Friday started out with some relative strength, but fell off on major weakness in wheat and some profit taking ahead of the long weekend. On the day we saw July wheat close down 44, while corn was down 4 and beans were down 7. For the week we saw corn close up 11, while July beans were off 43 and November beans were down 31. Wheat lost 36.
Traders continue to debate the effect of macroeconomic concerns on grain price direction with the world supply and demand situation still feeling as though it is in disarray. There has been a lot of talk about 2008 as of late, as many remember a seemingly insatiable bull market in commodities turning ice cold in a matter of weeks as we worked from then contract highs to unthinkable lows into harvest that year.
Many will argue this is nothing like 2008, with supply chain disruptions from Covid still present in the market and the war in Ukraine still creating uncertainty. However, with Goldman Sachs doubling their thoughts on the likelihood of a recession by 2023 to 30%, and Bloomberg Economics pointing to a 72% chance of us sinking into a recession by 2024, one must wonder what will happen if or when easy money stops flowing.
Outside of economic talk we are watching what is taking place on the world stage when it comes to supply and demand. The price of palm oil both in Malaysia and China has fallen off significantly since the start of the month as overflowing tanks in Indonesia has exporters begging for buyers. Palm oil values in China have dropped nearly 20% over the last 2 weeks as domestic demand has cooled with recent Covid lockdowns and supply availability for importers remaining plentiful.
Chinese soybean demand at government auctions remains tepid as well, with only 91,000 tonnes of the 500,000 tonnes offered purchased last week. This continues the trend of poor interest as crush margins remain negative and demand for feed remains surprisingly weak.
Looking ahead we will be watching what happens between Russia and Lithuania as Lithuania is set to enforce EU sanctions that went into effect this last weekend limiting their ability to transport sanctioned goods through the country. Russia has a territory separated from its mainland on the other side of Lithuania and will see a significant reduction in the flow of construction materials and other goods into the region. Russia calls the move a provocation, saying they will retaliate if the ban isn't rolled back.
In addition to what is happening in Eastern Europe, we will be continuing to monitor weather. Heat and dryness remains centered over much of the US with temps soaring into the upper 90s and 100s with limited rain. However, forecasts are trending a touch cooler and wetter to finish out June and kick off July, relieving some short term worry.
What happens after remains up in the air with forecaster opinions seemingly mixed beyond 10 days. Models continue to indicate a risk of heat and dryness remaining in place to finish out the summer, giving most traders enough of a reason to keep at least some level of risk premium in place.
We will get updated export inspections this morning, with traders needing to see around 25 million bushels of soybeans and 55 million bushels of corn shipped each week to meet USDA projections. After the close we will get updated crop progress figures with traders expecting to see planting wrapped up just about everywhere and somewhat steady crop conditions from a week ago.
Overnight markets were weak with some shifts towards that cooler, wetter finish to the month as mentioned and some harvest pressure in wheat. We're definitely to the time of year where the market will move with each new updated model run, so don't be surprised to see some increases in volatility.
Corn down 20 to 23
Beans down 23 to 25
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