Morning Comments July 18, 2022

Full Moon Over Location

Wheat continued its downward slide Friday, falling $1.15 on the week, while expectations of heat and some continued dryness in the Western Corn Belt helped to support prices into Friday's close. At the end of the day we saw December corn up 2, and down 20 on the week, with November beans also up 2, but down 54 cents on the week.

The moving pieces to the fundamental picture continue to grow as we see negative global macroeconomic signs out of China with a continued spread of Covid and lockdowns starting to increase. The concern developing over growing mortgage boycotts and what that would mean if it were to spread has been weighing heavy on investor sentiment as well.

Over the weekend, the Covid situation seemed to get worse, with case counts soaring to a new two month high and new cities adding to their list of restrictions. However, China's Banking and Insurance Regulatory group took a stand Monday regarding the issues at hand for real estate developers, helping to support both bank and developer stock.

What is being described as the group "strong-arming state owned banks into supporting troubled developers" will likely push banks to lend to developers in order to expedite the completion of the thousands of properties left unfinished across the country. In addition to the changes to banking, there has been a move from businesses threatening to fire any employees caught boycotting their mortgage payments as government officials do all they can to stop the protest.

Outside of China, the weather remains the main driver, with much needed rain falling across parts of the Eastern Corn Belt, but concerns are developing over what is taking place in the West. Throughout much of the last 6 weeks, a ridge was parked over Missouri, keeping Illinois, Kentucky, Indiana, Ohio, and others dry, while a more active pattern was seen in the West.

That ridge has moved west, parking itself over Texas and turning much of the Western Corn Belt over to very hot and very dry. The heat and dryness is expected to last through the end of the month with more rain expected to be seen as ridge riding thunderstorms develop.

Meteorologists believe we could see a switch in the pattern as we work into August, but models continue to leave the risk of more heat and dryness in extended outlooks.

Looking ahead, we will get updated export inspections later this morning, with a continued need to see an uptick in shipments. Friday morning we had a flash sale of new crop corn to China, the first of its kind in over a month, but that was rescinded later in the afternoon, making folks think it was likely a roll from old crop to new that was reported wrong.

We need to see around 55 million bushels of corn, 15 million bushels of wheat and around 25 million bushels of soybeans shipped each week to meet USDA expectations for the year. 

We will get updated crop progress numbers after the close as well, with traders expecting improved conditions to show in the Eastern Belt, with conditions likely starting to show some signs of stress, especially in the Southern Plains and the far Western Belt.

It all boils down to weather and the economic outlook moving ahead with a tug of war between funds looking to exit the inflation trade and potential fundamental adjustments that could come from lower production figures if realized. Fund length has been cut recently with the corn long down to its lowest level since October of 2020 and beans to their lowest since last December, potentially indicating a short term selling reprieve.

Catching a weather market bounce can provide a great opportunity to catch up on sales, but those opportunities could be short lived as we have seen, if outside market sentiment were to weigh further on commodities. Target orders will best catch these quick upward bursts if we get them.

Corn up 8 to 12

Beans up 25 to 30