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Demand uncertainty snipes grain prices

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Afternoon report: Corn, soybeans and wheat prices all start the week in the red

Traders largely ignored expectations for declining corn and soybean crop quality when USDA releases its next crop progress report later this afternoon, focusing instead on some weaker-than-expected Chinese economic data that led to a selloff of a large set of commodities on Monday. That included steep cuts to corn and soybeans, along with crude oil. Wheat losses were relatively muted, mostly ranging between 0.75% and 1.25%.

Rainfall will be highly variable between Tuesday and Friday, per the latest 72-hour cumulative precipitation map from NOAA. A band stretching from southern Iowa to northern Arkansas could see as much as 2” or more during this time. NOAA’s 8-to-14-day outlook predicts cooler-than-normal temperatures settling back into the central Corn Belt between August 22 and August 28, with more seasonally wet weather likely for the southern half of the country also likely.

On Wall St., the Dow trended 170 points higher in afternoon trading to 33,931 as investors eagerly await a round of retail earnings reports later this week. Energy futures spilled lower, with crude oil down nearly 3% this afternoon to $89 per barrel on lingering concerns about Chinese demand. Diesel dropped 2%, and gasoline fell 3.25%. The U.S. Dollar firmed moderately.

Last Friday, commodity funds were net buyers of corn (+6,200), soybeans (+2,500) and soymeal (+4,000) contracts but were net sellers of CBOT wheat (-2,500) and roughly even when trading soyoil contracts.

Corn

Corn prices tilted 2% lower on Monday after worries over Chinese demand prompted a broad commodity selloff today. Traders shrugged off expectations that crop quality will take a two-point hit when USDA shows new data later this afternoon, but come back to see how the numbers might affect prices tomorrow. September futures dropped 13.5 cents to $6.2625, with December futures down 15.25 cents to $6.27.

Corn basis bids were mixed but mostly lower across the central U.S. on Monday – especially after dropping 5 to 15 cents lower at four interior river terminals. An Iowa processor bucked the overall trend after firming 5 cents higher today.

Corn export inspections reached 21.2 million bushels last week. That was on the very low end of trade guesses, which ranged between 18.7 million and 31.5 million bushels. Cumulative totals for the 2021/22 marketing year are still significantly below last year’s pace, with 2.090 billion bushels. China, Mexico, Panama, Honduras and Trinidad were the top five destinations.

Ahead of this afternoon’s crop progress report from USDA, analysts expect the agency to lower corn quality another two points, with 56% rated in good-to-excellent condition through August 14. Individual trade guesses ranged between 55% and 57%.

Does it pay to second-guess the USDA? August WASDE estimates are usually close to final results, but they’re not perfect, according to grain market analyst Bryce Knorr, who offers five additional ways to estimate yields in today’s Ag Marketing IQ blog – click here to learn more.

Preliminary volume estimates were for 199,121 contracts, falling well below Friday’s final count of 357,220.

Soybeans

Soybean prices showed a lot of bearish sensitivity to the fact that the People’s Bank of China lowered interest rates after some weaker-than-expected economic data, which some read as a warning sign of a possible global recession. September futures dropped 41.25 cents to $14.9375, with November futures down 43.5 cents to $14.1075.

Soybean basis bids were steady to weak after tumbling 10 to 55 cents lower across four Midwestern locations on Monday.

Soybean export inspections trended moderately lower week-over-week to 27.4 million bushels. That was still good enough to reach the upper level of trade estimates, which ranged between 11.0 million and 31.2 million bushels. Cumulative totals for the 2021/22 marketing year are gaining ground on last year’s pace but still remain modestly behind year-ago totals, with 2.031 billion bushels. China, Mexico, Germany, South Korea and Italy were the top five destinations.

Prior to this afternoon’s crop progress report from USDA, analysts think the agency will show soybean conditions sliding a point lower, with 58% rated in good-to-excellent condition through Sunday. Individual trade guesses ranged between 57% and 58%.

Data from the National Oilseed Processors Association (NOPA), released this morning, shows a total U.S. soybean crush of 170.220 million bushels in July. That’s up 3.4% from June and 9.7% higher than last July’s total of 155.105 million bushels. Still, analysts were expecting an even bigger total, offering an average trade guess of 171.525 million bushels prior to the report’s release.

