Please RSVP for Axtell Golf Outing by Tuesday 8/22!
August 29th: 10am @ Awarii Dunes in Axtell, NE
This week’s price action:
|Corn Sep23 up 3.50 at 479|
|Corn Dec23 up 5.25 at 492.5|
|Corn Dec24 up 1.25 at 511.25|
|Beans Sep23 up 27.50 at 1363.5|
|Beans Nov23 up 47.75 at 1354|
|Beans Nov24 up 41.0 at 1295.75|
|KC Wheat Dec23 down 5.50 at 761.5|
|Hogs Aug23 up .10 at 102.25|
|Fats Aug23 down 2.05 at 178.275|
|Feeders Aug23 down 2.05 at 245.625|
Grain markets spent the early part of the week working lower on follow-through selling from last week and then found support to close out the week with a strong finish today. Wheat was the most bearish as hopes for bullish news didn’t materialize while beans were the most bullish as oil prices worked higher and the forecast for coming heat is concerning. Corn was caught in the middle and doesn’t have much of its own news to go on right now. It was reported that India is in talks with Russia to secure as much at 9 MMT of wheat and has also been a large buyer of palm oil recently. Grain production in India has been low this year with a weak monsoon season and they have one of the largest populations to feed. They have already banned some rice exports to try and help ease high food prices and have been selling wheat from government reserves. This news alone is not directly bullish for US grains, but with the threat of the ongoing war in Ukraine/Russia and potential production issues in China and Australia due to weather traders are watching closely for any demand that could shift to the US.
Technicals and charts reached oversold levels this week and were supporting a direction change and move higher in corn, beans, and wheat. We’ll see how much buying there is for each next week or if we’re just in for a quick bounce. Seasonal trends are lower for corn and beans for the next 4-6 weeks as we head into harvest, and we also have the Pro Farmer crop tour next week that will give everyone a look at the production potential of this year’s crop. Crop condition ratings have improved dramatically across the country since June, and it will be interesting to see if the reports support that. As an example, on Monday afternoon the Illinois corn crop was rated 64% good/excellent compared to just 26% good/excellent at the end of June, an improvement of 38%. Soybeans in Illinois were rated at 25% good/excellent at the end of June and on Monday were rated at 70% good/excellent, a 45% improvement. Nationwide crop conditions were rated at 59% good/excellent for comparison on both corn and soybeans Monday afternoon. It’s difficult to draw direct yield correlation from condition ratings but it does give a general sense that there appears to be good yield potential out there currently. If you need to make additional sales or hedges ahead of harvest this rally would be a good opportunity to do that and then we’ll focus on rolling hedges out to capture the strong board carry that’s currently being offered to us to store grain. Harvest basis on corn appears about normal, but bean basis right now appears 20-30 cents weaker than normal so they could offer a better reason to store on the farm and sell in Dec/Jan when basis seasonally improves.
The cattle market drifted lower this week on Live and Feeders both despite improvements in boxed beef prices. Technicals and charts have been working lower for the last 3 weeks after making new contract highs and both made new lows for the move today stopping right at their respective 50 day moving averages and then finished sharply higher. We’ll see if that starts the next move higher with cattle seasonally stronger into fall. Another rally should be used to get additional hedges made out into next year and LRP policies in place on levels that should be long term profitable especially if feed costs weaken.
China’s economy making headlines this week, with Hong Kong’s benchmark Heng Seng Index losing over 20% from highs hit in January. The stock index reached its highest level ever on hopes of a re-opening recovery post covid lockdowns, however that recovery has not materialized, and investor sentiment is low on China. This also has kept downward pressure on China’s currency, the Yuan, which paired with a strong dollar is not a good recipe for China’s purchase of American commodities. Below is the Yuan/Dollar exchange rate since the beginning of the year:
(Source: Wall Street Journal)
In domestic news, the average mortgage rate hit 7.09% on Thursday, the highest level in over 20 years. Higher interest rates have put a wet towel on the demand side of the US housing market, but supply remains tight, keeping prices elevated. The National Associate of Realtors publishes existing-home price data; as of June, the median home value of $410,000 was off from the records set early this year but is still the 2nd highest on record. National Median Home Price (including new homes is lower than previous readings, but still near all-time highs:
Not the markets:
Parts of Southern California were put under a tropical storm watch for the very first time Friday, as Hurricane Hilary grew to Category 4 strength and was poised to hit the region as a tropical storm as early as Sunday with “significant and rare impacts,” including heavy rainfall that could lead to extensive flooding, forecasters said.
Considered “large and powerful” by the National Hurricane Center, Hilary was about 360 miles south-southwest of Cabo San Lucas, Mexico, today with maximum sustained winds of 145 mph as it moved through the Pacific.
The hurricane center said it expects Hurricane Hilary to “still be a hurricane when it approaches the West Coast of the Baja California peninsula Saturday night” but will weaken to a tropical storm before hitting Southern California on Sunday afternoon.
A tropical storm watch was put in place Friday from the California-Mexico border to the Orange-Los Angeles county line, and included Catalina Island, meaning tropical storm conditions are expected generally within the next 48 hours.
Hurricane Hilary could be the first tropical storm to make landfall in California since 1939.
Thanks and have a great weekend!