Afternoon report: Oil dips below $100/barrel as outside investors begin to liquidate commodities, stocks amidst global growth concerns
Good afternoon! Grain markets took a nosedive today, pressured lower by broad recession fears in the outside markets which has helped spur a selloff from outside money managers within the commodity space. But fresh demand within the ag economy also seems to be in short supply, which contributed to the day’s losses.
Fun fact: The trucking industry is a leading economic indicator. That should come as no surprise to anyone involved in the agriculture industry. But truckers are beginning to report that volumes on the spot market are beginning to shrink, suggesting that manufacturing activity is beginning to slow – an indicator of recession that didn’t add much optimism to today’s markets.
Additional downward price pressure came from favorable weather forecasts across the Heartland for this week, though some of the weather losses were limited by drought concerns in parts of the Corn Belt.
Post-holiday export inspection data – which is subject to revisions – pointed to a weekly decline in grain and oilseed export loading volumes last week, which could have in part reflected buyer indecision ahead of last week’s USDA acreage and stocks reports.
Here’s a quick recap of the report. A full analysis of the report is posted on our website.
Uncharacteristically low volumes
It is not unusual for export inspection volumes to be underreported following a holiday period. Today was no exception, with all three main commodities (corn, soybeans, and wheat) registering below the pre-report trade forecasts.
These volumes will likely be rectified in next week’s report, after staffing returns to normal following the holiday. Market prices were already trading lower ahead of the report’s release but continued slightly lower in the half hour following before stabilizing.
Soybean export inspection volumes saw the smallest losses in today’s report, dipping 3.8 million bushels from last week to 13.0 million bushels through the week ending June 30. The trade had been expecting 14.7 million – 18.4 million bushels.
Weak wheat volumes
Last week’s USDA report found higher than expected wheat volumes on hand as of June 1, 2022. This indicates that export volumes continued to range on the slow side during the spring, which is not surprising considering a strong dollar paired with high global wheat prices that makes U.S. wheat a less competitive option on the global market relative to other suppliers.
Through the week ending June 30, federal export inspectors surveyed 4.1 million bushels of wheat, down from 13 million bushels in last week’s report. Marketing year to date wheat export inspections are currently trending 24% lower than the same time last year, verifying last week’s USDA data updates.
The trade had been expecting a range between 11.0 million – 18.4 million bushels, so today’s wheat readings were significantly below the trade range, prompting more bearish price activity for September 2022 futures contracts at the Chicago, Kansas City, and Minneapolis grain exchanges.
Corn’s export woes
Corn faced some similar demand concerns over the past few months in the June 30 Quarterly Grain Stocks Report, fighting a higher dollar and optimism for access to Ukrainian supplies as rising futures prices begin to temper global demand for the feedstuff.
Today’s report found weekly corn inspection volumes falling 46% from last week to 26.6 million bushels. Pre-report estimates had ranged between 35.4 million – 47.2 million bushels, so the corn findings were consistent with the other commodities in falling well below the anticipated trade ranges.
Corn
U.S. oil prices fell 8.2% today on recession fears, dragging corn futures down $0.28-$0.30/bushel. West Texas Intermediate crude contracts dropped below the $100/barrel benchmark for the first time since early May, though that likely brought little solace to farm country as the September 2022 futures contract in Chicago dipped below $6/bushel for the first time since mid-January 2022.
Corn condition ratings are expected to come in today between 63% to 67% good to excellent. Last week’s report found the crop rated at 67% good to excellent.
Cash corn bids widened at ethanol plants in the Corn Belt today, propped up by healthy profit margins. Basis weakened at export terminals on the Illinois and Mississippi Rivers but held mostly steady to slightly firmer at interior processing plants. Farmer sales were slow following the morning’s corn market selloff, according to an Iowa originator.
The dealer noted that “the sharp drop in the futures market was not convincing farmers they had to clear what was left of last year’s crop from their storage bins out in case prices do not rebound before harvest.”
Soybeans
Soybean prices fell $0.60-$0.76/bushel lower in today’s trading session, following a crude oil market selloff and broad recession concerns throughout the economy. Additional bearish pressure from the edible oil complex overnight also trickled into today’s trading session. Slightly higher rapeseed sowings in Canada added bearish price pressure to the edible oils market, even though Canada’s crop is still likely to be smaller than last year’s.