NOPA also reported that soyoil stocks fell to an 11-month low of 1.684 billion pounds. That was near the middle of trade estimates, which ranged between 1.600 billion and 1.807 billion pounds.

Preliminary volume estimates were for 166,172 contracts, sliding slightly below Friday’s final count of 184,603.

Wheat

Wheat prices followed a broad set of other commodities lower on Monday. MGEX spring wheat contracts showed the most downside, with harvest pressure for that crop also getting folded into the mix, but winter wheat prices were also in the red today. September Chicago SRW futures dropped 6.75 cents to $7.9925, September Kansas City HRW futures fell 8.75 cents to $8.8050, and September MGEX spring wheat futures faded 12 cents lower to $9.0750.

Wheat export inspections fell from 23.4 million bushels a week ago down to 13.7 million bushels. That was also toward the lower end of trade estimates, which ranged between 9.2 million and 24.8 million bushels. Cumulative totals for the 2022/23 marketing year are moderately below last year’s pace so far, with 142.7 million bushels. Mexico, the Philippines, Brazil, Japan and Portugal were the top five destinations.

Ahead of this afternoon’s crop progress report from USDA, analysts expect to see spring wheat quality erode a point lower, with 63% rated in good-to-excellent condition through August 14. Analysts think spring wheat harvest will move from 9% a week ago to 22%, with winter wheat harvest moving from 86% last week to 92%.

Russian consultancy Sovecon estimates that the country’s wheat exports in August will jump to 128.6 million bushels, which would be the highest monthly tally since last September, if realized. Russia is the world’s No. 1 wheat exporter.

Iraq issued tenders to purchase a nominal 1.8 million bushels of milling wheat and 50,000 metric tons of rice, which it hopes to source solely from the United States. Offers must be submitted by August 17.

Saudi Arabia’s state grain buyer SAGO announced today that it is purchasing 6.6 million bushels through a local agriculture/livestock investment company, SALIC. The grain will be for arrival between October and February.

Preliminary volume estimates were for 70,259 CBOT contracts, which was moderately below Friday’s final count of 98,671.

Settlement Prices for Key Commodities 
  High Low Last Change
Corn                     $/bushel      
22-Sep 635.25 616.5 626.75 -13.5
22-Dec 638.25 618 628.25 -15.25
Soybeans        
22-Sep 1530.75 1464.25 1494 -41.25
22-Nov 1443.75 1386 1412.25 -43.5
Soymeal                $/ton        
22-Oct 421.9 405.7 410.6 -13.3
Soyoil                    cents/lb        
22-Oct 68.25 65.5 67.44 -0.87
Wheat                    $/bushel        
22-Sep 804.5 778 800.75 -6.75
22-Dec 821 795.25 817.75 -6.5
KC Wheat        
22-Sep 886 858 882.75 -8.75
22-Dec 888.5 861.25 885 -8.75
MPLS Wheat        
22-Sep 913.5 888.25 910.75 -12
22-Dec 926 900.5 922.5 -14.5
Live Cattle             cents/lb        
22-Aug 140.8 139.7 139.8 -0.425
Feeder Cattle         cents/lb        
22-Sep 185.3 182.7 183 -0.375
Lean Hogs             cents/lb        
22-Dec 91.025 89.5 90.85 0.475
Crude Oil  $/barrel *Energy prices may not represent final settlements
22-Sep 92.1 86.82 89.35 -2.74
Diesel        
22-Sep 3.5337 3.3752 3.465 -0.0528
Unleaded Gasoline   $/gallon        
22-Sep 3.0631 2.8881 2.9545 -0.0915
Natural Gas        
22-Oct 8.912 8.383 8.678 -0.066
U.S. Dollar Index        
22-Sep 106.435 105.435 106.42 0.91
Gold                      $/ounce        
22-Sep 1803.7 1772.8 1781.1 -17.5
Copper        
22-Aug 3.6335 3.583 3.624 -0.052
Fertilizer Swaps     (as of 08/12)  
DAP Tampa-index              887.5 -25
DAP-New Orleans              829.5 -8.27
Urea-New Orleans              620.6 -40.79
Urea-Middle East              762.5 -2.5
Urea-Black Sea              585.0 35
UAN (32%) New Orleans              440.9 1.1

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