Morning Comments August 24, 2022

Corn closeup

A big day for corn yesterday as we have now retraced 50% of the summer move. Wheat and soybeans were firm as well on money flow and a return to commodities by new longs. December corn finished the day 26 higher, with December wheat up 12 and November soybeans up 26. 

The Pro Farmer Crop Tour worked its way through the rest of Eastern Nebraska and Western Indiana into East-Central Illinois yesterday. Scouts found a continuation of variability throughout Nebraska with early season storm damage evident. The crop was thought to be more uniform across Central Indiana, though some variability in areas due to a cool, wet spring and a hot and dry June were evident. 

Yield estimates to wrap up the day came in much lower than last year and the 3 year average for Nebraska, with tour participants gathering samples pointing towards a state-wide yield of 158.5 bpa compared to last year’s tour estimate of 182.35 and the 3 year average of 176.68. Pod count data came in lower than last year and lower than the 3 year average as well.

In Indiana, the crop is more in line with average observations, which is thought to be somewhat disappointing in the face of the need for a record crop to offset Western Belt losses. Tour participants put their state estimate at 177.85 bushel per acre, in line with the 3 year average of 178.26 but down from last year’s 193.48 estimate. Pod counts were somewhat surprising, coming in slightly better than the 3 year average, but lower than last year.

Traders will be watching closely today as the tour wraps up its observations in Illinois and moves into Eastern Iowa on the Eastern leg of the tour, snaking up the Western side of Iowa on the Western leg. A continuation of mostly disappointing observations along the Western leg of the tour is likely to happen today, with much of Western Iowa missing out on much needed rains throughout the growing season.

The remaining parts of Illinois and what scouts see in Eastern Iowa will become of the utmost importance today as observations so far throughout Eastern and East-Central Illinois have been disappointing. Meteorologists and academics had been discussing this area with concern throughout the summer as rains split the region. The concern appears to have been evident as both Pro Farmer and another well followed tour in the region have been disappointed in what they’re finding in fields so far.

In addition to concern over poorer than expected tour results, corn bulls got a shot in the arm yesterday as traders are beginning to anticipate greater than expected Chinese corn demand due to their own drought reduced crop. It is interesting to note however cash traders in Brazil continue to lament falling basis values as farmers and commercials work to wrap up harvest on a record corn crop. 

Industrial demand for corn in China seems to be falling off however, as demand for corn starch continues to drop. Traders are attributing the fall in demand to Covid reductions and shifts in consumer tastes. According to Chinese agricultural analytical group Sitonia Consulting, industrial capacity is running at about 44% for August, down from a 60% run rate in June. Demand reductions and energy shortages are said to be behind the drop as corn processing margins run at near 2 year lows. 

Looking ahead, we will continue to monitor outside market sentiment as the flight from commodities seen in July has done an about face. Increases in open interest seen so far this week point to new longs entering the market, with an increase in volume seen as supportive to price as well. 

The market is currently running on sentiment, with it seemingly able to turn on a dime. The Fed and other central bankers from around the world gather tomorrow facing an unprecedented task, bringing with them a risk of sentiment shift.

Corn up 8 to 10

Beans up 10 to 15