The trade expects a slight downgrade in soybean condition ratings in today’s Crop Progress report from USDA. The analyst range is forecast between 62%-65% good to excellent with an average guess of 64%. Last week’s report saw the soybean crop as rated at 65% good to excellent.
Soy crushers weakened their cash bids across the Midwest today along with river terminals. The lower futures market prices deterred any new cash sales from farmers who may need to start clearing out bins ahead of harvest.
Ongoing drought in China’s northern regions is likely to lead to smaller production volumes for the country this year, especially with more heatwaves expected to roast the top half of the country over the next two weeks. That means China could be more reliant on U.S. ag exports in the coming months. If diplomatic relations between the two countries can improve before that time, U.S. farmers could benefit from higher export volumes.
Wheat
Wheat prices also stumbled lower today on broad economic fears and hedge fund-led liquidations. Chicago futures shed $0.38-$0.41/bushel, with the nearby July 2022 contract dropping below the $8/bushel benchmark for the first time since the week leading up to Russia’s invasion of Ukraine.
Kansas City futures gave up $0.50-$0.54/bushel on growing harvest pressure across the Northern Hemisphere. The Minneapolis contracts took the biggest losses on a large Canadian wheat crop, falling $0.51-$0.54/bushel at last glance.
Stats Canada released updated acreage estimates for the 2022 growing season, with our neighbors to the north planting the largest wheat crop in nearly nine years. Canadian farmers planted 25.4 million acres of wheat this spring in response to high global wheat prices.
This morning’s Stats Canada report also contributed to some losses on the soy complex as competing canola acreage in Canada was reported at 21.4 million acres – half a million acres higher than previously expected in Canada’s initial plantings forecast. But even with lucrative profit options within the oilseed sector, Canadian farmers are still expected to grow nearly 5% fewer canola acres than last year amid high input costs.
Russia & Ukraine
Japan has provided $17 million to the United Nation’s Food and Agriculture Organization (FAO) to assist the agency in facilitating grain transport out of Ukraine. Japan – a prominent global grains importer – designated the money to be used towards adding extra storage capacity in Ukraine via modular containers and plastic silo bags.
Ukraine was able to export higher wheat volumes in June. While no official reason was provided by the government for the volume increase, it is likely that logistic efficiencies for rail transport and shipping channels on the Danube River improved. Ukraine shipped 5.1 million bushels of wheat in June 2022, up from 1.6 million bushels in May but still significantly below the 24.3 million bushels shipped via the Black Sea a year prior.
Ukraine, the world’s fourth largest grains exporter, continues to struggle amid the Russian invasion to find viable options to export its grain supplies, which are in danger of overflowing as the 2022 wheat harvest begins. The trapped supplies have pushed global food prices higher and threatens to trigger a global food security crisis in the coming months.
“Ukraine’s farmers are feeding themselves and millions more people around the world,” said Rein Paulsen, Director of the FAO’s emergencies and resilience office.
“Ensuring they can continue production, safely store and access alternative markets is vital to strengthen food security within Ukraine and ensure other import-dependent countries have sufficient supply of grain at a manageable cost,” he added.
Weather
More rains are on the way to the Heartland today, according to NOAA’s short-range forecasts. Mostly clear skies during the day today are going to give way to heavy showers and thunderstorms beginning this afternoon in the Plains and stretching all the way into the Eastern Corn Belt by tomorrow morning.
Rains continue to flood the forecast (pun intended) through the end of the week for the Corn Belt. Over the next 24 hours, up to an inch of accumulation is expected between the Dakotas and Nebraska, stretching all the way to Ohio.
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 second week of July. While pockets of the West are anticipating above average probability for rainfall, chances of rain in the Upper Midwest are growing increasingly slim.
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 receives substantial rainfall this week and no other unfortunate weather events during peak pollination.
Financials
S&P 500 futures were flat at $3,826.75 today but the Dow endured a nearly 500-point selloff, settling at $30,936.27 as investors liquidated equities amid recession fears. Seasonal declines in energy consumption triggered massive losses in the energy complex, as WTI futures dipped just under $100/barrel for the first time in two months.
