Morning Comments August 17, 2022

Corn 062419

Markets were weaker from the start yesterday as concerns over weather’s influence on Northern Hemisphere production begins to wane seasonally and worries over the condition of the global economy continue to weigh heavy. For the day we saw November beans down 31, December corn down 18, with Chicago wheat down 15.

The extended forecasts continue to call for normal to below normal temperatures across much of the heart of the country, with above normal precipitation expected across much of the Southern Plains up into the Eastern Corn Belt. At this point it appears only Nebraska and South Dakota will miss out on the spate of rains, but with recent rainfall and cooler temperatures, the crop outlook is expected to stabilize locally for the most part.

Rain is also expected in the driest parts of Europe where the Rhine River is at its lowest level in a handful of years, barely maintaining a level high enough to allow for barge traffic. While, like the US the above normal precipitation in the driest parts of the region’s growing areas will do little to increase crop size hit by one of the driest July’s on record, it will go far to stabilize the current production outlook and help start to replenish soil moisture.

Traders are continuing to monitor the situation in China as well as a major heat wave and drought has unfolded in the central and eastern portions of the country, dropping water levels, limiting hydro-based energy production, and raising concerns about crop potential. The areas in question are heavier into manufacturing than agriculture, with rice being the crop more heavily produced in the region and Sichuan only accounting for about 4% of Chinese corn production in recent years.

The heavy reliance on manufacturing and the risk of power cuts in the region has many local crushers and other industrial businesses shutting down until they feel comfortable with their energy supplies. These shutdowns are being contributed to the quiet nature of the Chinese bean buyer as it appears interest has all but died since the run of business put together early last week and the week before.

Looking ahead, today will likely be more heavily influenced by the macro environment and trader sentiment than anything. We will get updated retail sales this morning with traders hoping to see more in the way of consumer confidence. Outside markets rallied yesterday on increased revenues reported for both Walmart and Home Depot as the consumer gets used to “paying more for less.”

We will get July Fed meeting minutes today as well. The minutes are seen as valuable by traders as they give us insight into what the Central Bank is focusing on and what the conversation is surrounding rate hike decisions and monetary policy.

Updated energy information is expected mid-morning as well, with a focus on gasoline demand as prices continue to fall and consumers seemed to indicate a desire to drive again according to last week’s numbers. Ethanol production is expected to be down a touch on the week as seasonal slow downs and shutdowns rule the day and margins remain weaker than what we’ve grown accustomed to.

Speaking of ethanol, reports yesterday indicated that the US isn’t the only country possibly struggling with falling ethanol margins. Brazilian ethanol plants are reportedly seeing margins fall to levels so low plants shut down and sold corn back into the domestic market the last time they hit this point. With China working through its final list of requirements for Brazilian corn imports, the domestic market structure in the country will be important to watch.

Markets are mostly mixed this morning while we wait for direction.

Corn up 2 to 5

Beans up 5 to 10