Morning Comments July 28, 2022

Planter Kent Drone Photo

Markets were yesterday as wheat sold off a bit after its recent rally, with corn and beans supported by next week's hot and dry forecast. To end the day we saw September wheat down 13, with December corn up 2 and November beans up 26.

Fed chair Jerome Powell confirmed the market's suspicions and raised interest rates by 75 points yesterday. The hike is historical, though outside markets seem completely comfortable with it, rallying after the announcement on the idea we will soon get rate hikes out of the way and that the economy remains seemingly strong. 

We will get updated GDP data this morning, with traders expecting minor second quarter growth, narrowly avoiding the text book definition of a recession. The strength in the job market and some better than expected earnings figures has the Fed optimistic we can avoid a complete economic downturn, with many saying his words yesterday were far less hawkish than we had been hearing recently. 

In addition to Fed confidence we are seeing activity in the Senate, with a $280 billion dollar Industrial Policy Bill passed yesterday and senators coming to an agreement on a reported $369 billion dollar climate bill overnight. The moves by the Fed and our lawmakers definitely give conflicting signs to the market as spending our way out of inflation seems to be an extraordinary feat.

Speaking of stimulus, markets were also supported overnight on reports of a Chinese Real Estate Relief package making its way towards finalization. The package is said to provide state banks with billions of dollars in low interest loans in order to finance the partially completed real estate projects plaguing consumers and weighing heavy on the economy as a whole.

Here at home we will get updated export sales figures this morning, with poor results expected again for old crop corn and beans. Traders will be watching wheat sales closely as early sales figures have been better than what we had grown accustomed to over the last several months.

Yesterday's energy data was a bit surprising with bigger draws than expected in gasoline and oil supplies. Ethanol production was off slightly, with stocks down as well. 

Looking ahead we will continue to monitor what is happening in the Black Sea. The first ships loaded with wheat are set to leave one of the Ukrainian ports today, with work being done to open the Port of Odesa. Officials hope Ukraine's largest port will be open and ready to ship within a couple of weeks. Turkish officials are optimistic when it comes to the corridor deal, saying they believe upwards of 25 mmt of grain can be shipped by the end of the year if both parties work to facilitate the agreement.

Russia continues to contend sanctions are limiting their ability to sell grain, threatening the termination of the deal if more rollbacks don't take place.

As mentioned, we will be looking at second quarter GDP data closely this morning as it will give us insight into consumer spending trends and what the economy looks like at ground level. We will also have nearly $10 trillion dollars worth of earnings reports out today, which traders expect will give them greater insight into what companies are experiencing and how they are feeling about the future.

We have had earnings reports from two major publicly traded ag companies this week, with both showing large upticks in income and bullish on ag throughout the rest of the year and into next. 

Weather remains key as we look ahead, forecasts are for heat to build into the Western Corn Belt next week, with the ridge parking itself in Iowa for a handful of days. Models appear to break down the dryness in the 11-15, but without moisture crops will definitely take a hit with high temperatures expected to soar into the mid 90s throughout the Western Belt with low 90s expected elsewhere.

Corn up 8 to 12

Beans up 9 to 14