Morning Comments July 15, 2022

Soyplus Truck Entering Loadout

Another roller coaster day yesterday as markets lurched between supportive fundamentals and a general negative market sentiment. On the day we saw Chicago wheat close 16 lower, with November soybeans down 8. December corn found support on talk of extreme heat and dryness across Europe and thoughts Western Corn Belt corn will be pollinating in extreme heat and while experiencing moisture stress.

Global trade flows have come into focus as of late as signs of economic concern in nearly every country leave many traders uncertain as to what happens next. In China worry continues to grow as the movement to boycott mortgages on unpaid properties spreads. Overnight China's beleaguered Evergrande group announced the resumption of nearly 60 construction projects around the country. 

In addition to concerns over what is taking place in real estate, traders are now recognizing the significant downturn in Chinese imports as well. June imports only grew 1% on the month, despite the significant uptick in prices versus the year prior. Domestic demand remains poor for just about every commodity, with June soybean imports down 23% year over year, and overall soy imports for the year off 5.4%.

Signs of Chinese demand weakness were evident in this week's export sales report as well, with another week of significant cancellations by 'unknown' and China. With yesterday's cancellations, soybeans have now seen 600,000 metric tons (21.9 mbu) worth of sales reductions over the last 3 weeks. The drop in commitments has taken US exports from well above USDA projections with calls for further cuts to carryout, down to where it's possible we could see the USDA lower old crop exports if the trend were to continue.

Corn export demand is incredibly poor as well, with another week of poor sales punctuating weak global demand and the affects of a strong dollar on our place in the global corn market. Old crop corn sales over the last 2 months are the lowest for the time period since 2013, leaving US exporters with nearly 72 million bushels worth of corn to sell over the next 6 weeks. 

The same could not be said for last week's wheat export sales though, with the US seeing its largest weekly wheat sales figure since July 2013. Much of the excitement over the big Chinese purchases apparently hit the market a week ago however, as the wheat market continued its trend of extreme weakness. US soft red wheat remains the cheapest in the global market though, likely opening us up to some additional business, especially if talk of reopening Black Sea ports for grain exports fail to come to fruition.

Speaking of Black Sea ports, positive talk out of Turkey regarding a deal to resume safe exports likely being signed some time next week was trumped by reports of continued Russian atrocities with forces bombing civilian centers, universities and other important pieces of infrastructure throughout the Eastern portions of Ukraine currently under siege.

As it stands currently Ukraine has managed to create some ways to work around current Black Sea blocks, transporting grain out of the country via truck and rail, with additional river ports being reopened recently after the recapture of Snake Island. Estimates put Ukrainian exports for July near 3 mmt, still down from prior monthly averages of 5 mmt, but astounding considering many grain transport routes have been reworked in less than 5 months.

Looking ahead we continue to watch weather as models again underperformed on some overnight rain development in Iowa. Ridge riding storms remain in the forecast, with meteorologists finding it nearly impossible to pinpoint who is in for measurable rain more than a few hours out. 

The August forecast remains mixed as well, with models continuing to point towards heat and dryness, but other indicators showing a possible switch back to a more active pattern. 

Crude managed to find significant support yesterday, bouncing back from early lows and performing well from a technical standpoint. With the sell off being as aggressive as it has over the last several weeks, it is possible a relief rally is in the cards no matter the economic outlook, though failure to hold strength throughout the day would be an indication the market may want to take another leg lower.

Corn steady to 2 higher

Beans steady to 2 lower