Morning Comments August 9, 2022

Grain Bins

Monday’s trade was mixed and mostly quiet as traders continue to weigh the effects of a slowing economy against the idea of continued tight supply and demand fundamentals. On the day we saw September wheat close 4 higher, while December corn was down 3 and November beans were down 9.

Demand bulls got a shot in the arm early in the day as the USDA reported three different flash export sales on business done last Friday. We saw 4 million bushels of corn sold to Italy for new crop, with 4.7 million bushels sold to unknown for new crop as well. These corn sales are the first new crop corn flash sales we’ve seen since mid-June and are a welcomed sight. The USDA also announced a 4.8 million bushel sale on new crop beans to China, inline with rumored business being done at the tail-end of last week. 

Export inspections released later in the morning continued to show a much slower than needed pace to corn export shipments however, as we need to ship well over 80 million bushels a week to meet USDA projections for the current crop year and shipped just over 21 million. Soybean shipments were up on the week and were a multi-month high, though still slightly below the amount needed to ship each week, with wheat shipments a touch above the weekly amount needed.

After the close the USDA released updated crop progress figures, showing a larger decline in corn conditions than traders were expecting. Those judging the crop believe only 58% of the nation’s corn is in good to excellent condition, down 3% on the week when traders were anticipating a 1% decline. The biggest by state drops were seen in North Dakota where a 7% decline took the crop down to 72% good to excellent, with a similar 6% drop in South Dakota taking their crop down to 59% good to excellent. Both Iowa and Michigan saw 3% declines in their corn crop, taking Iowa down to 73% good to excellent, while Michigan sits at 61%.

Soybean conditions were down 1% on the week but inline with expectations. Like corn drops were seen in North and South Dakota with North Dakota down 4% on the week to 59%, while South Dakota was off 5% on the week to 60%. Michigan saw the biggest drop in bean crop conditions, down 7% on the week to 49% good to excellent.

In other news, the pace of shipments out of Ukraine is starting to pick up, though not without issue. The first boat released from Ukrainian ports was rejected by its buyer upon arrival yesterday with the buyer citing slow delivery. According to experts in the industry it is likely due to a disagreement among parties as to who is responsible for the freight bill that includes nearly 6 months of port wait time. Quality of the grain after having sat in the ship for an extended period is likely coming into question as well.

Once the backlog of ships that had arrived at Ukrainian ports prior to the invasion is cleared some Ukrainian grain industry members believe the pace of export shipments could meet if not exceed pre-invasion levels if ports and alternate export routes are used.

According to a director at one Ukrainian ag industry group over 6 mmt of grain could be exported each month, going on to predict that at that pace upwards of 70 million metric tons of grain could be shipped on the year. Other industry experts and analysts remain unconvinced as the line up of ships looking to head into the Black Sea for grain appears somewhat limited currently. Reports of difficulties obtaining insurance for foreign flagged ships to travel into the troubled region continue to plague optimistic shipment outlooks as well.

Meanwhile, China is again finding itself in a major battle against Covid as a post-lockdown travel surge has resulted in a large increase in cases. An area dubbed China’s Hawaii is under strict lockdown with nearly 25,000 tourists trapped there and subject to several rounds of tests until given an all clear. With local case counts doubling since last Thursday many residents are expecting to see further restrictions on travel and public gatherings.

Looking ahead we will continue to watch weather. The pattern looks to possibly break down in the 6-10 day period with cooler, more average temperatures working their way into the Corn Belt and rain potential picking up. Heat waves in China and Europe are keeping domestic prices in both regions supported as traders remember there is limited room for error in the current balance sheet. Analysts have already cut European corn outlooks, saying the region is experiencing its version of 2012 with France seeing its driest July on record and England having it’s driest July in 90 years. 

Markets are much stronger this morning across the board. Concerns over weather and uncertainty over what the USDA will do with yield forecasts will likely keep things violent but rangebound as we search for direction.

Corn up 10 to 15

Beans up 25 to 35Growing