Morning report: Corn, soybeans and wheat test moderate gains heading into Wednesday’s session. (Comments are updated by 7:30 a.m. Central Time.)
Overnight trends:
Corn: Up 5 to 6 cents
Soybeans: Up 40 cents
Wheat: Up 8 to 9 cents
*Prices as of 6:50am CST.
Yesterday’s World Agricultural Supply and Demand Estimates report from USDA turned out to be quite bearish for grain prices. The report contributed to declines of more than 6% in corn, while wheat fell 4% to 5% and soybeans slumped 3% lower. Was that spill steep enough to attract some bargain buyers on Wednesday? Overnight trading suggests this could be the case. Nearby corn contracts firmed 1% heading into today’s session, while nearby soybean contracts jumped 2.5% higher. Wheat prices tested much more modest gains, meantime.
Overseas stock markets were lightly mixed. Asian markets firmed slightly, anchored by gains of around 0.5% for Japan’s Nikkei market. European markets were down 0.6% to 0.9% in midday trading. On Wall St., the Dow inched 35 points higher ahead of the bell to 31,001 as investors lock in on the next updates to the consumer price index (a major inflation measuring tool), out later this morning.
Energy futures were mixed after incurring heavy losses yesterday. Crude oil firmed 0.75% to $96 per barrel in overnight trading. Diesel climbed nearly 2% higher, while gasoline dropped nearly 1%. Volatile natural gas prices jumped 5% higher. The U.S. Dollar softened slightly.
The latest 72-hour precipitation map from NOAA shows very few parts of the Midwest or Plains will see more than 0.25″ between today and Saturday. Many areas will see no measurable moisture for the rest of this week. Official 6-to-10-day forecasts show widespread hot, dry weather for the entire central U.S. between July 18 and July 22.
On Tuesday, commodity funds were net sellers of all major grain contracts, including corn (-31,000), soybeans (-25,000), soymeal (-5,500), soyoil (-11,500) and CBOT wheat (-16,000).
Corn
Corn prices look to recover from a dismal session on Tuesday, when prices tumbled more than 6% lower. Overnight trading suggests some bargain buying may be in store today, with hot and dry forecasts potentially lending additional tailwinds. July contracts were up around 0.75%, with September contracts testing gains of around 1.25%.
Corn basis bids showed some variability across the central U.S. yesterday, moving as much as 5 cents higher at an Illinois river terminal and as much as 12 cents lower at an Illinois ethanol plant on Tuesday.
Yesterday, USDA bumped beginning stocks 25 million bushels higher, due to reduced feed and residual use. Production for 2022/23 moved 45 million bushels higher, mostly matching analyst estimates of 14.520 billion bushels. USDA left yield estimates unchanged, at 177.0 bushels per acre. The season-average farm price slid 10 cents lower, to $6.65 per bushel.
Corn export inspections improved to 36.8 million bushels last week. That was good enough to stay toward the higher end of trade estimates, which ranged between 28.5 million and 43.3 million bushels. China was the top destination, with 15.9 million bushels. Cumulative totals for the 2021/22 marketing year are still well behind last year’s pace, meantime, with 1.938 billion bushels.
What can you do about volatile grain price swings, which have been quite common throughout 2022? First – brace yourself for future shifts, which could be likely as traders monitor weather trends as this season’s corn crop reaches the critical pollination phase. “The foundation for the upcoming 2022/23 marketing year will be the size of U.S. crops, so weather forecasts are garnering quite a bit of attention,” according to Brian Basting, commodity research analyst with Advance Trading. “Something like a slight–and unpredictable–shift in the position of a high-pressure ridge could potentially result in a several bushel swing in the national average yield of corn and beans.” Basting offers additional analysis in yesterday’s Ag Marketing IQ blog – click here to learn more.
South Korea purchased 2.7 million bushels of animal feed corn, likely sourced from South America, in an international tender that closed earlier today. The grain is for arrival in early October.
