HEADLINES: GFS weather forecast stays dry for Plains/W Midwest with blast furnace heat; China secures US wheat; Europe drought expands.
Grains battle back from US central bank’s war on inflation; Big range trade in summer row crop prices; US wheat to China in weekly sales report.
Chicago grain futures came under acute early selling pressure with the US DOW falling to more than a 600-point loss, the US$ swelling to a new 20 year high while spot crude oil futures fell below $89.00/barrel for the first time since February. The abundance of selling was based on the fear of the US Central Bank’s war against inflation and the coming recession. Energy, livestock, grain, and metal futures all fell to sharp losses on risk-off positioning. The coming US/world recession looks to cut demand which has been a worry and market theme for the past three weeks. The economic sky is falling!
Chicago futures battled back from the early financial selling pressure with the market led by the summer row crops (corn/soy on weather concern). At one point after the opening, November soybeans were more than 30 cents lower. They have rallied back to trade 15 cents higher in a range of 47 cents. Corn has traded in a daily range of 19 cents and wheat 32 cents. The volatility of Chicago futures is increasing due to the war of the US Central Bank vs. inflation and threatening Central US weather. And yes, an export corridor for Ukraine grain.
Chicago brokers estimate that funds have bought 7,000 contracts of corn, 2,100 contracts of wheat, and 2,800 contracts of soybeans. In soy products, funds have bought 2,700 contracts of soymeal and sold 3,200 contracts of soyoil. Please be advised that it does not take much volume to move Chicago futuChicago either sharply higher or lower. Market volatility is causing funds to have a more prominent role in CBOT price determination.
China secured US wheat (as we indicated last week). China booked 1 cargo of SWW wheat, 1 cargo of HRS and 2 cargoes of SRW wheat for a total of 265,000 mt. We understand that there is another 65,000 mt of US SWW wheat that was sold to an unknown destination that will end up being China for a combined purchase of 330,000 MTs, their biggest one-week purchase of US wheat in years.
For the week ending July 7, the US sold 37.4 million bu of wheat, 2.3 million bu of old crop and 13.7 million bu of new crop corn, with old crop soybean cancelations of 13.3 million bu. US new crop soybean sales were 4.2 million bu.
For the respective crop years to date, the US has sold 260 million bu of wheat, equal to the pace of last year. 2,378 million bu of corn (down 372 million or 13%), and 2,184 million bu of soybeans (down 90 million or 4%). The net cancelations will have us and WASDE cutting their old crop US soybean export estimate and adding those bushels to end stocks. The problem is that the cash market is staying incredibly strong with crushers on the hunt for cash beans. July soybeans look to expire above $16.00!
There are considerable unknowns regarding the Ukraine export corridor. The Ukraine Government now asking for security agreement that Russia will not attack or seize Ukraine ports or ocean vessels. This request could become a problem amid the ongoing war, and besides, which vessel owner wants to put their boat at risk in mined waters. And which insurance agent will insure it, and which bank will finance it. There are too many unknowns to assess an export corridor and gauge whether it will last. We are sceptical that the corridor will stay open to feed the world. Once Russia captures the Donbas, will their military attention turn to capture S Ukraine, and its ports.
There was little change in the midday weather forecast with rain to impact the E Midwest while the W Midwest and the Plains hold in a hot/arid pattern. Concern for a flash drought across the Plains/W Midwest stays high. Extreme heat will be felt in the Plains/W Midwest on numerous days. The ridge progresses to the South-Central US in the 10-15 day period.
It is a battle between financial market weakness (recession) and the droughts that are building across the EU/spine of the Central US. Supply (weather) should dominate Chicago price direction into September. US, EU, Canadian, and Argentine crop sizes are in retreat due to adverse weather. It is deciphering the duration of the adverse weather and counting the supply that has been lost. Expect extreme market volatility to persist.
HEADLINES: UN to hold an afternoon press conference to report on Russian/Ukraine grain export corridor; Central US weather threatening.
