Morning report: Demand looks good, but easing supply pressures and mounting economic concerns could keep Tuesday’s grain trade lower. (Comments are updated by 7:30 a.m. Central Time.)
Good morning! I hope you had a safe and happy Independence Day holiday! Grain and oilseed markets remain closed until 8:30am CDT this morning, so this morning’s prices are the same as those when the market closed on Friday.
Corn
Due to the holiday, corn prices were unmoved from last Friday’s closed. But based on increasingly favorable weather forecasts for corn conditions and pollination and a continuing hedge fund selloff in the corn and soy markets, I’d expect today’s market prices to open slightly lower.
Soybeans
Similar to corn, soybean markets face some weather price resistance in today’s trading session. But there is also room for optimism. There is a chance that President Biden will announce a scaling back of import tariffs against China today, which could help improve trade relations between the world’s top two economies.
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.
Palm oil prices in Malaysia traded sharply lower overnight to a nine-month low as surging inventories in top producer Indonesia caused the country’s government to increase its export quota to reduce some of the excessive supply pressure on the palm oil complex. That could also have some bearish impact on soybean prices this morning.
“Our objective is to speed up exports so storage would be freed up and the palm fruit of farmers can be absorbed,” senior Indonesian government official Veri Anggrijono told Reuters overnight. Indonesia has not yet set a time limit on this latest export quota modification.
Wheat
A handful of wheat tenders issued overnight from Japan, South Korea, Bangladesh, and Jordan was a bullish sign for global wheat demand following the holiday weekend. European wheat prices traded higher overnight, providing some glimpse of what might be in store for U.S. wheat markets today.
International bargain buyers were the chief driver of higher European wheat prices yesterday. The demand optimism largely offset easing supply pressures from Russia, who announced yesterday it would reduce its wheat export tax to allow better international access to its bumper crop over the coming weeks.
“I think the market is still trying to work out what the Russian government actually wants to achieve with its export taxes, but a reduction would be expected to mean more Russian wheat will be sold internationally,” a German trader told Reuters yesterday.
“However, world supplies remain so tight that the EU still looks likely to be able to sell all the wheat it has available in export markets. The fall in Chicago prices to their levels before the Ukraine invasion is also likely to stimulate more purchase tenders.”
Even with a large Russian crop expected, there is still a chance the logistics difficulties surrounding it will add some bullish price pressures to the wheat complex.
“A renewed competitiveness of Russian wheat is to be expected but whatever happens, the world market needs these volumes and it will be difficult for Russia to regain its full export regime,” consultancy Agritel said in a note.
Russia & Ukraine
Russian authorities in Eastern Ukraine announced yesterday that they had completed an agreement to sell Ukrainian grain to Iraq, Iran, and Saudi Arabia. The sale, which is expected to reach 150,000 tonnes of grain, could not be verified by Reuters.
So while it is an interesting headline, take it with a grain of salt. It is just one more added wrinkle to the complicated mess that has become the Black Sea conflict.
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.
West Coast Dockworkers
The current labor agreement between West Coast shippers and dockworkers expired last Friday, 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, though workers continued to report for duty through the weekend. 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.
