Morning report: Corn, soy drift lower on cool and wet weekend forecasts for the Upper Midwest. (Comments are updated by 7:30 a.m. Central Time.)
Corn down 1-2 cents
Soybeans down 7-12 cents; Soymeal down $6.10/ton; Soyoil down $0.32/lb
Chicago wheat up 3-4 cents; Kansas City wheat up 6-7 cents; Minneapolis wheat up 2-4 cents
*Prices as of 6:50am CDT.
Feedback from the Field updates! How does your farm’s crop conditions stack up against other farms around the country? Click this link to take the survey and share updates about your farm’s crop development. I review and upload results daily to the FFTF Google MyMap, so farmers can see others’ responses from across the country – or even across the county!
My new FFTF column was published on Tuesday! The majority of farmer insights came from growers who are struggling with lackluster crop conditions. Persistent dryness, lack of rainfall, and spring planting delays are the key culprits and yield downgrades are expected.
Corn
It’s raining in heat-stressed France, but it’s likely too little too late for French corn crops. The sentiment helped stave off a selloff in the U.S. corn market this morning, though prices still traded $0.01-$0.02/bushel lower on a combination of cooler and wet weather expected in the Corn Belt this weekend, a stronger dollar, Black Sea shipping paces, weaker oil prices, and murky global economic outlooks.
USDA-NASS releases monthly Cattle on Feed data today. In the latest Ag Marketing IQ blog, Naomi Blohm provides a great preview of today’s report, which I would highly recommend reading. Here are a few key points from that column as well as trade estimates that will be worth watching today.
Pre-report trade estimates place August 1 cattle on feed inventories at 11.23 million head, with an expected range of 11.15 million – 11.27 million head. The average guess represents a 0.7% increase from year ago volumes, but the high volumes don’t reflect the reality of a shrinking cattle herd amid high feed costs and drought-ravaged pasture and range lands.
“While the number of cattle coming to market is large, due to higher feed costs or lack of feed in some instances, weights have been trending lower,” Blohm points out in her latest column.
July 2022 marketings are expected to range between 4% lower and 2.1% higher than July 2021 volumes with an average trade guess of 1.85 million head. The wide trade range variance suggests that market watchers are unsure if robust domestic demand will continue to keep up with rapid exporting paces amid inflationary pressures at the meat counter.
“The choice/select spread is still trading wide near $25 to $26, which reflects the tightness of the beef lots and shows packers bidding up to find choice beef product to meet consumer demand,” Blohm explains. “This also suggests that demand for retail beef has not slipped in spite of higher overall costs for steaks at the grocery store.”
Last month’s (June 2022) sales for slaughter volume of 2.06 million head was the highest monthly reading of the 2022 calendar year. In fact, it was the largest monthly marketings volume for cattle since the May 2019 high of 2.07 million head. This reflects rapid demand and processing times
Placements are largely expected to fall from year ago volumes by an average of 1.5%. Pre-report market analyst guesses range between 1.63 million – 1.74 million head with an average guess of 1.71 million head. With few pastures in good enough condition to sustain cattle grazing, it seems likely this estimate will remain largely in line or slightly lower than last year’s reading.
“Keep in mind, trade is already expecting supportive or friendly news heading into the report, which has helped to push futures prices higher this week,” Blohm cautions. “For the short term, in order for prices to trade higher, the market needs to receive an “over the top friendly/bullish” Cattle-on-Feed report on Friday.”
“If we do not receive that ‘over the top bullish’ report, futures prices might be at risk of a short-term price correction.”
Blohm notes that the “lack of supply story” in the cattle market has been the primary market headline as barbeque season winds down and year end approaches. For corn growers, this should be setting off some alarms.
USDA issued further cuts to 2022/23 feed and residual corn usage rates in last week’s WASDE report. At 5.325 billion bushels, 2022/23 feed and residual consumption will be nearly 5% lower than a year ago and is expected to have the lowest annual volume since the 2017/18 marketing year.