June year on year inflation runs hot at 9.1%, Rumours of China seeking US corn, Russian/Ukraine talks in Istanbul end in Russian demands.
Chicago grain futures are rising with soybean futures in tow. Soybeans have been reluctant to join the morning’s bullish party on China’s slowing of imports during June, and the new one year low in palmoil futures that was scored overnight. Both have acted as a drag on soybeans this morning. December soyoil futures are back testing recent support against $0.55/lb which should underpin this break. Increasing renewable diesel demand looks to dramatically increase US domestic soyoil demand in the months ahead. Key at the close is whether corn/wheat values can close higher on value of the US$. A lower close of the US greenback would suggest that a US$ top is being scored.
Chicago brokers estimate that funds have bought 7,700 contracts of corn, 3,100 contracts of wheat, and a net 3,300 contracts of soybeans. In soy products, funds have bought 2,300 contracts of soymeal while selling 4,500 contracts of soyoil. Active soyoil/soymeal spreading has been noted this morning.
The July CPI report reflected a June Inflation rate of 9.1%, well above estimates of 8.6-8.8% on the rising cost of energy and food. The inflation rate as the highest since 1981 and will have the US Central Bank raising its lending rate by 0.75% later this month. Additionally, we look for another 0.5% rate hike in the FED’s September meeting.
However, June marks the high in US inflationary cycle on a month to month and year on year basis. Prices of all goods including real estate have come down in the past 3 weeks, with broad pressure noted in a host of markets on the fear of a recession. And by September the monthly and yearly comparable will be higher which will tap inflation down to 3-4.5%. This will push the US Central Bank to balance inflation vs. recession with just 0.25% rate hikes going forward. Stagflation is likely to be the economic word that becomes popular in 2023 and beyond. Energy and food prices will stay elevated which the US economy gets back to growing at a 1-1.50% pace.
There is fresh talk this morning that China private buyers have secured 4-5 cargoes of US Gulf corn. So far, no indication that COFCO or SinoGrain has joined the purchase parade, but private buyers that are expected to receive TRQ’s see US prices as highly profitable for import.
US ethanol production and gasoline consumption fell in the week following the July 4 holiday. The US produced 297 million gallons of ethanol last week with a need of producing 308 million gallons to reach the USDA annual forecast. US gasoline consumption fell 13% to 8.06 million barrels/day.
Russia/Ukraine/Turkey ended their Istanbul talks without resolve as the Russian’s put forward demands that call for the ending of economic sanctions. However, the UN will be holding a press conference later this afternoon. The press conference could enlighten the world on potential progress.
There was little change in the midday GFS weather forecast with rain to impact the E Midwest while the W Midwest and the Plains hold in a hot/arid weather pattern. Concern for a flash drought across the Plains and the W Midwest is high. Extreme heat will be felt in the Plains/W Midwest on numerous days. The forecast progresses the ridge to the South Central US in the 9-15 day period.
Today’s Chicago recovery following yesterday’s beating and soaring inflation indicates that seasonal lows are being formed. We will monitor the UN Press Conference to gauge if any progress has been scored in the opening of a grain export corridor out of Ukraine.
HEADLINES: USDA report neutral to slightly bearish; Chicago grains follow crude oil to sharp losses; Midday GFS weather forecast wetter in E Midwest.
Another Russian/Turkey/Ukraine export corridor meeting, USDA July report and Ukraine export rumours.
We understand that Wednesday’s corridor meeting in Istanbul will only be attended by military personal, no high-ranking diplomats, which suggests that nothing will happen other than parties blaming each other for the war and mined ports. Ukraine will not allow their ports to be unmined.
There have been news headlines that 6-8 foreign vessels have arrived at Ukraine ports for the transportation of agricultural goods, according to the Ukraine Armed Forces. This is due to Ukraine retaking Snake Island from the Russians. This opens the Bystre Channel for small coasters to move up Danube River with all the other goods that need to sail. Drafts are just 4 meters which means that any tonnages moved will be 2-5,000 mt. And passage is only 6-7 cargoes/day of all goods including steel. This is not a solution for Ukraine moving grain.
