0
#N/A
177.4
0
0.00%
AU ’21 Live Cattle
$ / CWT
0
#N/A
136.15
0
0.00%
CT2 ’21 Live Cattle
$ / CWT
0
#N/A
140.425
0
0.00%
JUL ’22 Live Hogs
$ / CWT
0
#N/A
113.15
0
0.00%
AUG ’22 Live Hogs
$ / CWT
0
#N/A
108.375
0
0.00%
JUL ’22 Class III Milk
$ / CWT
22.69
22.64
22.64
-0.1
-0.44%
AUG ’22 Class III Milk
$ / CWT
21.68
21.68
21.68
-0.02
-0.09%
SEP ’22 Class III Milk
$ / CWT
22.05
22.04
22.04
-0.04
-0.18%
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