Marketing

Grain Outlook July corn touches $8 mark

The following marketing analysis is for the week ending June 17.

CORN — There weren’t a lot of direct headlines for the markets this week. Soaring temperatures and interest rates were the focus. A plunging U.S. dollar that experienced its largest one-day drop since March 2020 also lent support.

Corn got off to a mixed start to the week with old crop posting small losses and new crop holding its own. Prices gained during the week as money seemed to be looking for a home as equity markets crumbled. July corn traded to a four-week high when it touched $8.00 per bushel just ahead of the long holiday week- PHYLLIS NYSTROM end. December corn couldn’t CHS Hedging inC. quite reach $7.50 per bushel; but St. Paul it also posted a four-week high at $7.49.25 per bushel.

Weather during the week was favorable for the crop with the heat hitting the crop along with sporadic, localized rain events. The crop will benefit from these conditions, but traders will be looking for more rain and relief from the extreme heat in the forecast before the Fourth of July. The Climate Prediction Center’s July through September forecast is for above normal temperatures for the entire Midwest with below average rainfall for the western belt and normal rainfall for the eastern belt. As of June 14, the U.S. Drought Monitor showed 9 percent of U.S. corn area and 9 percent of the soybean area were experiencing some sort of drought.

The Federal Reserve raised its target interest rate by .75 of a point in its effort to slow down inflation. The rate is projected to increase to 3.4 percent by the end of this year. They predict a slowing economy and rising unemployment in the coming months. This was the biggest rate increase since 1994. More increases are expected to come this year as they want to get inflation to their 2 percent objective.

Unemployment is forecasted to increase to 3.7 percent by the end of 2022 and continue to rise through 2024. The U.S. dollar index experienced its biggest one-day drop since March 26, 2020. Going into the weekend, rumors circulated that U.S. diesel and unleaded gasoline exports may be restricted to try and curb prices for the U.S. consumer. The response was a dramatic sell-off across the energy board.

A well-followed U.S. consultant this week estimat-

Cash Grain Markets

corn/change* soybeans/change*

Stewartville $7.56 +.09 $16.09 -1.09 Edgerton $7.84 +.04 $16.21 -.68 Jackson $8.16 +.29 $16.15 -.56 Hope $7.81 +.14 $15.97 -.66 Cannon Falls $7.51 +.14 $16.22 -.74 Sleepy Eye $7.81 +.24 $16.08 -.71 Average: $7.78 $16.12 Year Ago Average: $6.37 $13.56

Grain prices are effective cash close on June 21. *Cash grain price change represents a two-week period.

ed U.S. corn acres at 90.965 million acres and 1.475 million acres higher than the last U.S. Department of Agriculture forecast. They estimated U.S. soybean acres at 88.935 million acres and 2.22 million fewer acres than the USDA’s most current number. U.S. corn planting was right on the average at 97 percent complete as of June 12. Emergence was 88 percent vs. 89 percent average. The crop was rated 72 percent good/excellent, down 1 percent from the previous week but much better than last year’s 68 percent good/excellent for this date. Brazil’s safrinha corn harvest was 7 percent complete as of June 13.

Weekly export sales were disappointing at 5.5 million bushels and a marketing year low; but were still above what’s needed to meet the USDA outlook. Total old crop commitments at 2.35 billion bushels are 14 percent behind last year. We need to average 5.5 million bushels of sales for the last 11 weeks of the crop year to hit the USDA forecast of 2.45 billion bushels. New crop sales were 5.4 million bushels, bringing total new crop commitments to 232.2 million bushels and trailing last year’s 605 million bushels on the books by this date. Last year, China was a major buyer of new crop corn in May. We saw a couple of daily sales totaling 8.2 million bushels of old crop corn and 7.5 million bushels of new crop. Nearby corn basis has been surging higher notably on the domestic side.

Weekly ethanol production was up 21,000 barrels per day to 1.06 million bpd. This is on pace to meet the USDA’s 5.375 billion bushel corn for ethanol projection. Stocks fell 400,000 barrels to 23.2 million barrels but remain at record levels for this week and 12.6 percent higher than last year. Ethanol margins fell a nickel to 26 cents per gallon. Gasoline demand was steady for the week at 9.1 million bpd and 2.9 percent below last year.

It was reported this week that satellite imagery confirms Russian-flagged vessels have loaded grain at Ukraine’s Sevastopol port — which is controlled by Russia — and off-loaded in Syria. There has not been any progress in allowing Ukrainian grain to transport through the Black Sea. Russia’s spin is that they will allow it, but Ukraine is responsible for demining the area and they also want concessions from the West, which is unlikely to occur.

Looking at history for the June 30 stocks report: corn stocks have been higher than the trade expectation in seven of the last 11 years. Soybean stocks have been below the trade expectation in each of the last five years. December corn has closed lower seven times and higher five times in the last 12 years on the day of the Stocks and Planting reports. In 11 of the last 12 years, whichever way December corn closes on report day, it closes in the same direction the day after.

Outlook: July and December corn surged to fourweek highs as fears of continued hot, dry weather, inflation, recession, a weaker U.S. dollar, and renewed Covid lockdowns in China combined to push money into commodities, and risk premium was added back to prices. Nearby domestic basis has been jumping higher as ethanol plants and feeders scramble to secure supply.

Nothing new from Ukraine with Ukraine’s Ag Minister commenting we could see a global wheat shortage for at least three seasons due to Russia’s invasion. Countries are exploring the possibility of adding grain storage along Ukraine’s borders to ease storage concerns as they approach harvest.

December corn moved solidly above its 50-day moving average resistance this week and may be poised for a test of the contract high at $7.66.25 per bushel if the weather is perceived as a threat. For the week, July corn rallied 11.25 cents to $7.84.5, September gained a nickel to $7.37.75, and the December corn was 10.5 cents higher at $7.31 per bushel.

The Grain Stocks as of June 1 and Planting Acreage reports will be released June 30 at 11:00 a.m.

SOYBEANS — Soybeans got off to a very rocky start with huge losses on June 13 which were only marginally reversed in the last half of the week in the wake of the interest rate hike. Planting progress caught up with the average and conditions during the week were favorable for early crop development.

Weekly export sales were neutral this week with 11.7 million bushels for old crop and 15 million bushels for new crop. Old crop sales at 2.2 billion bushels continue to exceed the USDA’s 2.17 billion bushel outlook. New crop commitments at 481.5 million bushels are 73 percent higher than a year ago. China has bought 283 million bushels from the United States for the 2022-23 crop year compared to 110.2 million bushels last year on this date. The only daily export flash this week was a cancellation of 3.7 million old crop bushels to unknown.

The May National Oilseed Processors Association Soybean Crush report showed 171.1 million bushels of soybeans were crushed which was a new record for

See NYSTROM, pg. 17