The USDA July Report was neutral to slightly bearish.
US 2022/23 corn end stocks rose by 70 million bu to 1,470 million bu with soybean end stocks falling by 50 million bu to 230 million bu. WASDE left yields at 51.5 bushels/acre on soybeans and 177 bushels/acre on corn (a record). WASDE trimmed 2021/22 US corn feed/residual use by 25 million bu to 5,600 million bu which raised 2021/22 US corn end stocks to 1,510 million bu. And it raised 2022 US corn production by 45 million bu due to the 400,000 acre expansion in seedings. The net result was 2022/23 US corn end stocks of 1,470 million bu with an average farmgate price of $6.65/bu.
2022 US soybean production was cut 135 million bu with 2022/23 exports dropped 65 million bu and crush 10 million bu that left end stocks at an historically tight 230 million bu. With just 1 bushels/acre of yield loss, US 2022/23 soybean end stocks would decline 87 million bu or to a level below pipeline. The average farmgate price was estimated at $14.40/bu. Chicago futures sold off after the report due to the sharp falls of energy futures and the rally in the US$. We see Chicago values as too cheap, and we doubt that last week’s low can be taken out. Chicago values will stay be volatile, but there will be much better sales opportunities ahead. If there was a surprise it was USDA’s drop of China’s old crop soybean imports to 90 million mt, down 2 million. The 2022 US and European growing season is far from finished, this is no place to turn bearish of either corn or soybeans.
US 2022/23 wheat stocks were raised 12 million bu to 639 million bu as larger production slightly more than offset larger projected exports. The US winter wheat harvest was lifted a modest 19 million bu following an upward revision to harvested area. Combined US spring and durum wheat production is estimated at 580 million bu, vs. 331 Mil last year and vs. the previously implied number of 555 million bu. However, WASDE acknowledged that the US market is competitively priced and boosted 2022/23 exports to 800 million bu, up 25 million from June.
2022/23 US HRW stocks are pegged at 265 million bu, down 88 million from last year, HRS stocks are pegged at 126 million bu, down 14 million, with SRW stocks to rise 42 million bu to 136 million. High protein US wheat stocks will be tight.
Very few changes were made to the world wheat balance sheet. Combined Black Sea production was lowered 500,000 mt as reduced Ukrainian output offset a modest upward revision in Russia. Indian wheat production and exports were left unchanged at 106 and 6.5 million mt, respectively. Both are viewed as much too high, and recall India is now restricting both wheat and flour exports. Wheat’s top priority is measuring the pace of weekly Russian exports from here forward. Note that USDA increased 2022/23 world trade another 900,000 mt to a record 205.5 million mt. A major reshuffling of the global wheat trade matrix will be required immediately if Russia fails to export 3-5 million mt in July and August.
It is back to monitoring weather and macro market performance. Crude’s $8/barrel collapse this morning has forced selling in all other markets. The midday GFS weather forecast continues to advertise better rain chances in IL, IN and OH July 16-18, but no other model features needed widespread soaking precipitation in any region. US temperatures lean warm/hot into late month.
HEADLINES: Wheat falls on new Ukraine wheat corridor talk; GFS wetter this weekend; Hot/dry follows.
Another Putin/Erdogran wheat corridor meeting, USDA report ahead; GFS wetter nearby; Drier longer term
Chicago futures are mixed at midday. The summer row crops of corn and soybeans are holding firm while wheat futures sag. The volume of Chicago trade is down from prior days amid the USDA July Report which will be released tomorrow. It is expected that NASS will raise its all-wheat crop due to better than trend HRS wheat yields, while also proving class breakdowns that are supportive to HRW futures. Paris wheat futures are holding firm with US wheat being becoming even more cheaply priced. The Russian Ruble has fallen to 62.6:1 or by 1.8% that will further raise the Russian wheat export tax. The break in wheat makes little sense with Russia exporting just 150,000 mt of wheat during the first week of July. The volatility of the Russian wheat export tax makes it nearly impossible to price Russian wheat for export beyond the next week.
