8.5.22 Market Update

 

This week’s action:

Corn Sep down 9 @ $6.09

Corn Dec down 13 @ $6.09

Beans Nov down 66 @ $14.07

KC Wheat Sep down 31 @ $8.49

Feeders Aug up 1.3750 @ $180.125

Fats Aug up 1.65 @ $137.95

Aug Hogs up 12c @ $120.65

Sep Crude down 9.30 @ $89

Seasonal Averages:

Dec corn Feb 1 – June 30: $6.80

Dec corn since Russian invasion: $6.75

Nov beans April 1 – today: $14.65

Sep KC wheat since Russian invasion: $10.66

Recap:

It has been 163 days since Russia first invaded Ukraine. Although much of the hysteria surrounding this event has worn off, volatility continues. After a strong recovery last week, the market opened markedly lower to begin the week on news of the first grain ship since February safely left the port city of Odessa, Ukraine. This is extremely encouraging for nations relying on imported feed grains from the Black Sea. For perspective though, Ukrainian fall harvest will begin in about 45 days. Some analysts believe it will take 45 days loading 12-15 of these ships daily to empty the storage in Odessa before harvest.

Crop conditions released Monday were above expectations. Corn was rated the same as last week at 61% good/excellent (62% this time last year). Soybeans actually increased 1% to 60% good/excellent (60% this time last year). Nebraska is sitting 54% good/excellent compared to 71% a year ago. Iowa is rated 76% good/excellent compared to 62% this time last year, when the state produced a record yield of 205 bpa. Keep in mind, seasonally, it is difficult to rally from now into harvest. The great summer rally of 2012 peaked August 10. There is no getting around the US will have tight balance sheets going forward but do keep in mind- 2012/2013 corn feed usage dropped 200 million bushels and soy demand dropped 49 million bushels from the prior year. In a Reuters story this week, they claimed global wheat consumption is already headed for its largest annual decline in decades.

StoneX was the first firm to release their projected yields for 2022. They expect corn yield to be 176.0 bpa and a national yield of 51.3 bpa for soybeans. They are historically larger than the August WASDE forecasts, which will be released at noon next Friday.

April Fat cattle are approaching the top end range of the 2014-2015 bull market. A lot of pain followed.   

Forecast:

It is broadly expected to be hot and dry for many in the corn belt the next week to 10 days.

1-5 day drier NW Midwest, Slightly Wetter E. Midwest/Delta.

6-10 day wetter E. Midwest/S. & E. Delta, Drier Southeast. 

11-15 Day Slightly Wetter N. Midwest, Drier Far SE Midwest

Outside Markets:

The overall economy continues to flash signs of weakness. Front month crude oil is below $90/barrel for the first time since Russia invaded Ukraine. This as OPEC+ announced this week they will increase production by 100,000 barrels/day. This is far less than the Biden administration was hoping. The production increase is equivalent to 0.1% of global demand. Glencore first half profits doubled year over year as coal shipments have skyrocketed. They are the biggest coal shipper and trader and have greatly benefitted from commodity swings since the Russian invasion. Glencore returned 4.5 billion dollars to shareholders from first half profits.

Monthly PMI (Purchasing Managers’ Index) decreased in July to its lowest point since May of 2020 (COVID). It is the largest month over month drop since the global financial crisis in 2007. This likely signals a third consecutive quarter of a shrinking economy. According to the NY Fed, credit card debt increased 13% during Q2 as families battle inflation. This is the biggest increase since 1999.  For those under the age of 25, their credit card balances increased a dramatic 30%.

Something that Probably Means Nothing:

Mentions of word “recession” at the last 6 FOMC (Fed’s Federal Open Market Committee) press conferences:

December 2021: 0

January 2022: 0

March 2022: 4

May 2022: 9

June 2022: 6

July 2022: 26

Enjoy your weekend!