Morning Comments July 5, 2022

July corn

The sell off in grains continued Friday as funds looked for the exits ahead of the long weekend. On the day we saw December corn close down 12, July wheat lose 37 while November soybeans were down 63.

Funds were big sellers on the week, with numbers released after Friday's close showing larger than expected selling in both corn and soybeans through Tuesday. The liquidation is believed to have ramped up over the last half of the week, with those numbers not released until next Monday. 

As it stands based on last Tuesday's numbers, corn length has slid below the level of ownership seen a year ago, while soybean ownership remains the largest in nearly 10 years. Managed money shorts in both corn and soybeans remain at a multiyear low as well, though increases in open interest late last week indicated some new shorts are now entering the market.

Sell offs in other global markets have added some pressure to US markets as of late as well, as Malaysian palm oil values have dropped significantly from record highs seen in May. Fitch cut price expectations for global crude palm oil values late last week, taking their third quarter price targets down to nearly a third of what first quarter values averaged due to a backlog of supplies looking to move out of Indonesia and weakening global demand.

Matiff wheat had been a leader to the highside as well, before falling off hard as European harvest got under way. Yields in France and Italy are expected to be much lower than last year and slightly below average due to late season heat and dryness. Cash values have remained competitive on the global scale, with France winning much of the business in the unusually large tender seen out of Egypt last week.

Both markets seemed to have found support in their respective Tuesday trades, potentially offering some hope support will be found in oversold US markets when we reopen this morning as well.

Looking ahead, much needed rains were seen across a large portion of the country over the weekend, with more expected to fall today across the driest parts of Indiana and Ohio. 

Continued rain is expected to fall throughout the Corn Belt over the next 10 days, with models again indicating the potential for a drier trend reemerging the last half of the month. Meteorologists continue to struggle with confidence regarding extended forecasts, leaving us more focused on the short-term trend which is warm and wet.

We will get updated export inspections this morning with us again needing to see around 57 million bushels of corn, 22 million bushels of soybeans and 14 million bushels of wheat to meet USDA export projections. 

Rumors of China washing out of US bean cargoes due to poor margins and cheaper Brazilian values played a role in last week's selling, with more cancellations expected as Brazilian storage fills up, farmer selling accelerates and cash values turn cheaper versus US until at least harvest. Corn could potentially run into the same issues, though the phytosanitary agreement between China and Brazil is still being constructed.

Outside markets look to open weak today, with real concern starting to develop regarding European economic stability. Energy prices continue to soar, with German manufacturing beginning to show signs of major contractions and real plans to lower costs seemingly non-existent. China announced the lockdown of a city of 13 million in the north after 7 local Covid cases were discovered. This after jubilation and excitement regarding the prospect of the country abandoning its Covid Zero plans.

Opening calls this morning are mixed. Weather and outside markets are pointing to a lower open, but with markets as oversold as they are, a bounce isn't out of the question.

Corn down 9 to 15

Beans down 45 to 50