Also, wheat futures fell on algo headline selling with Turkish President Erdogran holding another telephone meeting on a Ukraine grain export corridor with Russian President Putin. The phone call took place ahead of a Russian/Turkish Summit to be held soon. Turkey and Russia have been talking for months over a Ukraine grain export corridor to no avail (Ukrainian representatives not invited!).
Russia and Turkey keep talking so that Russia can continue its rhetoric of blaming western sanctions for the world grain shortage. Like all the other talks beforehand, Russia will demand that NATO members drop economic sanctions for Ukraine marine grain exports to be restarted. We note that cash prices to interior Ukraine farmers are in the tank due to soaring costs including transportation. New crop wheat offers rest at $76/mt or $2.07/bu with new crop corn bid at $45/mt or $1.14/bu. At these low cash prices, one wonders why a Ukraine farmer would even take make the effort to harvest wheat.
Chicago brokers estimate that funds have bought 7,200 contracts of corn and 3,900 contracts of soybeans, while selling 7,600 contracts of wheat. In the soy products, funds have bought 2,400 soyoil and 3,800 contracts of meal.
US export inspections for the week ending July 7 at 36.7 million bu of corn, 13.1 million bu of soybeans, and 11.4 million bu of wheat. The US has exported 1,937 million bu of corn (down 397 million or 17% from last year), 1,917 million bu of soybeans (down 206 million or 9.7%) and 70.6 million bu of wheat (down 16 million or 18%). So far, the Russian war against Ukraine has not boosted US corn or wheat exports.
Argentine political and economic stability is being questioned amid rising debt, a falling Peso and new protests following the resignation of the country’s economic minister last week. Argentina is considering several economic measures to preserve dollar holdings. Argentine farmers sensing a deeper devaluation of the Peso have started to hoard old crop cash grain.
The midday GFS weather model offered soaking rain from E Iowa and across the northern third of IL/IN this weekend which was a wetter change. Rain totals are estimated in a range of 0.5-2.00”. The GFS ensemble model is drier in this slot and like the overnight run. We suspect that the GFS midday forecast is too wet, but the forecast models have trouble in forecasting ridge riding rainfall systems. Thereafter, the forecast is hot/dry for the Plains and the W Midwest with the mean position of the ridge progressing eastward to the Plains and the W Midwest. Extreme heat will be the result across most of the Central US. The extreme heat looks to persist into July 25.
There is just no room in the US or world balance sheets for any adverse Central US or EU weather. July USDA Crop reports tend to be a non-event and after its release, the market’s attention quickly returns to weather. We doubt the wetter midday GFS model since it is not backed up by the Canadian or the GFS ensemble models. The tropical system forming along the Gulf shore is causing the model fits. The best rain chances will be across the Northern Lake States and Ohio. Otherwise, hot/dry weather will likely drop US crop conditions and yield estimates. Oiur concern for US/EU weather remains high.
HEADLINES: GFS midday forecast calls for crop threatening central US heat/dryness; China seeking Australian/Canadian wheat.
Chicago futures are sharply higher with the grains leading the bull parade. China is rumoured to be seeking additional wheat in Australian and Canadian markets, while still asking for US offers from the PNW. And pre TRQ demand from private buyers in US corn is ongoing. Amid the newfound Chinese wheat demand (most likely Sino or COFCO as buyers), it is expected that the state will return for US corn with current price offering strong import margins. China and world feed importers see the recent break as providing an economic opportunity. Although US export sales were horribly this week, an uptick in demand is being felt around the world, with the US joining in some of the new business.
Chicago brokers report that funds have bought 7,600 contracts of wheat, 8,700 contracts of corn, and 4,500 contracts of soybeans. In soy products, funds have bought 4,300 contracts of soymeal and 2,300 contracts of soyoil.
The US July Employment report showed that 372,000 joined the non-farm workforce which eased worries over a nearby recession. The US unemployment rate held at a low 3.6% with strong demand for future workers noted.
