Wheat struggles against recession fears

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Afternoon report: Corn, soybean edge up on a round of bargain buying after yesterday’s losses

Good afternoon! Our latest Feedback from the Field report pairs farmer responses to yesterday’s Crop Progress report from USDA. Corn and soybean conditions are trending lower than the market realized, which helped to prevent further losses following yesterday’s turbulent trading session.

“It’s beginning to look like 2012,” cautioned a grower in Indiana.

You can participate in the Feedback from the Field series as often as you’d like this growing season! Just click this link to take the survey and share updates about your farm’s crop progress. I review and upload results daily to the FFTF Google MyMap, so farmers can see others’ responses from across the country – or even across the county!

Corn

Corn prices rose $0.02-$0.08/bushel today on a round of bargain buying following yesterday’s losses. The September 2022 contract settled right at the $6/bushel benchmark, with the deferred months following closely behind.

Markets opened higher this morning thanks to higher-than-expected cuts to corn condition ratings in last night’s weekly Crop Progress report from USDA. About 64% of the corn crop was rated in good to excellent condition as of Sunday, down 3% on the week and 9% lower than the start of the growing season.

Overnight storms across the Upper Midwest increased concerns about condition ratings – and potentially yields – for the 2022 U.S. corn crop, but markets were widely pleased with the beneficial rains that have fallen between Nebraska and Ohio over the past 24 hours.

Cash bids for corn rose across all originators in the Midwest today as falling prices led buyers to increase cash premiums in hopes of encouraging more farmer sales. Basis rose at elevators, processors, river terminals, and ethanol plants throughout the Heartland today. However, farmers did not seem keen to take up buyers on the stronger cash offerings, so country movement remained slow.

Brazil’s safrinha (second) corn crop is over a third harvested in the country’s center south region. The Brazilian consultancy Anec forecasts 2021/22 Brazilian corn exports reaching 1.7 billion bushels. USDA’s latest estimate for old crop Brazilian corn exports is slightly more optimistic at 1.85 billion bushels.

Soybeans

Soybean prices rose $0.02-$0.09/bushel in today’s trading session as markets continued to trade on last night’s worse-than-anticipated condition rating in USDA’s weekly Crop Progress report. Ratings have dropped 7% over the past three weeks with yesterday’s report finding 63% of U.S. soybeans in good to excellent condition.

Some technical and bargain buying also helped lift soy prices today. Gains were limited by losses in the energy market, where U.S. crude prices dipped back below the $100/barrel benchmark for the second day in a row after more COVID-19 flare-ups were reported in China and another round of lockdowns is being considered.

Soybean buyers were also eager to stimulate more country movement of soybeans across the Midwest today, as cash offerings for soybeans widened at elevators, crush facilities, and river terminals destined for export markets. Farmer sales remained slow as the stronger basis offering continues to hover well below recent futures market highs.

Cash soymeal offerings were largely unchanged from yesterday at rail and truck terminals, with most bids holding at a strong premium over futures. “Tight supplies were underpinning the market even though most end users had already placed their orders for July,” a rail broker told Reuters this morning.

“Most dealers were trying to keep their posted offer against the Chicago Board of Trade July futures contract for as long as possible because it was trading at a $43 premium to the August contract,” the broker shared.

Soymeal export markets were mostly steady for the nearby contracts – hopefully a good reflection of impending export demand this fall. But barge bids for November and December shipments eased, which encompasses the end of peak export season for soybeans in the U.S.

Wheat 

Even amid rapid demand for freshly harvested European wheat supplies on the global market, overarching recession fears continued to spur hedge funds across the globe to liquidate their long positions on wheat during today’s trading session. Plus, a surge in the dollar as a global safe haven asset continues to make U.S. wheat a less desirable option on the global market.

Kansas City futures bore the brunt of lower prices today, falling $0.08-$0.10/bushel. The September 2022 contract is holding strong just above $8/bushel, but any more bearish market news overnight could likely break that level of support.

Chicago and Minneapolis futures faced fewer losses, only giving up $0.01-$0.02/bushel in losses during today’s trading session.

