Morning report: Plus – retail input prices are falling. What does it mean for farmers? (Comments are updated by 7:30 a.m. Central Time.)
Corn up 8-12 cents
Soybeans up 22-38 cents; Soymeal up $8.20/ton; Soyoil up $2.23/lb
Chicago wheat up 18-20 cents; Kansas City wheat up 16-17 cents; Minneapolis wheat up 15-16 cents
*Prices as of 6:50am CDT.
Good morning! Farm Futures is currently conducting its annual August survey, which will help farmers anticipate 2022 corn and soybean yield prospects as well as provide the first look at 2023 acreage intentions. The yield results of our survey will be announced prior to USDA’s August 2022 WASDE report, while I will announce the results of 2023 acreage findings at the 2022 Farm Progress Show.
If you would like to participate in our survey – which is one of the few exclusively farmer-sourced estimates on the market – you can click this link to join in the fun. Thank you!
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Inputs
The Illinois USDA released its bi-weekly report on production costs yesterday, and the results were largely favorable for farmers who are considering locking in 2023 inputs as August nears.
Over the last month, anhydrous ammonia prices in Illinois have fallen $227.11/ton (14%) to an average price of $1,392.67/ton. It is the lowest price for ammonia recorded since November 18, 2021, marking an eight-month low for anhydrous prices.
Anhydrous prices aren’t the only input items seeing price discounts, though they have enjoyed the steepest price markdowns over the past couple months. Other nitrogen products, including urea and UAN have also seen gradual price declines in recent months as seasonal demand has eased, producers have had a chance to resupply stocks, and global trade flows realign in the wake of the Black Sea conflict.
In Illinois, urea prices have fallen $142.66/ton (also 14%) from their early April 2022 high of $1,027.33/ton to land at $884.67/ton as of July 28. Similarly, UAN prices reached a high of $686.05/ton in early May 2022, but prices have since come down 9% in the subsequent months to $623.10/ton as of yesterday.
Phosphate prices have eased 1%-4% lower over the past month while potash prices have backed away from record highs during that time. Diesel prices have dropped a staggering 16% over the past month to settle at an average of $4.46/gallon as of July 28.
For Illinois growers targeting 200 bushels per acre of corn production, this means that per acre production costs (which only include NPK in my calculations) have fallen $24.63-$30.44/acre in the last month. On a per-bushel basis, the recent input price declines suggest that $0.12-$0.15/bushel of recent corn futures losses are justified by the drop in input costs.
However, the recent cost reprieve could offer little comfort to farmers when comparing prices to year-ago values. Prices are still high – it still costs $203.28-$245.55/acre to supply the fertilizer to grow 200 bushels per acre of corn in Illinois. That represents a 50-51% increase from prices a year ago, which represents considerable cost outlays for growers looking to hedge 2023 production costs ahead of 2022 harvest activity.
Some of the price reductions have been unequal across the spectrum also. The recent reduction to nitrogen prices represents a 12%-22% decrease since late June 2022. But phosphate and potassium prices are only 1%-4% lower during that time. That suggests that growers looking to lock in 2023 pricing in the coming weeks may receive a better deal on hedging nitrogen expenses than phosphate and potassium products.
The fertilizer price reductions would have likely been met with more excitement following yesterday’s report had corn futures not recently engaged in a 20% selloff during the past two weeks. To be sure, December 2023 futures prices were last trading at $5.825/bushel this morning, which still covers input, labor, equipment, and land costs on a per-acre basis.
But it doesn’t leave a lot of room leftover for funds to go back directly to the farmer. My redneck math calculates out a $27/acre profit back to growers for 2023, though I suspect that may be a conservative estimate. However, that value still pales compared to 2022 profit estimations calculated earlier this year when corn prices soared to 10-year highs.
To sum it up, the recent fertilizer price declines should come as welcome news to farmers. But some of the optimism has likely been dimmed by falling corn prices over the past three months. More price cuts could be on the way if corn prices continue lower, though profit margins are likely to remain tight in the absence of a corn futures price rally.
There are some telling signs that 2023 profits may not be as lucrative as those recorded in 2022, so it may be a good idea to start looking at cost-saving measures for next year sooner rather than later.
Corn
France’s corn crop took a ratings beating overnight as a heat wave continues to roast Europe. The U.S. crop faces similar heat stress fears in the coming week and the combination of the two factors pushed up futures prices $0.08-$0.11/bushel during the overnight trading session.
September 2022 corn prices are slated to end the week nearly $0.52/bushel higher, which if realized will be its biggest weekly gain in seven years. Much of the crop has benefited from cool and wet weather this week, though dry upcoming forecasts during the first half of August could threaten yield potential.