Feed consumption typically accounts for the largest end user of U.S. corn. In the 2021/22 marketing year, feed usage consumed 37% of last year’s corn crop. This year, it is expected to use 37.1% of a smaller 2022 corn harvest.
But most notably, ethanol usage is expected to consume 0.3% more of the 2022 corn crop over the next 12.5 months to become the largest end user of U.S. corn. The last time ethanol consumption outpaced livestock usage for corn was during the 2017/18 marketing year.
For growers approaching harvest, this dynamic is worth keeping in mind as bids are sent out for fall harvest sales. While cattle feeders may be more willing to pay up front for freshly harvested corn, there could be dividends to be reaped by holding off on some sales until later in the marketing year when supply pressure intensifies for end users.
But if cattle numbers continue to drop in today’s report, corn growers may lose out on profits by waiting to sell. A smaller herd means less corn will be used for feed, especially if slaughter weights continue to err on the light side. While drought conditions have accelerated cattle slaughterings, some of this selloff can be attributed to demand destruction in response to high corn prices and tight supplies.
It suggests that the corn bulls may be lining up with the real ones in the coming months for slaughter. Make sure your marketing plan is ready when that probe fires.
Soybeans
Soybean prices fell $0.07-$0.12/bushel overnight on similar sentiments to losses in the corn market. However, soybean prices are more responsive to the cooler and wetter weather forecasts expected in the Upper Midwest through the weekend, which should help reduce some potential yield loss in regions where heat stress has become a concern. Losses were partially limited by a favorable export report for soybeans yesterday.
Soybean export sales for shipment in 2022/23 accelerated in yesterday’s weekly Export Sales report from USDA. Soybean shipping volumes also saw a 19% uptick above the previous four weeks’ average as China continues to buy U.S. soybean bushels. Meanwhile, corn export sales and shipping volumes continued to lag behind year ago paces.
Yesterday’s report is quite reflective of the current export market for corn and soybeans. As I write in my latest E-corn-omics column, new crop soybean sales to China are an important part of sustaining current soybean prices.
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.
There is a lot of optimism for the 2022/23 soybean export season. In early August 2022, outstanding export orders for the 2022/23 marketing year stood at 578.4 million bushels, over 1.3 times higher than the same time a year ago. For that time of year, it was the most advance orders for new crop soybeans placed by international buyers since the 2019/20 marketing campaign.
New crop soybean export orders to China are a key driver of that optimism. Advance orders to China doubled year-ago volumes in early August 2022, rising past 325 million bushels.
For deeper analysis on how new crop corn exports are shaping up so far, check out my latest E-corn-omics column.
Wheat
Bargain buyers swooped into the wheat complex overnight after Chicago prices notched a six-month low during yesterday’s trading session. Market watchers continue to be skeptical that the Black Sea conflict will be resolved in the near future, though ongoing diplomatic negotiations between Russia and Ukraine are putting a cap on the morning’s gains in the U.S. wheat market.
Wheat prices bounced back $0.02-$0.07/bushel higher this morning on technical buying.
“Generally speaking, the supply outlook remains positive, though it is still fraught with considerable uncertainty, which argues against any pronounced fall in wheat prices,” Commerzbank said in a note, as reported by Reuters.
Ongoing harvest activity in Russia and Ukraine is expected to add to global supplies, which is likely to have a bearish impact on prices in the intermediate future.
Weak U.S. wheat export volume data reported yesterday signaled an early end to peak wheat export season in the U.S. after a rapid flurry of orders were booked in July for U.S. wheat from Central American and Southeast Asian countries.
China
I’ve written about China’s ongoing drought in recent days, but it is worth noting that the dry conditions are intensifying in China. Late last night, Chinese government officials announced the first nationwide drought alert of 2022 as rivers dry up and crop damage is reported. The alert has been classified as “yellow” which means it is just two categories short of the most dangerous warning level for China’s weather system.