Cash bids on both hard and soft red winter wheat in the Plains and Midwest traded largely to a discount to futures prices today, with little additional movement from yesterday’s trading session. Harvest pressure continues to be a key driver for cash wheat markets and many growers are content to wait to sell until they see a rebound in futures market prices.

French agricultural consultancy Agritel forecasts the 2022/23 Ukrainian wheat crop just shy of 801 million bushels. That volume is 32% lower than last year’s harvest, due in large part to the ongoing Russian invasion in Ukraine.

Agritel expects that 14.3 million acres of wheat will be harvested in Ukraine this year. The consultancy also expects that 83% of Ukraine’s harvest will be produced in Ukrainian regions not currently under Russian occupation.

It is not yet clear how the market will account for the remaining 136 million bushels expected to be harvested in Ukraine’s southern and eastern regions where Russian forces have invaded.

Ukraine’s grain traders’ union, UGA, also updated its 2022/23 Ukrainian wheat production forecasts this morning, pegging this year’s harvest slightly lower than Agritel’s estimate at 764 million bushels. USDA currently estimates 2022/23 Ukrainian wheat production at a more conservative 790 million bushels – down nearly 35% from last year.

South Korea snapped up 5.5 million bushels of milling wheat today from the U.S. and Australia. A group of mills combined to purchase 1.8 million of those bushels from the U.S. and the remaining from Australia for shipment in September and November, respectively.

Outside investors continued to liquidate long positions on European wheat over the past week, mirroring similar selloffs in the U.S. ag markets as investors grow worried about high inflation and a global recession.

Russia and Ukraine

Just more of the same to report here as Russia tightens its grip on Eastern Ukraine. Growing world hunger concerns are rising with the U.N. warning of a “looming catastrophe” resulting from restricted access to fuel, fertilizer, and food supplies from the Black Sea.

Overnight, Ukraine requested that Turkish officials investigate three Russian cargo vessels for possessing stolen Ukrainian grain. Turkey continues to try to play a diplomatic role between Russia, Ukraine, and the West, though likely to little avail as no progress has yet been made to make Black Sea food and fertilizer stocks more readily available to the world market.

These are tricky allegations to prove, especially as a bumper Russian crop is expected to come to market in the coming weeks.

Russia also announced overnight it would purchase nearly 37 million bushels of locally produced wheat to reinforce state stockpiles following the 2022 wheat harvest. United Grain Company (UCG), Russia’s state grain buyer, anticipates using these reserves to ensure domestic price stability.

UCG Chief Executive Dmitry Sergeyev told President Vladimir Putin in a televised meeting that UCG will likely purchase 110 million bushels (plus 250,000 metric tonnes of sugar) for the state reserves by 2024.

Weather

More rains and some cooler temperatures are forecast for the Heartland today, according to NOAA’s short-range forecasts. Once again, heavy showers and thunderstorms will continue to stretch from the Plains through the Eastern Corn Belt, dropping up to an inch of precipitation along the way over the next 24 hours.

Regions of Eastern Nebraska and Western Iowa could see rainfall totals up to 2 inches during that time. The system is not likely to dissipate until the weekend, providing heat-stressed crops a favorable reprieve just ahead of peak reproductive season.

NOAA’s 6- to 10-day and 8- to 14-day forecasts updated this morning continue to trend on the warm side for the Heartland during the second week of July. While the chances for rain in the Upper Midwest are growing increasingly slim, above average precipitation forecasts are being predicted for the Southern Plains and Southeast.

But that’s not all bad news – that is right around the time that corn pollination will begin so the dry weather will actually be a welcome weather event for corn growers across the country. Of course, that condition will only be met if the Midwest receives substantial rainfall this week and no other unfortunate weather events during peak pollination.

Financials

The Federal Reserve anticipates “more restrictive” rate increases as long as inflationary pressures remain high, according to minutes released today from the Federal Open Market Committee’s mid-June 2022 meeting.

The minutes show that the Fed is aware that the interest rate hikes will likely slow economic growth (GDP) over time but that returning to inflationary levels around 2% is “critical” for keeping employment stable. There was some evidence of “economic cooling” through mid-June, but not enough to stave off further inflationary pressures.