“Oil prices are starting to reflect a much greater recession risk,” Matt Miskin, co-chief investment strategist at John Hancock Investment Management, told the Wall Street Journal this afternoon.
Also of interest – more Americans are being forced to dig into savings as inflationary pressures continue to climb.
What else I’m reading this morning on our website, FarmFutures.com:
Are you playing the grain market blame game? Bryce Knorr has helpful insights for farmers who may have been surprised by higher corn acres in last week’s USDA report.
The latest Purdue University-CME Ag Economy Barometer finds that farmers’ expectations of the future are weakening amid rising input costs and uncertainty about the future.
Looking to expand your farm? Darren Frye has three questions farmers should answer before they pull the trigger on expansion plans.
Commstock’s Matthew Kruse expects yield will become a more critical factor in determining ending stocks in the future, limiting any potential U.S. acreage expansion in the future.
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!
Closing Ag Commodity Prices – 7/5/2022
Contract
Units
High
Low
Last
Net Change
% Change
JUL ’22 CORN
$ / BSH
7.65
7.26
7.375
-0.17
-2.25%
SEP ’22 CORN
$ / BSH
6.1625
5.825
5.9025
-0.295
-4.76%
DEC ’22 CORN
$ / BSH
6.02
5.71
5.78
-0.295
-4.86%
MAR ’23 CORN
$ / BSH
6.09
5.78
5.8425
-0.295
-4.81%
MAY ’23 CORN
$ / BSH
6.135
5.8225
5.8875
-0.29
-4.69%
JUL ’23 CORN
$ / BSH
6.1625
5.82
5.8825
-0.2825
-4.58%
SEP ’23 CORN
$ / BSH
5.8725
5.5825
5.5975
-0.28
-4.76%
DEC ’23 CORN
$ / BSH
5.7625
5.485
5.5
-0.2675
-4.64%
MAR ’24 CORN
$ / BSH
5.8325
5.5625
5.5925
-0.245
-3.90%
JUL ’22 SOYBEANS
$ / BSH
16.2425
15.72
15.72
-0.54
-3.32%
AUG ’22 SOYBEANS
$ / BSH
14.95
14.3175
14.4375
-0.66
-4.37%
SEP ’22 SOYBEANS
$ / BSH
13.9975
13.2625
13.41
-0.7575
-5.35%
NOV ’22 SOYBEANS
$ / BSH
13.745
13.04
13.2
-0.7525
-5.39%
JAN ’23 SOYBEANS
$ / BSH
13.81
13.1
13.2625
-0.745
-5.32%
MAR ’23 SOYBEANS
$ / BSH
13.8375
13.0775
13.2475
-0.715
-5.12%
MAY ’23 SOYBEANS
$ / BSH
13.8125
13.105
13.2425
-0.7175
-5.14%
JUL ’23 SOYBEANS
$ / BSH
13.7025
13.095
13.22
-0.7075
-5.08%
AUG ’23 SOYBEANS
$ / BSH
13.4525
13.1775
13
-0.7075
-3.59%
SEP ’23 SOYBEANS
$ / BSH
12.765
12.5425
12.5675
-0.6775
-5.30%
NOV ’23 SOYBEANS
$ / BSH
12.7225
12.305
12.4175
-0.5725
-4.41%
JUL ’22 SOYBEAN OIL
$ / LB
65
59.7
60.52
-5.16
-8.65%
AUG ’22 SOYBEAN OIL
$ / LB
63.66
59.43
59.6
-4.83
-7.50%
JUL ’22 SOY MEAL
$ / TON
459.8
451.1
452.8
-6.9
-1.22%
AUG ’22 SOY MEAL
$ / TON
422.6
410
411.4
-10.7