According to Chinese state broadcaster CCTV, at least 66 rivers in 34 counties have dried up across China’s Chongqing province in the southwestern part of the country. China’s southwestern Sichuan province, also located in the southwest, has suffered weeks of unrelenting heatwaves.
Officials in Chongqing are already sending out teams to evaluate crop damage and provide farmers compensation for their losses due to the heat, which government officials blame on climate change. While China’s corn and soybean crops are primarily grown in the country’s northern regions (away from the Yangtze River in the Central and Southern parts of the country), there is still expected to be some corn, soybean, and wheat crop damage due to the drought that could increase China’s reliance on importing paces during the coming months.
Ukraine
Ukraine’s wheat harvest is now 91% complete for the 2022 season, even amid ongoing fighting with Russian military forces in western and southern regions of the country where much of Ukraine’s wheat crop is grown.
So far, Ukrainian farmers have harvested 639 million bushels of wheat. USDA predicts the Black Sea country will harvest 716 million bushels of wheat this year, down 41% (496 million bushels) from the 2021 haul.
Ongoing shipments from three Black Sea ports at Odessa, Pivdennyi and Chornomorsk will help reduce storage pressure for freshly harvested crops, especially as peak fall harvest approaches. So far, 25 ships have hauled 625,049 metric tonnes of grain out of Ukrainian terminals since the “Grain Initiative” began on August 1.
So far, Ukraine has barely shipped 3 million metric tonnes (MMT) of grain in the 2022/23 marketing year that began on July 1. The country shipped 48.5 MMT of grain and oilseed products during the last marketing year – an 8.5% annual increase even before the Russian invasion began.
Weather
While blisteringly hot temperatures are notched in southern regions of the U.S. over the next week, temperatures across the Midwest are not likely to reach the severe highs of those regions. Key Corn Belt region weather will hover between the 80s-90s again today with highs in the Plains topping 90 over the next couple days, according to NOAA’s short-range forecasts. Areas of the Upper Midwest could see highs only reaching into the 60s-70s today.
More showers will continue to hover in the Upper Midwest today, with parts of the Dakotas, Minnesota, Iowa, Illinois, Wisconsin, and Missouri expected to see between a quarter to a full inch of accumulation over the next 24 hours, which bodes favorable for soybean yields in the region.
The slow-moving rain system is likely to hover over the Upper Midwest through tomorrow and will likely creep into the Eastern Corn Belt by Sunday.
Drought conditions soared to a three-week high in yesterday’s weekly Drought Monitor update from the University of Nebraska. Through the week ending August 16, 66.61% of the U.S. was in some sort of abnormally dry to exceptional drought condition, up over 1% from last week.
That is concerning for soybean pod development, which is currently in its peak fill phases and highly susceptible to yield loss if heat stress becomes too severe through the end of the month.
More moderate temperatures are forecast in the 6-10-day NOAA outlook. Areas of the Upper Midwest could still face above average temperatures and below average chances for moisture during that time, while temperatures in the Central Plains and Eastern Corn Belt are trending more moderate and wetter through the end of the month.
While the wetter and cooler forecasts bode well for some corn and soybean crops, expect market focus to shift towards crop conditions in the Upper Midwest over the next two weeks. Soybeans are still filling pods, so any exceptionally hot and dry weather could raise market concerns about 2022 yield prospects.
Financials
S&P 500 futures fell 0.96% to $4,246.00 this morning after yesterday’s Federal Reserve meeting minutes from the July FOMC meeting were released. Markets rallied yesterday as the Fed evaluated its direction on interest rate hikes and outlined additional increases in the near future.
“This feels like a re-evaluation of whether there has been enough financial tightening,” John Roe, head of multiasset funds at Legal & General Investment Management, told the Wall Street Journal this morning. “And if there hasn’t actually, could we get more pain from central banks having to do more?”
Oil prices continued lower this morning, with U.S. West Texas Intermediate futures dipping below the $90/barrel benchmark again this week. The last time WTI futures had traded consistently below $90/barrel was in early February 2022.
