6 minute read
Marketing
Grain Outlook Economy/weather tug-of-war
The following marketing analysis is for the week ending June 24.
Advertisement
CORN — Weather and recession fears, that’s probably all you need to know about this week’s price action. Prices imploded when traders returned to their screens after the Juneteenth holiday with soybeans and world vegetable oil markets leading the way lower.
December corn fell to its lowest closing price since March 29. Funds were heavy liquidators as we head to first notice for July futures, month end, quarter end, and the June 30 U.S. Department of Agriculture reports. Late in the week, September and December corn came close to PHYLLIS NYSTROM trading their 50-cent daily trad- CHS Hedging inC. ing limit! Recession fears were St. Paul flying high when Federal Reserve Chair Jerome Powell told the U.S. Senate Banking Committee that in the fight against inflation, interest rates may be increased enough to cause a recession — although that’s not their intent. A Wall Street Journal survey of economists put the probability of a recession in the next 12 months at 44 percent, up from 28 percent in April.
High temperatures across the Corn Belt allowed crops to play catch up; but temperatures are expected to moderate going into July. Current weather maps show the possibility of a ridge forming in the first half of July which may limit rain and bring warmer-than-normal temperatures back into the Corn Belt. Changing forecasts will keep the market on its toes — which is not unusual for this time of year.
Corn conditions for the week ended June 19 declined 2 percent to 70 percent good/excellent. Illinois conditions dropped 6 percent to 71 percent, Iowa down 3 percent at 83 percent, and Minnesota improved 7 percent to 65 percent good/excellent.
Brazil’s corn crop seems to be increasing. Agroconsult raised its Brazilian safrinha corn estimate 1.7 million metric tons from 87.6 mmt to 89.3 mmt with 9 percent of the corn harvested. The International Grain Council raised its world corn production number by 6 mmt to 1.190 billion tons.
President Biden proposed a 90-day suspension of the federal gasoline and diesel fuel taxes and encouraged individual states to do the same. The current
Cash Grain Markets
corn/change* soybeans/change*
St. Cloud $7.15 -.33 $15.51 -.83 Madison $7.57 -.23 $15.67 -.59 Redwood Falls $7.60 -.18 $15.87 -.60 Fergus Falls $7.30 -.33 $15.42 -.55 Morris $7.39 -.39 $15.51 -.75 Tracy
$7.57 -.29 $15.81 -.67 Average: $7.43 $15.63 Year Ago Average: $6.61 $14.12
Grain prices are effective cash close on June 28. *Cash grain price change represents a two-week period.
federal gasoline tax is 18.4 cents per gallon and the diesel tax is 24.4 cents per gallon. Congress must approve the plan. Many legislators are skeptical of the plan saying that only 20 percent of a cut would reach consumers and if prices decline it could lead to additional demand. U.S. Energy Secretary Granholm said no tools are off the table when he was asked about a possible fuel export ban.
The war in Ukraine escalated this week when Russia hit two export facilities in Mykolaiv, Ukraine with shells. One elevator was on fire and the other was assessing the damage Reportedly, two sunoil tanks were hit and damage assessments were ongoing. This does not blend well with reports that Russia is open to providing Black Sea shipping corridors for Ukrainian grain.
Weekly export sales were at a seven-week high for old crop sales at 26.5 million bushels. Total commitments at 2.375 billion bushels are 13 percent behind last year. Weekly sales only need to average 6.8 million bushels per week to hit the USDA’s target of 2.45 billion bushels. New crop sales were 14.2 million bushels to bring total sales to 246.4 million bushels. The weekly ethanol report was not published due to technical issues.
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: Technically, December corn closed below its 100-day MA support for the first time since late September 2021. From the high on June 17 at $7.49.25 to this week’s low at $6.45.5, December corn crashed $1.02.75 per bushel! China’s corn market traded to its lowest since early February this week.
Weather is king, but the June 30 reports will be influential as well. On the June 21 Drought Monitor, 62 percent of the United States was in some form of drought, up 5 percent from the previous week, with nearly 25 percent of the Midwest in those conditions. Illinois was 47 percent in abnormally dry conditions, up 17.3 percent from the previous week. Weather and politics will hold sway in the coming weeks. Big swings and ranges may be with us for some time. We have a lot of growing weather ahead of us with pollination expected to be at least a week later than usual. Strap in boys and girls!
For the week, July corn dropped 34.25 cents to $7.50.25, September plunged 55 cents to $6.82.75, and December crashed 57 cents lower to $6.74 per bushel. Are you looking at 2023 new crop prices? December 2023 corn closed the week at $6.09.5 per bushel. The daily trading limit for corn is 50 cents per bushel.
The Grain Stocks as of June 1 and Planting Acreage reports will be released June 30 at 11:00 a.m. In seven of the last 11 June 30 reports, U.S. corn stocks and corn acreage have been above the trade estimate.
SOYBEANS — It was a brutal, holiday-shortened week as soybeans plunged lower. Soyoil and world vegetable oil markets led the way lower. Indonesia is returning to the palm oil export market and prices there dropped to six-month lows. November soybeans dropped to a six-week low and the lowest close since before the Russian invasion of Ukraine. Nearby soyoil experienced lower closes for 10 consecutive days which was the longest losing streak since 1973. Active fund liquidation as a milder forecast developed. China’s Dalian Exchange saw meal fall 5.5 percent on June 23 — the biggest drop in nearly 10 years! Dalian soyoil dropped 4 percent for the largest single-day loss in a year.
China’s meal stocks have tripled in the last three months as bean imports hit the short and feed demand is down. China offered 500,000 metric tons of state-owned reserve soybeans at auction this week, but only 24,500 were sold. They will offer another 500,000 metric tonst of soybeans at auction next week.
Palm oil dropped to its lowest price since December as it retreated nearly 15 percent for the week as Indonesia’s exports increased and production ideas were raised. Brazil’s soybean crush margins have fallen into negative territory through September. Agroconsult increased its Brazilian soybean crop estimate by 2.3 mmt to 126.9 mmt.
There was talk this week that when the G7 countries meet the last week of June the topic of a temporary waiver of biofuel mandates (lessen demand) to help with high food costs will be discussed. Germany will likely have to restart some coal plants to make up for reduced natural gas supplies from Russia.
