Morning Comments August 8, 2022

Beans 062419

Friday’s trade was relatively calm compared to what we had seen in the days prior, with corn soybeans and wheat closing lower but all within a dime of the previous day’s close. For the week November soybeans lost 60, December corn lost 17, while wheat was down 33.

Friday’s jobs numbers came in far better than expected, with the economy adding 528,000 jobs in July, well above the 250,000 anticipated ahead of the report. July’s gain marks the 19th straight month of job growth and a full recovery in employment after Covid. This data was important as it indicates members of the Fed have a long way to go before significantly cooling the economy. 

Over the weekend the Senate managed to pass a massive $750 billion dollar policy and climate bill with a tie breaking vote from the vice president. The bill has over $400 billion allocated to battle climate change, with $20 billion of that being set aside for ‘climate smart ag practices,’ including but not limited to additional incentives for planting cover crops and sequestering carbon.

The bill also includes a $1.25 to $1.75 per gallon tax credit for sustainable aviation fuel, a jet fuel created from soybeans, corn or other grains and oilseeds. The fuel is currently only used in about 0.5% of overall jet fuel demand due to poor economics, with the tax credit set to offset some of the additional cost seen. 

With nearly 400 million bushels worth of additional soybean demand being created domestically through planned renewable diesel, biodiesel, and other biofuel projects, many in agriculture were glad to see the credit make its way to the final draft. Others were less enthused with some in the oil industry continuing to claim sustainable aviation fuels and other biofuels are more carbon intense than typical energy sources.

Global grain traders were encouraged to see more ships making their way out of Ukrainian Black Sea ports over the weekend, with the first foreign flagged ship arriving to load grain Saturday. The pace is expected to further quicken, with the Ukrainian Infrastructure Ministry claiming upwards of 3 mmt of grain per month will be possible soon. 

In other geopolitical developments, China announced a continuation of military drills around Taiwan beyond their original Sunday deadline, claiming the island is their territory and they are operating well within their rights as a country. Taiwan has claimed the drills aren’t impacting trade flows but has demanded an immediate end to what they call provocative activity. 

Looking ahead we will continue to monitor geopolitical developments as well as outside economic activity. We will get July inflation data this week for the US, with traders expecting to see a downturn in consumer prices from last month. The USDA will release export inspection data this morning with us needing to ship 28.5 million bushels of soybeans, 81 million bushels of corn and 15 million bushels of wheat each week to meet USDA projections. 

We will get updated crop progress after the close, with deterioration expected to be seen across the Western Corn Belt as heat and dryness took its toll on the crops in drier pockets. Rainfall over the weekend was better than expected in Northern Iowa, with little to nothing falling south of I80 unfortunately. The week ahead is expected to be mostly cooler than last week from Iowa to the east, though dry weather is expected to remain across much of the area west of the Mississippi.

Traders will start to square their positions ahead of Friday’s USDA report as well, with NASS giving us their first crop yield estimate. Markets are a touch lower this morning, with energies down after trying to stage a recovery overnight. 

Corn down 4 to 7

Beans down 3 to 8