7.22.22 Market Commentary

This week’s action:

Corn Sep down 44 @ $5.62

Corn Dec down 42 @ $5.63

Beans Nov down 33 @ $13.13

KC Wheat Sep down 24 @ $8.16

Feeders Aug up 5.05 @ 181.65

Fats Aug up 2.20 @ 137.15

Aug Hogs up 8.65 @ 118.575

Aug Crude up .50 @ $94.86

 

Seasonal Averages:

Dec corn Feb 1 – June 30: $6.80

Dec corn since Russian invasion: $6.82

Nov beans April 1 – today: $14.71

Sep KC wheat since Russian invasion: $10.95

 

Recap:

It’s been ten days since we gapped higher in corn and soybeans last Sunday evening. Since then, both new crop corn and soybeans have lost over $1 in value. In no particular order, these are the major driving forces behind this drastic selloff:

• Improving weather forecasts
• Hedge fund liquidation/increasing interest rates
• Ukraine/Russia deal to export grain (remains to be seen how effective)
• Collapse in oil

Dave Toth is an analyst with RJO and he sent his thoughts on Dec22 this morning. He only looks at charts/technicals and has no regard for physical supply and demand. Long story short, he was concerned a close below $5.66 (overnight low from July 6) could accelerate a downward move. The market closed at $5.63 this afternoon. If you are looking for a place to put “catch up” sell orders in, $6.24 is his first line of resistance to the upside.

 

Forecast:

We began the week expecting hot/dry forecasts, which were mostly realized. As we moved through the week the 7-10 day forecast shifted milder/wetter for a large swath of the corn belt. If these rains are realized, they will be timely as much of the US growing region begins pollination. 

 

Outside Markets:

The European Central Bank raised interest rates .50% this week, marking their first interest hike in 11 years. Traders were expecting a more modest .25% increase. Many expect the US to follow suit next week with a .75-1.00% raise. After some “routine” maintenance, Russian has resumed the flow of natural gas to Europe via the Nord Stream 1 pipeline. Europe was nervous the pause in shipments would drag on longer. This does not solve the energy crisis Europe and the world are experiencing.

“Don’t be deceived .. We estimate that seasonally adjusted [home] prices fell by a hefty 1.8% month-to-month .. Excluding the initial Covid shock, you need to go back to spring 2011 to find a bigger two-month drop in prices. This is not noise.” -Pantheon Acroeconomics

 

Something that Probably Means Nothing:

Tesla reported Q2 earnings this week. They reported $621 million in free cash flow. To help accomplish this positive cash flow, they also reported net proceeds from selling digital assets (crypto) of $936 million. Many suspect sold at a loss.

Enjoy your weekend!