“Many participants judged that a significant risk now facing the committee was that elevated inflation could become entrenched if the public began to question the resolve of the committee,” the minutes showed. “They recognized the possibility that an even more restrictive stance could be appropriate if elevated inflation pressures were to persist.”

For more of the top highlights from the Fed’s June 2022 FOMC meeting minutes, check out this great Bloomberg article.

The S&P 500 index edged 0.54% higher today to $3,852.22 – a one-week high – as some optimism for a cooling economic and labor market eased concerns about a looming recession and potentially more Fed rate hikes.

What else I’m reading this morning on our website, FarmFutures.com:

  • Advance Trading’s JJ Keske uncovers three reasons why farmers don’t use options to manage risk.
  • Are you playing the grain market blame game? Bryce Knorr has helpful insights for farmers who may have been surprised by higher corn acres in last week’s USDA report.
  • The latest Purdue University-CME Ag Economy Barometer finds that farmers’ expectations of the future are weakening amid rising input costs and uncertainty about the future.
  • Looking to expand your farm? Darren Frye has three questions farmers should answer before they pull the trigger on expansion plans.
  • Commstock’s Matthew Kruse expects yield will become a more critical factor in determining ending stocks in the future, limiting any potential U.S. acreage expansion in the future.
  • Naomi Blohm has the latest insights on how to manage price volatility this summer.
Closing Ag Commodity Prices - 7/6/2022
Contract Units High Low Last Net Change % Change
JUL '22 CORN $ / BSH  7.61 7.26 7.51 0.15 2.04%
SEP '22 CORN $ / BSH  6.015 5.82 6.0025 0.08 1.35%
DEC '22 CORN $ / BSH  5.8625 5.665 5.855 0.07 1.21%
MAR '23 CORN $ / BSH  5.9275 5.7325 5.9175 0.0675 1.15%
MAY '23 CORN $ / BSH  5.965 5.78 5.955 0.0625 1.06%
JUL '23 CORN $ / BSH  5.9575 5.78 5.95 0.06 1.02%
SEP '23 CORN $ / BSH  5.6625 5.515 5.64 0.0175 0.31%
DEC '23 CORN $ / BSH  5.5775 5.4275 5.5375 0.02 0.36%
MAR '24 CORN $ / BSH  5.6275 5.52 5.6075 0.015 0.27%
JUL '22 SOYBEANS $ / BSH  15.9625 15.6 15.7825 0.03 0.19%
AUG '22 SOYBEANS $ / BSH  14.615 14.2425 14.48 0.0875 0.61%
SEP '22 SOYBEANS $ / BSH  13.5825 13.215 13.4325 0.0625 0.47%
NOV '22 SOYBEANS $ / BSH  13.4 13.025 13.245 0.085 0.65%
JAN '23 SOYBEANS $ / BSH  13.4525 13.075 13.29 0.07 0.53%
MAR '23 SOYBEANS $ / BSH  13.425 13.055 13.2525 0.0525 0.40%
MAY '23 SOYBEANS $ / BSH  13.4375 13.08 13.255 0.0375 0.28%
JUL '23 SOYBEANS $ / BSH  13.4225 13.065 13.23 0.0275 0.21%
AUG '23 SOYBEANS $ / BSH  13.0975 #N/A 13.0125 0.0125 0.00%
SEP '23 SOYBEANS $ / BSH  12.5675 12.5 12.585 0.0175 -0.50%
NOV '23 SOYBEANS $ / BSH  12.5275 12.275 12.3975 0.015 0.12%