What else I’m reading this morning on our website, FarmFutures.com:
Naomi Blohm’s full article forecasting today’s Cattle on Feed report from USDA.
My recent E-corn-omics column highlights wheat export optimism.
Jacqui Fatka summarizes the benefits to conservation programs from the Inflation Reduction Act.
The farm economy is strong – for now. But Federal Reserve data shows shrinking expectations for farmland values and profitability.
Does it pay to second guess USDA? Bryce Knorr looks at five ways to estimate 2022 corn and soybean yields.
Morning Ag Commodity Prices – 8/19/2022
Contract
Units
High
Low
Last
Net Change
% Change
SEP ’22 CORN
$ / BSH
6.2275
6.16
6.185
-0.0125
-0.20%
DEC ’22 CORN
$ / BSH
6.185
6.12
6.145
-0.0125
-0.20%
MAR ’23 CORN
$ / BSH
6.255
6.1925
6.215
-0.0125
-0.20%
MAY ’23 CORN
$ / BSH
6.2775
6.2225
6.24
-0.0125
-0.20%
JUL ’23 CORN
$ / BSH
6.26
6.2
6.22
-0.01
-0.16%
SEP ’23 CORN
$ / BSH
5.935
5.905
5.905
-0.0175
-0.30%
DEC ’23 CORN
$ / BSH
5.8725
5.8225
5.835
-0.02
-0.34%
AR2 ’24 CORN
$ / BSH
5.9125
5.9125
5.9125
-0.0175
-0.30%
MAY ’24 CORN
$ / BSH
0
#N/A
5.965
0
0.00%
SEP ’22 SOYBEANS
$ / BSH
14.9925
14.795
14.8125
-0.1425
-0.95%
NOV ’22 SOYBEANS
$ / BSH
14.1
13.89
13.915
-0.1375
-0.98%
JAN ’23 SOYBEANS
$ / BSH
14.155
13.96
13.98
-0.135
-0.96%
MAR ’23 SOYBEANS
$ / BSH
14.1475
13.995
13.9975
-0.1325
-0.94%
MAY ’23 SOYBEANS
$ / BSH
14.1575
14.01
14.015
-0.1325
-0.94%
JUL ’23 SOYBEANS
$ / BSH
14.1525
14.0075
14.0175
-0.12
-0.85%
AUG ’23 SOYBEANS
$ / BSH
13.915
13.9125
13.9125
-0.0425
-0.30%
SEP ’23 SOYBEANS
$ / BSH
13.5525
13.5475
13.55
-0.025
-0.18%
NOV ’23 SOYBEANS
$ / BSH
13.455
13.315
13.33
-0.0925
-0.69%
AN2 ’24 SOYBEANS
$ / BSH
0
#N/A
13.4525
0
0.00%
AR2 ’24 SOYBEANS
$ / BSH
0
#N/A
13.375
0
0.00%
SEP ’22 SOYBEAN OIL
$ / LB
66.9
65.84
65.97
-0.29
-0.44%
OCT ’22 SOYBEAN OIL
$ / LB
65.39
64.36
64.51
-0.29
-0.45%
SEP ’22 SOY MEAL
$ / TON
451.2
443
443.2
-6.2
-1.38%
OCT ’22 SOY MEAL
$ / TON
414.6
407.6
407.9
-5.1
-1.23%
DEC ’22 SOY MEAL
$ / TON
408.9
403
403.1
-4.8
-1.18%
JAN ’23 SOY MEAL
$ / TON
404.8
399.4
399.7
-4.2
-1.04%
MAR ’23 SOY MEAL
$ / TON
397.2
393.5
393.5
-3.6
-0.91%
SEP ’22 Chicago SRW
$ / BSH
7.4225
7.3225
7.3525
0.0375
