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THE LAND — JULY 22/JULY 29, 2022
www.thelandonline.com — “Where Farm and Family Meet”
MARKETING
Grain Outlook
Yield figures typically jump by harvest The following marketing analysis is for the week ending July 15. CORN — Corn saw a huge swing early in the week with a Sunday night gap higher reversed when prices cratered on July 12 before and after the July World Agriculture Supply and Demand Estimates report. September corn traded from $6.67 to $5.84.75 in the first three days of the week. December corn traded from $6.58.5 to $5.76.75 during that same time. The push higher came from a warmer, drier outlook only to be offset by a slightly better longerterm forecast into the end of July. Forecasts later in the week still showed hot, dry conditions PHYLLIS NYSTROM CHS Hedging Inc. for the Midwest. The July St. Paul WASDE report, in my opinion, didn’t warrant the 40-plus cent collapse in prices we experienced. The numbers weren’t overtly bearish, but neither were they strongly bullish. The dollar’s rise to fresh 20-year highs during the week added to pressure on the agricultural sector. The Euro was at par with the U.S. dollar for the first time in nearly 20 years. The drop in crude oil prices lent pressure to the energy field, including biofuels. At mid-week, the fears of inflation once again took a step forward when the June Consumer Price Index showed a 9.1 percent increase to a 41-year high! The annualized Producer Price Index through June was up 11.3 percent year-on-year. This suggests the Federal Reserve may increase interest rates a full basis point at their July 26-27 meeting to combat inflation. Talks between Ukraine, Russia, Turkey and United Nations officials in Istanbul at mid-week over a grain export corridor through the Black Sea reportedly reached a tentative agreement. According to Turkey, a coordination center will be formed with Russia, Ukraine, and the United States for grain exports. There will be joint controls for checking grain at the harbors and to ensure the safety of the export routes. The countries involved will meet in the next week to sign the agreement. Some questions still need to be answered. What facilities can load the estimated 20 million metric tons of grain in Odessa’s silos? Will Ukraine demine the area which would lower their defenses? Is Russia willing to sign without at least some sanctions against them getting lifted? China has reached an agreement with Brazil to import Brazilian corn. The phytosanitary agreement,
Cash Grain Markets corn/change* Stewartville Edgerton Jackson Hope Cannon Falls Sleepy Eye Average:
$6.46 -.18 $7.07 +.25 $6.94 +.05 $6.87 -.05 $6.51 -.03 $6.82 +.05
soybeans/change* $14.35 -.25 $14.73 +.04 $14.55 -.06 $14.42 -.01 $14.57 -.11 $14.58 +.19
$6.78
$14.53
Year Ago Average: $6.39
$14.20
Grain prices are effective cash close on July 19. *Cash grain price change represents a two-week period.
however, won’t allow for shipment to begin until 2023 since China wasn’t able to certify this year’s crop. China wants information as the crop is grown and shipped, including pesticide and herbicide usage, crop conditions during development, etc. Previously, China sourced its corn imports from the United States and the Black Sea region. The July WASDE report incorporated the June 20 acreage and stock numbers. On the 2021-22 balance sheet, the feed and residual line was lowered by 25 million bushels which fed to an increase in ending stocks by a similar amount to 1.51 billion bushels. This compared to the trade expectation for 1.49 billion bushels and 1.485 billion bushels last month. The average farm price was unchanged at $5.95 per bushel. The 2022-23 balance sheet reflected the June 30 acreage number of 89.9 million acres vs. 89.5 million previously. Production was up 45 million bushels to 14.505 billion bushels (14.524 billion estimated) and the yield was unchanged at 177 bushels per acre. Ending stocks rose 70 million bushels to 1.47 billion bushels. The trade was expecting 1.428 billion bushels of ending stocks. The average farm price was cut a dime to $6.65 per bushel. The ending stocks to use ratio fell from 9.6 percent to 10.1 percent. World ending stocks for 2021-22 were 312.3 mmt compared to 311.5 mmt estimated and 310.92 mmt in June. World ending stocks for 2022-23 at 312.9 mmt was 2.5 mmt above the trade estimate. Argentina’s and Brazil’s corn production figures were unchanged at 53 mmt and 116 mmt respectively, with exports steady at 39 mmt and 44.5 mmt respectively. Ukraine’s corn exports were unchanged at 9 mmt and China’s unchanged at 18 mmt. On China’s own balance sheet, they have corn imports at 18 mmt and soybean estimates at 95.2 mmt. Weekly export sales were in line with expectations at 2.3 million bushels for old crop and 13.7 million bushels for new crop. Old crop sales need to average 9 million bushels per week to reach the U.S. Department of Agriculture’s 2.45 billion bushels target by the end of the marketing year. Total export commitments are down 13 percent from a year ago when the USDA is estimating an 11 percent year-onyear decline. New crop total commitments stand at
269 million bushels vs. 633 million last year. On July 15 the USDA flashed a 5.2 million bushel new crop sale to China. However, at midday, the sale was withdrawn after the exporter provided additional information to the USDA. So, we still haven’t seen a daily export sales flash for corn since June 9. China’s new crop purchases are 114.2 million bushels compared to 421.2 million bushels last year. The strength of the US dollar and the weakness of the Brazilian real have kept U.S. commodities uncompetitive with South America. Weekly ethanol production fell 39,000 barrels per day to 1 million bpd while stocks rose 100,000 barrels to 23.6 million barrels. Production hasn’t hit the weekly average needed for the last eight weeks. Ethanol margins improved by 7 cents per gallon to a negative 10 cents per gallon. Gasoline demand was 8 million bpd which was a 26-week low and down 13 percent from a year ago as high prices take a toll on consumers. Outlook: Corn is headed into the gut slot of pollination and weather will be the key headline with inflation/recession talk barking at its heels. Without a crystal ball, determining the final yield is impossible. If history is any indication, the corn yield in seven of the last nine years has increased from July to the final report. Last year, the corn yield fell 2.5 bu./acre from July to the final report. Some traders are skeptical that corn will make the 177 bu./acre yield the USDA is using since we haven’t had ideal conditions. Put me in the Doubting Thomas category for any real changes to happen in the immediate future if the Black Sea Initiative gets signed in the coming week. We will continue to look for big swings and high volatility with the weather the leading factor. Buckle in folks, the ride has not come to a complete stop! For the week, September corn dropped 29 cents to $6.04.25 and the December contract crumbled 19.75 cents to $6.03.75 per bushel. SOYBEANS — Soybeans followed the same pattern as corn this week, but a weaker world vegetable oil lingered in the background. Increasing cases of Covid in Shanghai are also a concern that more lockdowns may be implemented. China’s soybean imports in June were down 23 percent vs. last year as their hog margins are under pressure and they seek to reduce inventories. This was their lowest June soybean import number in three years. China’s crude oil imports hit a four-year low in June as lockdowns slashed demand. The refreshed 2021-22 soybean balance sheet saw a 10 million bushel reduction in crush with exports steady at 2.17 billion bushels. Ending stocks at 215 million bushels were 5 million higher than last month and the trade estimate. For 2022-23, the acreage number was raised to reflect the June 30 figure of 88.3 million acres. With the yield unchanged at 51.5 bu./acre, production dropped 135 million bushels to 4.505 billion bushels which was slightly below the 4.536 billion estimate. On the demand side, the crush was down 10 million, and exports reduced by 65 million bushels to 2.135 billion bushels. Ending stocks See NYSTROM, pg. 9
