THE LAND — JULY 22/JULY 29, 2022
www.thelandonline.com — “Where Farm and Family Meet”
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MARKETING
Grain Outlook
Corn prices fall to lowest since January CORN – A bright start to the week was quickly erased with a Turnaround Tuesday that continued for the balance of the week as corn faded to lows not seen since January. The markets are at the mercy of every updated weather forecast. Returning from the weekend the 6–15-day weather maps were hot and dry. Within 24 hours the maps were relenting slightly on the temperature and giving better chances of showers in the Midwest. The maps looked more favorable for pollination throughout the week. Later in the week, NOAA released its August/September/October forecast that is for above normal temperatures for the country and below normal rainfall for most of the Corn Belt. Although PHYLLIS NYSTROM CHS Hedging Inc. the US dollar’s strength was St. Paul cited as a factor in weakness in grain earlier in the month when the dollar faded the grain didn’t receive the love in return. The signing of the Black Sea Initiative at the end of the week pressured wheat with big losses that spread to the corn market. The Black Sea Initiative talks continued and resulted in signed agreements on July 22. There are four main parties involved, Russia, Ukraine, Turkey, and the UN. Ukraine signed an agreement with Turkey and the UN and Russia signed a parallel agreement with Turkey and the UN. Russia and Ukraine did not sign an agreement with each other. There is high optimism that Ukrainian grain shipments will begin in the coming weeks, but there is also some skepticism about how smoothly this may occur. The terms as I understand them include Ukraine guiding grain ships from three specific Black Sea ports out to sea, but no military escorts. The ports of Odesa, Chernomorsk, and Yyzhny are included in the plan. A team consisting of members from all parties will inspect incoming ships to prevent the smuggling of weapons or troops into Ukraine. Russia agrees not to attack grain carrying ships or specified grain facilities in a pseudo-ceasefire situation, although no ceasefire is mentioned in the documents. The agreement is for 120 days with extensions available. The UN is hoping for 5 mmt of exports per month, but traders are anticipating something closer to 3 mmt per month. There are unanswered questions remaining: insurance companies want assurance of escorts to provide safety to vessels and we don’t know if the current plan will meet that need; the plan for vessels to be guided
Cash Grain Markets corn/change* St. Cloud $6.62 +.03 Madison $6.82 +.03 Redwood Falls $6.87 +.03 Fergus Falls $6.57 +.03 Morris $6.72 -.02 Tracy $6.84 +.03 Average:
soybeans/change* $14.29 $13.78 $13.84 $13.40 $13.79 $13.74
-.19 -.80 -.94 -.78 -.54 -.99
$6.74
$13.81
Year Ago Average: $6.11
$13.47
Grain prices are effective cash close on July 26. *Cash grain price change represents a two-week period.
will meet the USDA’s corn for ethanol usage projection of 5.375 billion bushels. Ethanol stocks fell 53,000 barrels to 23.55 million barrels. Margins were drastically improved to 41 cents per gallon. Gasoline demand at 8.5 million bpd is up approximately 500,000 bpd but is down 8.3% for the same period last year. President Biden stopped short of declaring a national climate emergency which could allow him to move funds toward clean energy projects, restrict offshore drilling, or limit the movement of fossil fuels. He did announce plans through executive actions to increase wind energy development in the Gulf of Mexico and on the Atlantic and Florida coasts. The Energy Department is expected to announce a plan to spend $96 million to push technology and charging infrastructure needed to electrify tractors, construction equipment, planes, trains, boats, etc. OUTLOOK – Grower sales have dried up as producers sold what they wanted before prices broke lower and are reluctant to sell at current levels. Empty storage in the country is abundant as we approach fall harvest and if prices don’t rebound, we could see a tendency to fill that storage this fall. September and December corn traded to their lowest since January 24. December corn prices will be at the mercy of every weather forecast with pollination in full force. Adding to the big swings in the market will be the influence of the progress of the Black Sea Initiative, money flows, demand, and macroeconomic issues. For the week, September corn plummeted 40 cents to $5.64 ¼ and December corn plunged 39 ½ cents to $5.64 ¼ per bushel. SOYBEANS – Soybeans saw the same early week action for the same reasons as corn. A change in the weather outlook slashed Monday’s gains in a Turnaround Tuesday dance but soybeans rallied into the weekend to shave earlier losses. November soybeans however did trade to their lowest since January 24. Indonesia’s decision to eliminate its export tax on palm oil through August lent pressure to palm and soyoil. They have also postponed their plan to increase their biodiesel blend from 30% to 35%. Rumors of China buying US new soybeans were confirmed this week, but the amount was less than expected. Safras updated its 2022/2023 soybean production outlook to a record 151.6 mmt compared with the USDA outlook for 149 mmt. Soybean acreage is anticipated to increase 2.6 percent year/ year to 106 million acres. China’s hog margins have improved with the government buying for reserves. How their Covid situation pans out will figure into their soybean demand. Shanghai citizens will have to take a Covid test at least once a week through August. China imported 27.7 mmt of Brazilian soybeans in the first half of 2022, up from 26.1 mmt last year. In the same period, China imported 17.54 mmt of U.S. soybeans
around mines versus the mines being removed may be tricky; how much and what quality of grain is in the export houses is uncertain; and if the grain facilities are operatable and how they will be staffed is unknown. And will Russia honor any agreement they sign? Russia’s assault on Ukraine is unrelenting. The Nord Stream 1 natural gas pipeline that supplies most of the gas to Germany was closed for 10 days of annual maintenance that concluded July 21. The pipeline flow restarted at 40% of capacity which was the rate before the downtime. However, Russian President Putin continues to warn this rate could be lowered or even stopped. Europe reportedly is formulating a plan to ration Russian natural gas as needed if Russian supplies tighten. The plan includes limiting indoor temperatures to 66 degrees and prioritizing energy-intensive industries. The heat the US has experienced doesn’t seem to compare to the record heat across Europe and the United Kingdom. Fires in Portugal, Spain, France, and Germany are on the rise. Crops are feeling the effect of the heat in combination with a lack of moisture. Weekly export sales were the second lowest of the marketing year. The last time we had a daily export sales flash for corn was on June 9. Old crop sales were just 1.3 million bushels. Total commitments are 2.4 billion bushels and down 13 percent from last year. We need to average 10.2 million bushels per week to hit the USDA’s 2.45-billion-bushel target. As the marketing year dwindles to just seven weeks left, the USDA’s number may be too high. New crop sales were 22.5 million bushels. New crop sales are 291.6 million bushels compared with 635 million bushels last year (China last year had an early buying spree). Brazil’s corn exports in the first half of this year are up 221% without Ukrainian competition. Has China covered their old crop needs out of the US? Corn prices on the Dalian Exchange this week fell to 8-month lows. Weekly ethanol production was up 29,000 bpd to 1.03 million bpd, but the 4-week average is down 1.4% from last year. This casts doubt on whether we See NYSTROM, pg. 8
Information in the above columns is the writer’s opinion. It is no way guaranteed and should not be interpreted as buy/sell advice. Futures trading always involves a certain degree of risk.
