Morning Comments June 10, 2022

Inverted corn

Yesterday was a day of notable strength in old crop corn and beans versus new crop values as we enter June and end users realize the easy bushels have been bought. On the day we saw July wheat finish down 3, with spring wheat off 10. July corn was up 8, with December up 1, while July soybeans were up 29 with November beans up 14.

Yesterday’s export sales figures showed continued unexpected and counter-seasonal strength in soybean sales, with over 400,000 tonnes of old crop beans reported sold and an even greater amount of new crop committed. As it currently stands sales on the books outpace USDA export projections for the year by 63 million bushels, prompting traders to believe another large increase to export projections and subsequent reduction in old crop carryout is necessary.

The increase in old crop export projections and thoughts that we’re on track to meet current USDA crush estimates has traders expecting another reduction in old crop ending stock figures in today’s USDA supply and demand update. Ahead of today’s report traders are expecting the USDA to reduce old crop ending stocks by 17 mbu, down to 218 mbu from last month. New crop ending stock reductions are expected to be more muted coming down 3 mbu from last month to 307 mbu.

Global adjustments are expected to be minimal as it appears the USDA is inline with most private production figures out of South America.

Corn export sales weren’t as supportive as beans, coming in below pre-report expectations and lower than the amount needed to hit current USDA projections. Heading into today’s report traders are expecting limited adjustments to demand, with the average carryout estimate coming in 3 mbu lower than last month. New crop ending stocks are expected to see a 20 million bushel reduction from initial estimates.

Similar to soybeans, adjustments to global supply and demand figures are expected to be minimal, though traders will be watching to see if the USDA makes any further adjustments to their trade outlook as the war in Ukraine drags on.

Changes to wheat ending stocks both domestically and globally are expected to be minimal ahead of today’s report as well, with traders expecting a slight increase in old crop wheat ending stocks and a decrease in new crop carryout.

In the spirit of updated supply and demand estimates, China gave their updated 22/23 outlook this morning, with the expectation of another large production year for corn, soybeans, and wheat. Import needs are projected to be lower year over year as reduced feed demand and negative import and crush margins continue to plague the industry. Soybean imports for the 22/23 crop year are expected to come in just over 95 mmt, versus the USDA’s 99 mmt projection for new crop, with corn import expectations inline with current USDA projections at 18 mmt.

Consumer inflation data out of China this morning indicated Covid lockdowns limited demand in April, bringing down prices and showing signs of cooling inflation. We will get updated US inflation data this morning, with many expecting to see confirmation inflation topped in March.

The European Central Bank left rates unchanged this month, but signaled a rate increase is expected next, spooking investors as the ECB raising rates indicates world central banks are going to do what they can to slow growth and reduce inflation. Outside markets continue to struggle, especially in emerging spaces as this realization permeates the market.

Looking ahead it will be all about weather going forward as it appears any true progress in reopening Ukrainian exports remains slow at best. Forecasts are calling for above normal temperatures to work their way through much of the Corn Belt to the east for much of next week and possibly beyond. Current forecasts indicate a possible continuation of the warmer and drier pattern into July, but meteorologists remain unconvinced about what to expect after.

With many west of the Mississippi lacking growing degree days and heat units thanks to a much cooler and wetter April and May, some heat and dryness will be welcome, though obviously we will need to see accompanying rain to avoid production reduction risks.

Corn down 3 to 5

Beans down 3 to 5