Soybeans
Soybean prices shot up $0.23-$0.35/bushel overnight on worries about a dry first half of August 2022 in the U.S. “Here the market is primarily focused on the U.S. weather worries,” Tobin Gorey, director of agricultural strategy at the Commonwealth Bank of Australia, told Reuters this morning.
A continued rally in the soyoil market also helped support soybean prices over the past couple days.
If today’s gains hold, August 2022 soybean futures will close the week with the largest weekly gain realized in 18 years thanks to the impending heat wave.
Wheat
Wheat prices gained momentum from a weaker dollar overnight, rising $0.16-$0.20/bushel on lingering uncertainties about a potential deal to release Black Sea grain supplies. Allegedly, Ukraine is ready to begin shipments out of Black Sea terminals, but no official date has been released for the shipment’s release.
Weather
Temperatures remain moderate across much of the Corn Belt today, especially as showers continue to douse areas of the Southern Plains and Southern Corn Belt, according to NOAA’s short-range forecasts.
More showers are expected to sweep through the Southern and Central Plains today, with some southern edges of the Eastern Corn Belt benefiting from the cross-country rain system as well. The system is likely to hover over the region through Sunday, which bodes favorably for depleted soil moisture volumes in the drought-stressed Southern Plains.
Between an inch and two inches of accumulation are forecast over the next 24 hours from Eastern Colorado and New Mexico to Southern Ohio through Tennessee.
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 week of August.
Financials
S&P 500 futures traded 0.632% higher overnight to $4,099.00 as favorable earnings reports from Amazon and Apple issued last night eased fears about recession concerns. Markets are largely responding in a favorable price manner to recent Federal Reserve rate hikes and tech company earnings even though consumer-goods companies are reporting signs of consumer cutbacks amid inflationary pressures.
What else I’m reading this morning on our website, FarmFutures.com:
Leading up to USDA’s release of August yield results, my latest E-corn-omics column focuses on evaluating the significance of those findings.
AgMarket.Net’s Jim McCormick explains how to price in weather risks from the U.S., South America, and Europe into current commodity market pricing.
Ed Usset’s latest marketing character, Terry Timer, aims to price grain before harvest, but holds off if the price is lower than production costs. Does this strategy work?
Dave Kohl explains why taming inflation and stopping a recession is difficult for the Federal Reserve.
Bryce Knorr forecasts the chances of corn and soybeans becoming collateral damage from another Federal Reserve interest rate hike expected today.
Morning Ag Commodity Prices – 7/29/2022
Contract
Units
High
Low
Last
Net Change
% Change
SEP ’22 CORN
$ / BSH
6.265
6.12
6.2525
0.1025
1.67%
DEC ’22 CORN
$ / BSH
6.3075
6.16
6.295
0.105
1.70%
MAR ’23 CORN
$ / BSH
6.365
6.2225
6.355
0.1025
1.64%
MAY ’23 CORN
$ / BSH
6.4
6.2575
6.3875
0.1
1.59%
JUL ’23 CORN
$ / BSH
6.3925
6.255
6.38
0.095
1.51%
SEP ’23 CORN
$ / BSH
5.995
5.885
5.9925
0.0775
1.31%
DEC ’23 CORN
$ / BSH
5.83
5.72
5.825
0.07
1.22%
AR2 ’24 CORN
