7-6-22
December corn futures finished today's session 6 1/2 cents higher at $5.85 and November soybeans were up 6 3/4 cents $13.22 3/4, and December wheat in Chicago was 2 1/2 cents lower at $8.21 1/2.
?Commodities tried to rally early in today’s session, but initial advances were met with renewed selling pressure. As it has been this is the result of economic worries and elevated indications of a recession in the US. The 2 year treasury yield has traded above the 10 year which is a negative sign for the economy. A new strain of Covid has been reported in China which only added to the liquidation of commodity positions. Futures are now oversold, but this has not provided support. Trade ignored the decline in the weekly crop condition report as rains moving through the Corn Belt are expected to be beneficial. Soybeans suffered additional pressure from the nine-month low in Palm Oil.
We are starting to see somewhat of a shift in attitude in the market on exports and future potential, mainly on soybeans. In last week’s export sales report net sales on soybeans were a negative 4.4 million bu (mbu) due to buyers washing out of previous bookings. Thoughts are another 5 cargoes of sales were cancelled during last week’s trade again. This is the exact opposite of what trade was expecting, as most thought we would see an increase in sales for late summer when Brazil exhausts their reserves. The main concern now is that if this trend continues, the USDA will start to raise its ending stocks estimates.
The Safrinha harvest is quickly advancing in Brazil. A reported 30% of the crop has been harvested, twice the volume that was out a year ago. This rapid harvest pace has created logistic issues in Brazil and pressured the country’s offers. Corn out of Brazil is now being offered at a sharp discount to the US, but this starting to narrow. It is questionable as to how much business the US will see though, as Brazil is likely still going to be making exports when the US harvest starts.
When it comes to US exports more interest is being placed on the soy complex. Combined US soybean sales currently total 804 mbu, a record for this time of year. The previous forward contracting record on US soybeans is 644 mbu, and last year the US had 332 mbu of sales on the books. Nearly all of these sales were made when concerns were building over the potential size of the South American crop. These fears have now subsided, and when combined with easing global demand, the complex has been pressured. Sales cancellations are also lessening the trade response to the high numbers.
Renewable fuel production in the United States continues to increase according to the latest industry report. Total US renewable fuel production in the month of March was up 14% from February and a 26% increase from last year. Total renewable fuel production for the month came in at 121 million gallons, the second highest on record. As production capacity increases, so will the monthly output.
Trade is closely monitoring the size and exports of the Russian wheat crop. Officials in Russia have increased the size of the crop to a record at 88.8 million metric tons. Russia had been increasing its export tax on wheat and hit a record just short of $150.00/metric ton. This has dropped considerably though and is now at $85.00 per ton. Russia is also basing its tax values off the Ruble rather than the US dollar, which is impacting all quotes. The question remains who will buy Russian wheat with much of the world placing sanctions on them until the Ukraine war ends, and possibly longer.
We continue to receive updates on the Ukraine export situation with differing opinions. Officials in Ukraine believe it will still take considerable time to get exports back to normal, as not only are logistics an issue internally but for the Black Sea as well. Other countries in the Black Sea believe Ukraine could be making exports in a matter of days, however. The United Nations is hoping Ukraine will resume exports sooner than later as the world needs food grains to prevent shortages.
The sentiment of the US farmer is rapidly declining and is now at its lowest point since October 2016. According to research from Purdue University and the CME group, the rising cost of production for most US farmers is outweighing the higher than average commodity values. Not only are higher input costs a worry, but the simple availability of product is as well according to 60% of respondents to a survey from the two groups.