0.51%
DEC ’22 Chicago SRW
$ / BSH
7.6
7.4975
7.53
0.04
0.53%
MAR ’23 Chicago SRW
$ / BSH
7.7625
7.665
7.7025
0.0425
0.55%
MAY ’23 Chicago SRW
$ / BSH
7.8575
7.7725
7.8025
0.035
0.45%
JUL ’23 Chicago SRW
$ / BSH
7.875
7.8025
7.8325
0.045
0.58%
SEP ’23 Chicago SRW
$ / BSH
7.9175
7.84
7.8625
0.03
0.38%
DEC ’23 Chicago SRW
$ / BSH
8.01
7.9225
7.9225
0.025
0.32%
SEP ’22 Kansas City HRW
$ / BSH
8.2175
8.125
8.195
0.07
0.86%
DEC ’22 Kansas City HRW
$ / BSH
8.2525
8.16
8.2125
0.06
0.74%
MAR ’23 Kansas City HRW
$ / BSH
8.265
8.19
8.2325
0.055
0.67%
MAY ’23 Kansas City HRW
$ / BSH
8.275
8.21
8.26
0.06
0.73%
JUL ’23 Kansas City HRW
$ / BSH
8.245
8.165
8.18
0.03
0.37%
SEP ’23 Kansas City HRW
$ / BSH
8.2075
8.155
8.185
0.0375
0.46%
DEC ’23 Kansas City HRW
$ / BSH
8.22
8.22
8.22
0.04
0.49%
SEP ’22 MLPS Spring Wheat
$ / BSH
8.615
8.535
8.555
0.0275
0.32%
DEC ’22 MLPS Spring Wheat
$ / BSH
8.735
8.6475
8.6725
0.025
0.29%
MAR ’23 MLPS Spring Wheat
$ / BSH
8.8625
8.785
8.8175
0.035
0.40%
MAY ’23 MLPS Spring Wheat
$ / BSH
8.9275
8.88
8.9075
0.0375
0.42%
JUL ’23 MLPS Spring Wheat
$ / BSH
8.98
#N/A
8.9
0
0.00%
SEP ’23 MLPS Spring Wheat
$ / BSH
8.71
8.71
8.71
-0.0075
-0.09%
DEC ’23 MLPS Spring Wheat
$ / BSH
0
#N/A
8.765
0
0.00%
SEP ’21 ICE Dollar Index
$
107.975
107.415
107.965
0.55
0.51%
SE ’21 Light Crude
$ / BBL
90.85
88.38
88.39
-2.11
-2.33%
OC ’21 Light Crude
$ / BBL
90.44
87.95
87.99
-2.12
-2.35%
SEP ’22 ULS Diesel
$ /U GAL
3.6588
3.5662
3.5751
-0.0746
-2.04%
OCT ’22 ULS Diesel
$ /U GAL
3.6132
3.5266
3.5343
-0.069
-1.91%
SEP ’22 Gasoline
$ /U GAL
3.0554
2.975
2.9758
-0.0503
-1.66%
OCT ’22 Gasoline
$ /U GAL
2.8146
2.7346
2.7362
-0.0522
-1.87%
AUG ’22 Feeder Cattle
$ / CWT
0
#N/A
181.525
0
0.00%
SEP ’22 Feeder Cattle
$ / CWT
0
#N/A
185.275
0
0.00%
AU ’21 Live Cattle
$ / CWT
0
#N/A
141.275
0
0.00%
CT2 ’21 Live Cattle
$ / CWT
0
#N/A
144.75
0
0.00%
OCT ’22 Live Hogs
$ / CWT
0
#N/A
93.3
0
0.00%
DEC ’22 Live Hogs
$ / CWT
0
#N/A
85.175
0
0.00%
AUG ’22 Class III Milk
$ / CWT
20.08
20.07
20.07
-0.01
-0.05%
SEP ’22 Class III Milk
$ / CWT
20.11
20.06
20.11
-0.15
-0.74%
OCT ’22 Class III Milk
$ / CWT
20.18
20.13
20.13
-0.17
-0.84%
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