Morning Comments August 1, 2022

Sillouette Sunset Location Rail

After a strong week, corn and wheat had a quiet finish, with wheat down 9 and December corn down 1 on Friday. Soybeans added to their epic move, finishing 28 higher. On the week we saw corn close 56 higher, with November soybeans up $1.53, both having the best week in the life of the contracts. Wheat added 48 cents. 

The focus Friday was on hot and dry forecasts for the Corn Belt this week and beyond, with both the Euro and GFS calling for temperatures in the 100s across Iowa up into the Dakotas. As this forecast has rolled forward through the weekend however, it has cooled a touch. Des Moines' forecast has went from multiple days above 100 to two days in the upper 90's with the rest of the week expected to see highs in the upper 80's and low 90's.

The lack of rainfall in the region remains concerning however, with the 7 day precipitation outlook putting any amounts of measurable rainfall east of the Mississippi. Meteorologists continue to contend more rain should build into the Western Corn Belt next week, but many in the area believe another week with heat will definitely take the crop backwards, with some of the extremely dry pockets becoming more evident.

Heat and dryness in Europe is having obvious impacts on the crop there as well, with only 68% of the French corn crop rated good to excellent. This is down significantly from last year's 90% rating for this week in the production season. Many analysts continue to cut their production estimates in the region, possibly having big implications on supplies available for export. Similar to what we are seeing in the Western Corn Belt, forecasts this week keep heat and dry weather in the short term, with rain expected next week.

Speaking of exports, we saw the first ship loaded with Ukrainian corn leave Odesa this morning, expected to arrive in Turkey for inspection tomorrow. If all goes well this is the first of an estimated 16 ships in the region set to sail.

Over the weekend members of Ukrainian agriculture and industry participants around the world were shocked to learn one of the founders of Ukraine's largest grain exporters was killed when a missile struck his home in Mykolaiv. Whether the attack was intentional remains unclear. 

In other news, we are watching Speaker Pelosi's Asian trip closely as she is rumored to be stopping in Taiwan while in the area, something China has warned will cause unrest in the region. No plans to make the stop were seen in the speaker's official itinerary released Friday, though overnight news leaked that a stop is in the works still for tomorrow afternoon.

China again quickly responded, saying a stop in Taiwan would force them to take "resolute responses" and "strong countermeasures." 

In addition to concerns over a potential showdown regarding Taiwan, we continue to monitor what is happening when it comes to China's property sector as an estimated $350 billion in losses could happen if a worst-case scenario failure situation were to develop.

With some banks already over-exposed to potential downturns in real estate, many analysts continue to struggle with how developers will access financing to restart stalled projects. Evergrande, China's largest and most beleaguered developer failed to deliver on restructuring plans by the end of July as it had promised as well, increasing concerns that a plan to fix the ailing industry is becoming harder to come by. 

Looking ahead, we will of course be watching the weather, though it currently appears as though geopolitical and economic concerns will step into the driver's seat. We will get updated export inspections this morning at 11 eastern, with the US needing to ship 30+ mbu of beans and 60+ mbu of corn a week to meet USDA projections.

We will also get updated crop progress figures this afternoon at 4 eastern with more declines in Western conditions expected. 

Corn down 13 to 17 

Beans down 25 to 30