US wage pressures ebbed, and the outlook for US job improvement looks favourable. The US jobs market outlook allows the US FED job easier to manoeuvre into a soft landing. US growth of manufacturing is occurring, and US inflation rates will ebb by September on a year-on-year basis measures improve.
FAS/USDA reported that for the week ending June 30 the US sold 10.5 million bu of wheat (4.2 million bu hard and 3.9 million bu spring hard), cancelations of 2.6 million bu of old crop corn sales and 4.4 million bu of new crop, with 5.9 million bu of old crop soybean sales and 8.8 million bu of new crop. Soybean cancelations came from China and unknown destinations that were rumoured last week.
For their respective crop years to date, the US has sold 222 million bu of wheat (down 23 million or 11%), corn sales are 2,376 million bu (down 368 million or 13%) with US soybean sales at 2,200 million bu (down 74 million or 3.2%). US new crop soybean sales at 505 million bu are near the record highs, and a strong US soybean export program is ahead.
China is rumoured to be seeking Canadian/Australian wheat as their buying program spreads. And new US corn demand is also being cited from private buyers that are likely trying to get ahead of state agency buying.
The midday GFS weather forecast is drier than the overnight run, which has been a trend of recent model runs. A high-pressure ridge retrogrades west to a position over the Intermountain West and then progresses back into the W Midwest late next week. Midwest rains will end in the next 24 hours with a drier trend to follow as a ridge amplifies over the Plains and slowly progress east to the C Midwest during the 7–14-day period. Extreme heat builds with highs in the upper 90’s to lower 100’s. The extreme heat looks to persist into July 23. The forecast going forward looks dry with extreme heat to return and add stress to pollinating corn and podding soybeans. Our concern for Central US weather is elevated, and rising sharply following the latest GFS forecast.
The holiday shortened week has produced a late week recovery on threatening US/EU weather and Chinese grain import demand. The GFS midday forecast is one of the hottest and driest that we have seen in years beyond the coming weekend. La Niña remains entrenched, and history argues for late season Central US crop stress. And the European drought looks to worsen into late July. This week’s rains have eased stress, but such rain would be gone with 6-10 days of hot/dry weather. Our US/EU weather worry is high.
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HEADLINES: Central US weather goes drier/warmer. China purchasing US corn, sorghum, wheat. Russian wheat export taxes.
US grain demand rumours, Russian export doubt and crude oil recovery.
Chicago grain futures are sharply higher at midday in a recovery of the lashing of prior trading days. Improved US export demand, strong domestic biofuel margins and concerning Central US weather forecasts have combined to lift Chicago values. Wheat has paced the recovery with soybeans/corn in tow. Managed money appears to be willing to embrace the buy side of the grain ledger with the July US Employment report to report that the US added 200-225,000 new jobs. The adding of new hires to the US workforce will tap down on the discussion of a looming US recession. “Risk on” is the theme of the morning with hedge funds unwilling to hold cash for long periods of time. Energy and ag markets appear cheap compared with existing fundamentals.
However, traders are not willing to chase the morning rally with the Weekly FAS Export Sales Report due out tomorrow. Traders fear that China cancelled or rolled forward 8-12 cargoes of US soybeans late last week, which would be seen as bearish. Rumours abounded in the cash markets of China cancelling US August soybeans which could be reflected in the weekly sales data.
Chicago brokers estimate that funds have bought 4,200 contracts of corn, 2,200 contracts of wheat, and 3,100 contracts of soybeans. In the soy products, funds have bought 3,400 contracts of soyoil and 3,800 contracts of meal.
There are cash rumours that China may have purchased US sorghum out of the Gulf and wheat/corn off the PNW. The tonnages involved are 400-600,000 mt of US corn for January/February shipment and 200-300,000 mt of wheat, and 120-180,000 mt of sorghum. The buying is likely for a private Chinese group. We note that China’s pork price has been soaring to their best levels in years which has turned feeding margins profitable.