$ / BSH
5.9
5.805
5.9
0.07
1.20%
MAY ’24 CORN
$ / BSH
0
#N/A
5.8625
0
0.00%
AUG ’22 SOYBEANS
$ / BSH
16.46
16.0925
16.44
0.3475
2.16%
SEP ’22 SOYBEANS
$ / BSH
14.8825
14.5275
14.8575
0.2875
1.97%
NOV ’22 SOYBEANS
$ / BSH
14.685
14.355
14.6375
0.2325
1.61%
JAN ’23 SOYBEANS
$ / BSH
14.745
14.425
14.6975
0.2225
1.54%
MAR ’23 SOYBEANS
$ / BSH
14.6925
14.3925
14.6575
0.2175
1.51%
MAY ’23 SOYBEANS
$ / BSH
14.65
14.365
14.63
0.2225
1.54%
JUL ’23 SOYBEANS
$ / BSH
14.6
14.32
14.555
0.195
1.36%
AUG ’23 SOYBEANS
$ / BSH
14.155
14.155
14.155
0.0775
0.55%
SEP ’23 SOYBEANS
$ / BSH
12
#N/A
13.575
0
0.00%
NOV ’23 SOYBEANS
$ / BSH
13.5275
13.315
13.5025
0.1425
1.07%
AN2 ’24 SOYBEANS
$ / BSH
13.38
13.3475
13.38
-0.0075
-0.06%
AUG ’22 SOYBEAN OIL
$ / LB
68.07
65.8
68.07
2.23
3.39%
SEP ’22 SOYBEAN OIL
$ / LB
66.34
63.54
65.85
1.85
2.89%
AUG ’22 SOY MEAL
$ / TON
502.8
497.9
502.2
12.5
2.55%
SEP ’22 SOY MEAL
$ / TON
452.5
442.6
452.1
9
2.03%
OCT ’22 SOY MEAL
$ / TON
426
420.1
425.6
4.5
1.07%
DEC ’22 SOY MEAL
$ / TON
423.3
418
422.5
3.5
0.84%
JAN ’23 SOY MEAL
$ / TON
420.1
415.5
419.8
3.4
0.82%
SEP ’22 Chicago SRW
$ / BSH
8.4575
8.095
8.415
0.245
3.00%
DEC ’22 Chicago SRW
$ / BSH
8.6375
8.2775
8.5975
0.245
2.93%
MAR ’23 Chicago SRW
$ / BSH
8.795
8.4375
8.7575
0.2425
2.85%
MAY ’23 Chicago SRW
$ / BSH
8.86
8.5025
8.845
0.2575
3.00%
JUL ’23 Chicago SRW
$ / BSH
8.7725
8.425
8.7475
0.2325
2.73%
SEP ’23 Chicago SRW
$ / BSH
8.7575
8.46
8.75
0.24
2.82%
DEC ’23 Chicago SRW
$ / BSH
8.78
8.52
8.755
0.2225
2.61%
SEP ’22 Kansas City HRW
$ / BSH
9.1525
8.8125
9.1125
0.215
2.42%
DEC ’22 Kansas City HRW
$ / BSH
9.215
8.8775
9.1775
0.2125
2.37%
MAR ’23 Kansas City HRW
$ / BSH
9.2525
8.9125
9.21
0.21
2.33%
MAY ’23 Kansas City HRW
$ / BSH
9.2525
8.915
9.225
0.2225
2.47%
JUL ’23 Kansas City HRW
$ / BSH
9.08
8.8375
9.08
0.2375
2.69%
SEP ’23 Kansas City HRW
$ / BSH
8.9725
#N/A
8.7625
0
0.00%
DEC ’23 Kansas City HRW
$ / BSH
8.94
#N/A
8.7375
0
0.00%
SEP ’22 MLPS Spring Wheat
$ / BSH
9.47
9.195
9.4525
0.1725
1.86%
DEC ’22 MLPS Spring Wheat
$ / BSH
9.595
9.3275
9.575
0.1725
1.83%
MAR ’23 MLPS Spring Wheat
$ / BSH
9.6775
9.4375
9.6625
0.1625
1.71%
MAY ’23 MLPS Spring Wheat
$ / BSH
9.68
9.575
9.68
0.1
1.04%
JUL ’23 MLPS Spring Wheat
$ / BSH
9.61
9.58
9.58
-0.01
-0.10%
SEP ’23 MLPS Spring Wheat
$ / BSH
9.3
9.3
9.3
0.0475
0.51%
DEC ’23 MLPS Spring Wheat
$ / BSH
8.51
#N/A
9.3075
0
0.00%
SEP ’21 ICE Dollar Index
$
106.125
105.41
105.85
-0.386
-0.36%
SE ’21 Light Crude
$ / BBL
99.02
96.41
98.68
2.26
2.34%
OC ’21 Light Crude
$ / BBL
97.1
94.59
96.82
2.17
2.29%
AUG ’22 ULS Diesel
$ /U GAL
3.7268
3.685
3.685
-0.0013
-0.04%
SEP ’22 ULS Diesel
$ /U GAL
3.6459
3.6055
3.6208
0.007
0.19%
AUG ’22 Gasoline
$ /U GAL
3.5489
3.5338
3.5355
0.0709
2.05%
SEP ’22 Gasoline
$ /U GAL
3.162
3.106
3.1413
0.0395
1.27%
AUG ’22 Feeder Cattle
$ / CWT
0
#N/A
177.425
0
0.00%
SEP ’22 Feeder Cattle
$ / CWT
0
#N/A
180.2
0
0.00%
AU ’21 Live Cattle
$ / CWT
0
#N/A
136.175
0
0.00%
CT2 ’21 Live Cattle
$ / CWT
0
#N/A
141.825
0
0.00%
AUG ’22 Live Hogs
$ / CWT
0
#N/A
119.125
0
0.00%
OCT ’22 Live Hogs
$ / CWT
0
#N/A
96.325
0
0.00%
JUL ’22 Class III Milk
$ / CWT
22.53
#N/A
22.54
0
0.00%
AUG ’22 Class III Milk
$ / CWT
20.19
20.1
20.1
-0.07
-0.35%
SEP ’22 Class III Milk
$ / CWT
19.7
#N/A
19.83
0
0.00%
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