JUL '22 SOYBEAN OIL  $ / LB 61.59 58.95 60.22 -0.3 -2.46%
AUG '22 SOYBEAN OIL  $ / LB 60.5 57.54 58.76 -0.86 -1.44%
JUL '22 SOY MEAL $ / TON 464.3 457 462.9 10.1 2.23%
AUG '22 SOY MEAL $ / TON 420.3 411.2 415.3 4.9 1.19%
SEP '22 SOY MEAL $ / TON 396.7 388.4 391.4 2.1 0.54%
OCT '22 SOY MEAL $ / TON 384.9 376.1 379.2 2.1 0.56%
DEC '22 SOY MEAL $ / TON 385.4 376.5 379.7 2.1 0.56%
JUL '22 Chicago SRW $ / BSH  8.13 7.79 7.9225 -0.015 -0.06%
SEP '22 Chicago SRW $ / BSH  8.385 7.8525 8.0675 -0.0025 -0.03%
DEC '22 Chicago SRW $ / BSH  8.545 8.0225 8.2325 -0.0075 -0.09%
MAR '23 Chicago SRW $ / BSH  8.665 8.1775 8.3825 -0.01 -0.12%
MAY '23 Chicago SRW $ / BSH  8.755 8.255 8.435 -0.0425 -0.50%
JUL '23 Chicago SRW $ / BSH  8.64 8.135 8.3025 -0.08 -0.95%
SEP '23 Chicago SRW $ / BSH  8.5625 8.06 8.215 -0.1075 -1.29%
JUL '22 Kansas City HRW $ / BSH  8.8375 8.365 8.51 -0.0925 -1.08%
SEP '22 Kansas City HRW $ / BSH  8.8725 8.325 8.535 -0.085 -0.99%
DEC '22 Kansas City HRW $ / BSH  8.935 8.4125 8.61 -0.095 -1.09%
MAR '23 Kansas City HRW $ / BSH  8.9975 8.48 8.66 -0.1075 -1.23%
MAY '23 Kansas City HRW $ / BSH  9.02 8.5075 8.6925 -0.0925 -1.05%
JUL '23 Kansas City HRW $ / BSH  8.8 8.33 8.4825 -0.135 -1.57%
SEP '23 Kansas City HRW $ / BSH  8.625 8.2125 8.405 -0.105 -1.23%
JUL '22 MLPS Spring Wheat $ / BSH  9.03 8.535 8.8 -0.2375 -2.63%
SEP '22 MLPS Spring Wheat $ / BSH  9.125 8.705 8.895 -0.005 -0.06%
DEC '22 MLPS Spring Wheat $ / BSH  9.3 8.86 9.045 -0.0225 -0.25%
MAR '23 MLPS Spring Wheat $ / BSH  9.35 9.005 9.175 -0.035 -0.38%
MAY '23 MLPS Spring Wheat $ / BSH  9.4275 9.1125 9.295 -0.005 -0.05%
JUL '23 MLPS Spring Wheat $ / BSH  9.39 9.195 9.33 -0.02 -0.21%
SEP '23 MLPS Spring Wheat $ / BSH  9.14 8.8 9 -0.1375 -1.50%
SEP '21 ICE Dollar Index $ 107.07 106.135 106.905 0.585 0.55%
 AU '21 Light Crude $ / BBL  102.14 95.1 98.56 -0.94 -0.94%
 SE '21 Light Crude $ / BBL  99.11 92.18 94.9 -1.62 -1.68%
AUG '22 ULS Diesel $ /U GAL 3.662 3.351 3.4443 -0.1573 -4.37%
SEP '22 ULS Diesel $ /U GAL 3.5989 3.2946 3.376 -0.165 -4.66%
AUG '22 Gasoline $ /U GAL 3.4015 3.188 3.2249 -0.1041 -3.13%
SEP '22 Gasoline $ /U GAL 3.2506 3.0514 3.0803 -0.1103 -3.46%
AUG '22 Feeder Cattle $ / CWT 173.9 172.075 173.65 0.95 0.55%
SEP '22 Feeder Cattle $ / CWT 177.425 175.525 177.175 1.075 0.61%
 AU '21 Live Cattle $ / CWT 134.975 133.05 134.55 1.625 1.22%
CT2 '21 Live Cattle $ / CWT 140.475 138.8 139.95 1.475 1.07%
JUL '22 Live Hogs $ / CWT 114.425 112.375 113.25 1.1 0.98%
AUG '22 Live Hogs $ / CWT 109.95 107.025 109.175 3.225 3.04%
JUL '22 Class III Milk $ / CWT 22.42 22.03 22.42 0.32 1.45%
AUG '22 Class III Milk $ / CWT 21.79 21.2 21.51 -0.17 -0.78%
SEP '22 Class III Milk $ / CWT 21.86 21.34 21.62 -0.33 -1.50%

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