In the past few years China has purchased sizeable tonnages of French wheat for feeding/milling purposes (and to comply with their WTO obligations). US SRW wheat is far cheaper then French offers into China, and one must be aware that China could engage in a US SRW wheat purchase program under existing price relationships.
Question abounds on whether wheat exported from Russian occupied Donbas region (Mariupol port) will be subject to Russian export taxes. If the taxes do not apply, then the grain is Ukrainian, and should be considered stolen. The Russian occupation of E Ukraine is likely to persist for a long time. How the world sees the grain exports from this region will be important. Few world wheat millers want to be seen as using stolen wheat to produce flour. Ukraine is already making a media frenzy on the use of stolen Ukrainian grain.
Brazil’s CONAB trimmed their estimate of the 2022 Brazilian soybean crop to 124 million mt, down 300,000 mt from last month. The Brazilian total corn crop was forecast at 115.7 million mt, up 500,000 mt from June. We maintain that the CONAB’s 2022 corn estimate is too high by 4-6 million mt.
The GFS weather forecast is drier than the overnight run, which has been a trend of recent model runs. A high-pressure ridge retrogrades west to a position over the Intermountain West and then progresses back into the W Midwest. The best chance for Midwest rain is over the next 24-36 hours with a frontal pass-through Illinois/Indiana. Rain totals are estimated in a range of 0.2-1.00”. A decidedly drier trend follows with the ridge to amplify over the Plains and slowly progress east to the W Midwest during the 11-15 day period. Our concern for Central US weather stays elevated.
Recessionary worry produced the 2-week Chicago break. Lower US soybean seeding and a seasonal low in wheat looks to maintain a bullish trend. Amid China’s feeding margins to hogs as profitable, we hold to a bullish price trend.
HEADLINES: Midday GFS more threatening amid warm/dry central US weather; Paris wheat fills open chart gap; crude oil tries to recover.
Chicago grain futures are under pressure at midday with an early rally effort failing amid new selling in the energy markets. WTI spot crude oil futures have fallen another $3.00/barrel to $96.00 which pulled a host of raw material markets lower. Chicago grains, cotton and energy futures are lower at midday on fresh selling. Recession fears and the strong US$ capped the early commodity rally. The US$ has nearly reached its best level in 2 decades based on rising US interest rates. The minutes of the June FMOC meeting will be released early this afternoon with the US July Jobs Report will be out this Friday. Traders are gauging the health of the US economy and whether the US Central Bank has been able to talk inflationary trends lower. The UN will release their July Food Index measure on Friday with today’s ISM data showing ongoing new growth in demand for US consumers. And the US jobs growth on Friday would help confirm that the US economy is not in recession.
Chicago brokers estimate that funds have sold 9,200 contracts of corn, 4,200 contracts of wheat, and 5,500 contracts of soybeans. In the soy products, funds have sold 4,500 contracts of soyoil and bought 1,200 contracts of meal.
Pakistan has yet to buy 500,000 mt of wheat with world futures markets in a freefall. Pakistan is still in negotiations with multinational exporters, but it is becoming likely that Pakistan could cancel this tender and issue another for next week. Pakistan is expected to import 3-4 million mt of wheat in 2022/23 to boost domestic supplies.
Ukraine doubts a political deal to unblock its grain exports will happen soon. Ukraine foreign minister Dmytro Kuleba cast doubt on a breakthrough in talks with Russia that unblock ag exports outside of the 1.2-1.8 million mt that are leaving through Eastern Europe. Russia continues to seek that NATO members drop their economic sanctions for a grain export corridor. Such a sanction drop is a nonstarter.
The lack of Ukraine marine grain exports amid soaring costs due to the war has pressured Ukraine domestic grain bids to farmers. Reports have Ukraine farmers receiving record low bids (near $100/mt for wheat) which is causing them to push their newly harvested grain into on farm storage. The low cash bids will ultimately cause Ukraine farmers to abstain from planting a new wheat crop and hope that the war ends before next spring, when row crops can be seeded. Capital availability for most Ukraine farmers is becoming strained.