-2.53%
SEP ’22 SOY MEAL
$ / TON
399.7
388.3
389.8
-11.4
-2.84%
OCT ’22 SOY MEAL
$ / TON
387.5
374.8
378.5
-10.2
-2.62%
DEC ’22 SOY MEAL
$ / TON
388.4
375.3
378.3
-10.9
-2.80%
JUL ’22 Chicago SRW
$ / BSH
8.29
7.975
7.9375
-0.375
-3.70%
SEP ’22 Chicago SRW
$ / BSH
8.425
8.045
8.0475
-0.4125
-4.88%
DEC ’22 Chicago SRW
$ / BSH
8.595
8.2025
8.215
-0.41
-4.75%
MAR ’23 Chicago SRW
$ / BSH
8.7275
8.3425
8.365
-0.39
-4.45%
MAY ’23 Chicago SRW
$ / BSH
8.935
8.4125
8.445
-0.3875
-4.39%
JUL ’23 Chicago SRW
$ / BSH
8.705
8.285
8.345
-0.405
-4.63%
SEP ’23 Chicago SRW
$ / BSH
8.8025
8.23
8.26
-0.4425
-5.08%
JUL ’22 Kansas City HRW
$ / BSH
9.1
8.575
8.575
-0.535
-5.87%
SEP ’22 Kansas City HRW
$ / BSH
9.11
8.595
8.625
-0.51
-5.58%
DEC ’22 Kansas City HRW
$ / BSH
9.1925
8.68
8.71
-0.505
-5.48%
MAR ’23 Kansas City HRW
$ / BSH
9.22
8.7425
8.7825
-0.4925
-5.31%
MAY ’23 Kansas City HRW
$ / BSH
9.2275
8.76
8.77
-0.4975
-5.37%
JUL ’23 Kansas City HRW
$ / BSH
8.9925
8.5875
8.6025
-0.4775
-5.26%
SEP ’23 Kansas City HRW
$ / BSH
8.7225
8.5275
8.535
-0.4175
-4.66%
JUL ’22 MLPS Spring Wheat
$ / BSH
8.8
#N/A
9.41
0
0.00%
SEP ’22 MLPS Spring Wheat
$ / BSH
9.465
8.88
8.94
-0.54
-5.70%
DEC ’22 MLPS Spring Wheat
$ / BSH
9.61
9.045
9.105
-0.5175
-5.38%
MAR ’23 MLPS Spring Wheat
$ / BSH
9.75
9.1925
9.2425
-0.5175
-5.30%
MAY ’23 MLPS Spring Wheat
$ / BSH
9.79
9.3075
9.3075
-0.5475
-5.56%
JUL ’23 MLPS Spring Wheat
$ / BSH
9.75
9.3625
9.3625
-0.545
-5.50%
SEP ’23 MLPS Spring Wheat
$ / BSH
9.56
9.085
9.085
-0.6
-6.20%
SEP ’21 ICE Dollar Index
$
106.58
104.835
106.325
1.416
1.35%
AU ’21 Light Crude
$ / BBL
111.45
97.43
99.17
-9.26
-8.54%
SE ’21 Light Crude
$ / BBL
108.28
94.62
96.22
-9.17
-8.70%
AUG ’22 ULS Diesel
$ /U GAL
3.9851
3.5837
3.5903
-0.3486
-8.85%
SEP ’22 ULS Diesel
$ /U GAL
3.907
3.5254
3.5288
-0.3324
-8.61%
AUG ’22 Gasoline
$ /U GAL
3.7528
3.2726
3.3438
-0.344
-9.33%
SEP ’22 Gasoline
$ /U GAL
3.5855
3.1406
3.2003
-0.3309
-9.37%
AUG ’22 Feeder Cattle
$ / CWT
176.325
172.45
172.575
-1.925
-1.10%
SEP ’22 Feeder Cattle
$ / CWT
179.1
175.8
175.975
-1.675
-0.94%
AU ’21 Live Cattle
$ / CWT
135.075
132.675
133.125
-1.475
-1.10%
CT2 ’21 Live Cattle
$ / CWT
140.45
138.4
138.625
-1.35
-0.96%
JUL ’22 Live Hogs
$ / CWT
112.575
110
112.35
2.75
2.51%
AUG ’22 Live Hogs
$ / CWT
106.425
102.15
105.975
3
2.91%
JUL ’22 Class III Milk
$ / CWT
22.42
22.1
22.21
-0.21
-0.94%
AUG ’22 Class III Milk
$ / CWT
22.42
21.67
21.72
-0.7
-3.12%
SEP ’22 Class III Milk
$ / CWT
22.74
21.95
22.04
-0.66
-2.91%
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