This week’s action:
Corn Dec down 1 @ $6.75
Beans Nov down 20 @ $14.26
KC Wheat Dec up 14 @ $9.50
Feeders Nov down 4.45 @ $178.175
Fats Dec down 2.375 @ $148.675
Hogs Dec down 5.175 @ $82.850
Crude Nov down 6.19 @ $78.84
Markets finished relatively quiet on the week, however on Tuesday we had a strong move higher on the back of Russia/Ukraine tensions ramp back up. As Russia plans to annex 4 eastern territories, the most important question to the markets is the willingness of vessel owners and insurance companies to sail into the region. Any increased military action surely will result in slower to non-existent shipments out of the black sea region. Friday saw most of those early week gains taken back on macro-economic concerns.
RJO’Briens Rich Feltes had a good breakdown of what is driving the markets heading into the year end. The case for more range bound markets into yearend:
Will Sept to Final CN/BN yields decline or increase? Minimal cushion if yields decline given USDA’s Sept 9/23 CN/BN carryovers of 1.219 bil bu/0.200 bil bu respectively. Recent years characterized by more Sept to Final declines in CN/BN yields than gains but prior to 2018-vast majority of Sept to Final changes in corn/bean yield are gains.
How will ongoing PRC Covid lockdowns and slowing China GDP growth impact their CN/BN import demand? WAS DE has already taken unusual step of trimming 22/23 PRC soy import demand 1 mmt vs. August to 97 mmt (still 7 mmt above 2021/22 soy imports). Select sources believe 22/23 PRC soy imports may be under 90 mmt.
Will gains in 2023 S American CN/BN crops over 2022 be realized (Cordonnier up 38.3 mmt/11.6 mmt respectively)? Likelihood of 3 consecutive S Hemisphere La Nina ups uncertainty factor. As for Brazil, latest forecasts suggest timely start to majority of center-west growing areas. S Brazil getting timely showers. Still a long way to go before having any confidence in 2023 S American crops-a reality that typically accommodates carrying risk premium.
Will Sept 30, 2022 crop report post any surprise downward revisions in 9/22 US CN/BN stocks? Some attribute portion of historically elevated old crop CN/BN basis to overstated 2021 us CN/BN production. Recall NASS, which on occasion tweaked prior year US soy production on the Sept 30 report, announced potential revisions in prior year corn crops on Sept 30 report as well. Any downward revisions in 2021 US CN/BN production would further tighten 9/23 us CN/BN stocks.
How will today’s Fed rate hike (and likelihood of 4 more hikes by end of 2023 according to Goldman) impact length/depth of recession and the dollar? Highest inflation since 1981, prospects for worst recession since 2007 and strongest dollar since 1985 (Fed tightening & pro-growth Reagan polices) are converging to dampen demand, slow economic growth and undermine wealth creation. Additionally, more economists highlighting misguided allocation of Federal spending to global warming, student debt cancellation and social programs rather than progrowth initiatives to boost US innovation, productivity and global competitiveness.
Will managed funds, who downsized ag longs from late June thru late July, continue to rebuild longs into harvest (5 market ag long at 475K vs. 286K late July)? Suspect recent modest rebuilding of managed CN/BN longs driven by concern that USDA is overstating 2022 US CN/BN yields. Additionally, managed funds know that farmers will be tight holders’ of 2022 production, that 22/23 Ukraine ag production/exports will be suppressed by ongoing war and that domestic end users will be anxious buyers on dips until uncertainties outlined above are resolved. Meanwhile, will wheat rally continue once managed funds cover their small remaining wheat short?
Bottom line: Corn and wheat charts trending higher while soy buoyed by strength in grains. Items listed above are well known variables-some bullish/some bearish-that clash leaving markets lacking a central driving force until traders know more about 2022/23 supply, US export demand and developing crop prospects across S America. We are unable to make a compelling case for a sustained price breakout (in either direction) until market gains more clarity on these issues.
30yr interest rates at 6.3% highest since 2008. The US $ at 1.13 is up 20% in the last year. Euro trading below par first time since 2002. British Pound lowest in 37yrs. against the USD $.
-August Cattle on Feed higher than expected.
-July placements higher than expected. 100 vs 98.1 est.
-July marketing’s higher than expected. 106 vs 105.9 est.
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Matthew is a corn and soybean farmer from Aurora, Nebraska. Check out his video to learn more about his relationship with Tredas!
Nate started out with just a few acres of ground and has worked to build his farm for decades. For him, the growth was easy, but the marketing? Not so much. Nate loves the options his Tredas Consultant, Zane Abner provides.
Gary farms corn and soybeans when he’s not feeding cattle near Bertrand, NE. He goes into detail about what sets Tredas apart from other companies.
Rob has a long history of working with corn, soybeans & cattle. He loves the hands-off approach of partnering with Tredas and how the Team keeps him motivated to keep making sales.