Financials
S&P 500 futures dipped 0.55% lower to $3,806.25 this morning as the stock market wavered ahead of the post-holiday trading session. While market watchers greeted yesterday’s news of the U.S. potentially scaling back some of its tariffs on imports from China with optimism, concerns about economic growth are likely to hold back gains in this morning’s trading session.
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:
Roger Wright published a helpful sample timeline to explain how wheat puts work.
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.
Morning Ag Commodity Prices – 7/5/2022
Contract
Units
High
Low
Last
Net Change
% Change
JUL ’22 CORN
$ / BSH
0
#N/A
7.545
0
0.00%
SEP ’22 CORN
$ / BSH
0
#N/A
6.1975
0
0.00%
DEC ’22 CORN
$ / BSH
0
#N/A
6.075
0
0.00%
MAR ’23 CORN
$ / BSH
0
#N/A
6.1375
0
0.00%
MAY ’23 CORN
$ / BSH
0
#N/A
6.1775
0
0.00%
JUL ’23 CORN
$ / BSH
0
#N/A
6.165
0
0.00%
SEP ’23 CORN
$ / BSH
0
#N/A
5.8775
0
0.00%
DEC ’23 CORN
$ / BSH
0
#N/A
5.7675
0
0.00%
MAR ’24 CORN
$ / BSH
0
#N/A
5.8375
0
0.00%
JUL ’22 SOYBEANS
$ / BSH
0
#N/A
16.26
0
0.00%
AUG ’22 SOYBEANS
$ / BSH
0
#N/A
15.0975
0
0.00%
SEP ’22 SOYBEANS
$ / BSH
0
#N/A
14.1675
0
0.00%
NOV ’22 SOYBEANS
$ / BSH
0
#N/A
13.9525
0
0.00%
JAN ’23 SOYBEANS
$ / BSH
0
#N/A
14.0075
0
0.00%
MAR ’23 SOYBEANS
$ / BSH
0
#N/A
13.9625
0
0.00%
MAY ’23 SOYBEANS
$ / BSH
0
#N/A
13.96
0
0.00%
JUL ’23 SOYBEANS
$ / BSH
0
#N/A
13.9275
0
0.00%
AUG ’23 SOYBEANS
$ / BSH
0
#N/A
13.7075
0
0.00%
SEP ’23 SOYBEANS
$ / BSH
0
#N/A
13.245
0
0.00%
NOV ’23 SOYBEANS
$ / BSH
0
#N/A
12.99
0
0.00%
JUL ’22 SOYBEAN OIL
$ / LB
0
#N/A
65.68
0
0.00%
AUG ’22 SOYBEAN OIL
$ / LB
0
#N/A
64.43
0
0.00%
JUL ’22 SOY MEAL
$ / TON
0
#N/A
459.7
0
0.00%
AUG ’22 SOY MEAL
$ / TON
0
#N/A
422.1
0
0.00%
SEP ’22 SOY MEAL
$ / TON
0
#N/A
401.2
0
0.00%
OCT ’22 SOY MEAL
$ / TON
0
#N/A
388.7
0
0.00%
DEC ’22 SOY MEAL
$ / TON
0
#N/A
389.2
0
0.00%
JUL ’22 Chicago SRW
$ / BSH
0
#N/A
8.3125
0
0.00%
SEP ’22 Chicago SRW
$ / BSH
0
#N/A
8.46
0
0.00%
DEC ’22 Chicago SRW
$ / BSH
0
#N/A
8.625
0
0.00%
MAR ’23 Chicago SRW
$ / BSH
0
#N/A
8.755
0
0.00%
MAY ’23 Chicago SRW
$ / BSH
0
#N/A
8.8325
0
0.00%
JUL ’23 Chicago SRW
$ / BSH
0
#N/A
8.75
0
0.00%
SEP ’23 Chicago SRW
$ / BSH
0
#N/A
8.7025
0
0.00%
JUL ’22 Kansas City HRW
$ / BSH
0
#N/A
9.11
0
0.00%
SEP ’22 Kansas City HRW
$ / BSH
0
#N/A
9.135
0
0.00%
DEC ’22 Kansas City HRW
$ / BSH
0
#N/A
9.215
0
0.00%
MAR ’23 Kansas City HRW
$ / BSH
0
#N/A
9.275
0
0.00%
MAY ’23 Kansas City HRW
$ / BSH
0
#N/A
9.2675
0
0.00%
JUL ’23 Kansas City HRW
$ / BSH
0
#N/A
9.08
0
0.00%
SEP ’23 Kansas City HRW
$ / BSH
0
#N/A
8.9525
0
0.00%
JUL ’22 MLPS Spring Wheat
$ / BSH
0
#N/A
9.41
0
0.00%
SEP ’22 MLPS Spring Wheat
$ / BSH
0
#N/A
9.48
0
0.00%
DEC ’22 MLPS Spring Wheat
$ / BSH
0
#N/A
9.6225
0
0.00%
MAR ’23 MLPS Spring Wheat
$ / BSH
0
#N/A
9.76
0
0.00%
MAY ’23 MLPS Spring Wheat
$ / BSH
0
#N/A
9.855
0
0.00%
JUL ’23 MLPS Spring Wheat
$ / BSH
0
#N/A
9.9075
0
0.00%
SEP ’23 MLPS Spring Wheat
$ / BSH
0
#N/A
9.685
0
0.00%
SEP ’21 ICE Dollar Index
$
106.085
104.835
106.06
1.151
1.10%
AU ’21 Light Crude
$ / BBL
111.45
107.25
108.24
-0.19
-0.18%
SE ’21 Light Crude
$ / BBL
108.28
104.26
105.18
-0.21
-0.20%
AUG ’22 ULS Diesel
$ /U GAL
3.9851
3.8611
3.8959
-0.043
-1.09%
SEP ’22 ULS Diesel
$ /U GAL
3.907
3.7882
3.8168
-0.0444
-1.15%
AUG ’22 Gasoline
$ /U GAL
3.7528
3.6388
3.6489
-0.0389
-1.05%
SEP ’22 Gasoline
$ /U GAL
3.5855
3.4846
3.5022
-0.029
-0.82%
AUG ’22 Feeder Cattle
$ / CWT
0
#N/A
174.5
0
0.00%
SEP ’22 Feeder Cattle
$ / CWT
0
#N/A
177.65
0
0.00%
AU ’21 Live Cattle
$ / CWT
0
#N/A
134.6
0
0.00%
CT2 ’21 Live Cattle
$ / CWT
0
#N/A
139.975
0
0.00%
JUL ’22 Live Hogs
$ / CWT
0
#N/A
109.6
0
0.00%
AUG ’22 Live Hogs
$ / CWT
0
#N/A
102.975
0
0.00%
JUL ’22 Class III Milk
$ / CWT
22.42
22.36
22.37
-0.05
-0.22%
AUG ’22 Class III Milk
$ / CWT
22.42
22.42
22.42
0
0.00%
SEP ’22 Class III Milk
$ / CWT
22.52
#N/A
22.7
0
0.00%
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