The preliminary report from the CBOT showed daily futures volume move to 428,542, with open interest firming by 5,487. Options volume moved to 214,790 and favors calls (146,011) over puts (68,779) by a more than 2:1 margin. Implied volatility for near-the-money September contracts remains relatively high, at 44.5%, and doesn’t expire for another 43 days.
Soybeans
Soybean prices posted unusual results overnight. July contracts jumped more than 2.5% higher, while August futures eased slightly. This may be due to the fact that old crop stocks remain quite tight but will soon be replenished by what is expected to be a bumper U.S. crop. Prices have cooled in recent weeks, but seeing prices above $16 per bushel is still a relatively rare sight – and one that is unlikely to be repeated next year if Brazil can rebound from this season’s disappointing, drought-addled results.
On Tuesday, soybean basis bids were largely steady, with the exception of two interior river terminals, which saw bids swing 15 cents in either direction yesterday.
USDA trimmed its soybean harvested area estimates by 2.6 million acres to 87.5 million acres in Tuesday’s WASDE report. Because of that, the agency lowered its production estimates by 135 mil-lion bushels, for a new tally of 4.5 million bushels. Yield estimates are unchanged, at 51.5 bushels per acre.
Soybean export inspections were largely disappointing last week, falling moderately lower week-over-week and coming in at 13.1 million bushels. That was also below the entire range of analyst estimates, which were between 13.8 million and 21.1 million bushels. China was the No. 1 destination, with 2.7 million bushels. Cumulative totals for the 2021/22 marketing year are still moderately below last year’s pace, with 1.917 billion bushels.
Brazil’s Anec expects the country to export 292.3 million bushels of soybeans in July, along with 2.173 million metric tons of soymeal this month. Anec also estimates that Brazilian corn exports will reach 246.2 million bushels in July.
Chinese soybean imports in June dropped 23% year-over-year to 303.1 million bushels, due in large part to high prices and weakening demand. “Crushing margins are relatively poor and importers are just buying what they needed and don’t want to build up large stocks when forward margins are negative,” according to one Chinese trader. Crushing margins have been in the red for approximately three months now.
The preliminary report from CBOT showed daily futures volume at 170,125 with open interest sliding 6,232 lower. Options volume moved to 64,434 and heavily favors calls (41,827) over puts (22,607). Implied volatility for near-the-money August contracts moved to 32.6% and expire in eight days.
Wheat
Wheat prices have struggled mightily in recent weeks, with harvest progress across the Northern Hemisphere applying ample downward pressure. USDA’s latest set of supply and demand data, out yesterday, didn’t do any favors, either. But have prices fallen enough to attract some bargain buyers today? That seems to be the case, considering overnight gains of around 1%.
USDA raised its supply estimates for wheat by 44 million bushels to 1.781 billion bushels due to an uptick in harvested area and per-acre yields. The agency pegs winter wheat production at 1.201 billion bushels, plus another 503 million bushels for spring wheat. USDA also raised its export forecast by 35 million bushels to 800 million for the 2022/23 marketing year, noting that a recent decline in prices makes U.S. grain more competitive overseas. The season-average farm price slid 25 cents lower to $10.50 per bushel.
Wheat export inspections reached 11.4 million bushels last week. That was on the lower end of analyst estimates, which ranged between 9.2 million and 16.5 million bushels. Mexico led the way, with 3.2 million bushels. Cumulative totals for the 2022/23 marketing year are running slightly behind last year’s pace so far, with 70.6 million bushels.
Japan received no offers for its simultaneous buy-and-sell auction to purchase 2.6 million bushels of feed wheat and 1.8 million bushels of feed barley. That grain would have been for shipment in October.
Taiwan purchased 1.6 million bushels of milling wheat from the United States in a tender that closed earlier today. The grain is for shipment between late August and mid-September.
The preliminary report from CBOT showed daily SRW volume at 92,228, with open interest trending 5,530 higher. Options volume moved to 28,483 heavily favors calls (18,536) over puts (9,947). Implied volatility for September near-the-money options moved to 45.1%, and expires in 43 days.
Volume in HRW wheat moved to 33,927, with open interest trending 508 lower. Options volume is at 3,212 and heavily favors calls (2,440) versus puts (772).
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