Paris wheat futures have fallen to a key open chart gap that was filled with the break today. This pushed Paris wheat back to the pre-invasion price. However, with the €uro likely to trade at a parity with the US$, demand for its wheat is likely to keep quickly rising with the export line up growing.
HEADLINES: Recession worry increases as fund related selling increases across all asset classes; Bottoms are formed on fear.
The Sky is Falling!
Chicago futures are sharply lower at midday with corn, soybean and wheat falling to double digit losses as a host of asset classes are in freefall. The US DOW has lost another 700 points amid growth/recession worry while crude oil has fallen to $98/barrel, down a sharp $9.00. Whether it be stocks or commodities, the trade has been to sell returning from the US July 4th holiday. The US$ has reached a new rally high on a flight to safety.
Amid the sharp price drop in Chicago values in the past 2 weeks, traders suggest that the “sky is falling” and that a comment from US Fed Chairman Powell that the US Central Bank will get inflation back to the 2% target through rising interest rates continues to ring in the ear of investors/traders.
The ongoing fear is slow growth and recession, and a future drop in demand. Can the US Central Bank put the economic genie back in the bottle to cure inflation at a time of war in the Black Sea. The worry about a landscape of rising interest rates and a slowing US economy has sent grain markets into a tailspin amid reduced liquidity.
Yet, the cash grain markets are holding far better (than futures) as indicated by the July-Sept corn spread pushing out to a $1.50 July premium. The cash market is holding on demand amid profitable margins in ethanol, renewable diesel, and biodiesel. US farmers have shut down cash selling amid the 2-week market freefall in both old and new crops. Historically, trading bottoms tend to occur in the days following the July 4th holiday. WASDE will be using their update seeding estimates in their July balance sheets, and the 2.7 million bu decline in US soy seedings will be difficult to overlook.
Stats Canada estimated 2022 total wheat acres at 25.4 million acres of wheat (up 8.7% or 2 million. acres from 2021) with canola seeding at 21.4 million acres (down 5% or 1 million acres). Oat seeding was 3.97 million acres or up 550,000 acres. The wheat and oat seeding data was viewed as slightly bearish, while canola acres were slightly bullish. Canada will face another year of exceptionally tight canola stocks/supplies.
The Russian Ruble has had a 10-cent range today with an early day low of 55 cents and high of 65.5 cents vs the US$. The weaker Ruble has jolted the export tax rate upwards by $30/mt, which would normally be bullish to world wheat. But in a day where everything is being sold so hard, the information is being passed over amid the fear of a pending recession. Chicago grain and world financial markets have already digested a bad recession (that has yet to be christened). The US may be in a recession already, but this just makes the FED’s battle against inflation all that more difficult. Be prepared for wild swinging financial and commodity markets. A recession today makes their fight against structural inflation more difficult.
The midday GFS weather forecast is similar to the overnight run with a high pressure ridge to retrograde west to a position over the Intermountain West which maintains hot/dry weather over the SW Midwest and the S Plains.
The Upper Midwest enjoys ridge riding rainfall with totals of 0.75-2.00”. The GFS forecast keeps the mean position of dangerous high pressure aloft across the Southern and Central Plains, with the jet stream lifting northward into Canada in the 8–14-day period. The shifting of the ridge back and forth from the Plains into the SW Midwest will cause fresh episodes of heat/dryness across the W Midwest and the Plains.
Margin calls have pushed Chicago grain values to sharp losses on economic recessionary fear. November soybeans are testing $13.00, December corn $5.70 and September Chicago wheat $8.00. Recessions have historically not produced big drags on US grain demand, but combined US exports of just 44 million bu has caused nearby trade worry. Based on new crop corn prices, we calculate that US ethanol producers are making $2.30/bu and renewable diesel producers $2.70/gallon. Grain fundamentals are bullish, but macro-economic concerns are in their way. Be patient with sales, a sharp recover will ensue once recessionary worry lows are scored in the coming days. US labour hiring is active.
