Morning Comments June 14, 2022

Aerial Farm Land

Grains managed to settle relatively decently yesterday in the face of significant weakness in both soybeans and the outside markets. On the day we saw wheat settle close to unchanged across all three classes, with July corn down 4 while December corn closed up 1. July soybeans closed down 38 with November beans down 34.

Soybeans had a double whammy of concern resurface yesterday with city officials in Beijing working to stop the spread of Covid stemming from a night club in one of the city's most populous districts. With the case count working towards 300, officials now say they are in a race against time to stop the spread and will do whatever it takes. As a result many of the city's restaurants have been shut down for both dine in and delivery, with many public gatherings also suspended until further notice.

Upping the ante even further, owners of the bar in question are now likely to face criminal charges as officials want to make it clear how important following Covid protocol is.

Shanghai's reopening is not going well either, with a new cluster of cases found outside of quarantine zones, believed to have come from a store that has been since shutdown due to non-compliance.

Concern and uncertainty over what steps officials will take next to contain Covid continues to plague demand, with many Chinese crushers further curtailing their expectations as trade remains lukewarm at best throughout the country.

In addition to questions regarding future demand from China, we are seeing an interesting transition in Brazilian cash bean values as currency moves and a rally in futures have turned farmers into more willing sellers of their recently harvested crop. This uptick in selling has pressured basis and provided exporters with more supply to offer into the global market.

On the flip side, US basis values have surged recently thanks to the unexpected and counterseasonal export program gained through a reduced Brazilian harvest and limited farmer selling. The surge in US values combined with the fall in Brazilian basis has shifted Brazil into an unusual position of being the cheapest price offered not only for July but out into September and possibly beyond.

Export inspections yesterday showed we shipped just over 22 million bushels of soybeans last week. This would be slightly below the newly adjusted weekly number of 27 million bushels needed each week to meet USDA expectations. We currently have around 330 million bushels of soybeans sold but left to ship with just over two and a half months left in the marketing year.

Corn shipments were a 4 week low, coming in nearly 10 million bushels lower than the amount needed to ship each week to meet USDA projections. China saw an uptick in bushels shipped though, taking just over 16 million bushels of the 47 million shipped for the week.
Wheat shipments were inline with the amount needed to meet USDA expectations for their first full week of the new marketing year.

After the close we got updated crop progress figures, with nothing overly surprising seen. Corn planting is now thought to be 97% complete, with soybeans 88% planted, both have now recovered to the 5 year average. Spring wheat planting remains behind the 5 year average but is now 94% complete with many saying planting is mostly over in the region.

Conditions saw a slight dip in corn, down to 72% good to excellent from 73% last week. Most credit the overall decline to a 10% drop in Nebraska conditions after a wide swath of severe weather dropped large hail across the state. The first soybean condition rating of the year put the crop at 70% good to excellent, close to expectations.

Wheat harvest remains slightly behind average, but with dry weather expected across much of the Southern Winter Wheat Belt, pace this week should pick up substantially.

In addition to all of the moving pieces we are following in grain when it comes to production and trade flows, we are also continuing to monitor what is happening in the outside markets. The S&P confirmed it's in a bear market yesterday, now trading over 20% below its recent record high.

With inflation data coming in hotter than expected last week and June data pointing to an even larger increase the first 2 weeks of the month, some believe the Fed may take an even more aggressive stance than initially thought. Goldman Sachs said after the close yesterday they fully anticipate a 75 point increase in rates in both this week's meeting and in July.

Traders are now actively pricing in the Fed reaching 3.5% to 3.75% by January of 2023, with some believing 100 point moves could even be on the table if we don't start to see a major correction in the prices of goods. The Fed will announce its June decision tomorrow afternoon around 2 eastern.

Looking ahead, outside of what is happening in the outside market space our focus will remain on what to expect weather-wise. The summer pattern is trying to emerge, but the questions regarding the long-term outlook remain. Heat is expected to build across much of the country this week into next with major precipitation producing systems limited. Some private meteorologists are expecting the ridge to move to the west into July and beyond, while others continue to contend detecting any type of pattern shift out beyond 10 days in this current environment is nearly impossible. Early trade has corn and wheat weaker, with soybean a touch stronger.

Corn down 3 to 5

Beans up 5 to 8

Juneteenth Holiday Trading Hours

Sunday, June 19

  • No evening trading session.

Monday, June 20 (Juneteeth Observed)

  • CME Group CLOSED for daytime operations.
  • Evening trading for grains resumes at 7:00 p.m. CST

Tuesday, June 21

  • Grains trade normal hours.
  • Livestock resumes trading at 8:30 a.m. CST