Morning Comments July 8, 2022

Agronomy Early Corn

Relief rally, bargain hunting, dead cat bounce, yesterday's market move had plenty of different names it could be given, but for the very least at this point, it appears support has been found. At the end of the day, we saw Kansas City and Chicago wheats up 32 cents with Minneapolis up 37. September corn was up 9 with December up 11. November beans closed 32 higher. 

Rumors of Chinese buying interest for US corn and wheat combined with some recovery in the global vegetable oil market was behind a decent amount of yesterday's strength. With talk of China looking to stimulate their economy through infrastructure spending and restaurant coupons, traders around the world are hesitant to get too bearish on commodities until we see how this plays out. 

Interesting to note, however, Chinese soybean demand remains tepid at best as government auctions of 500,000 tonnes of soybeans out of reserves in the last two weeks have had zero buying interest. Crushers continue to battle negative margins and logistical nightmares, prompting them to slow or even stop production in some regions, citing terrible meal demand.

Chinese pork prices have surged in recent weeks after hitting multi-month lows early in the year. The government had stepped in making several rounds of pork purchases to put support under prices, helping hog producers see positive margins for the first time in several months. However, recent strength in hogs and a subsequent run up in pork prices has the government doing a quick about-face, threatening to release recently purchased stocks into the market if prices don't cool.

As mentioned, vegetable oil prices also found support midweek after Malaysian palm oil prices hit a one year low. Talk that Indonesia will remove export levies on palm oil exports was considered bearish to the market, but ideas the government may bump their required level of palm oil blending in the fuel supply to help soak up burdensome supplies brought buyers back into the space.

Here in the US, two of the more traditionally hawkish members of the Fed took the stage yesterday, both reiterating the need to see a 75 point increase in July, likely followed by the much discussed 50 point increase in September. Both members were also clear in their belief we can maneuver through rate increases and the current inflationary landscape without falling into a recession.

Traders will be watching this morning's jobs report to see if the job market is in fact remaining untouched by high production costs and possible shifts in consumer spending. With job openings recently seen at near record highs and wages continuing to show signs of growth, many feel the job market will be the best indicator as to whether or not our economy is remaining strong. 

Weather-wise after today much of the Corn Belt is expected to turn dry, with expectations of continued dryness over at least the next two weeks. Much of next week is expected to be cool throughout the bulk of the production area, with limited rainfall. Heat looks to build back in late in the extended forecast, with models showing some extreme warmth potential throughout the heart of the Corn Belt in the 11-15 day.

Forecasters continue to caution getting too comfortable with extended forecasts as models continue to struggle with carrying the current atmospheric conditions too far forward. We have also seen multiple incidents of heat signals being overstated in the past, providing some hesitancy when it comes to getting overly concerned. 

In any event though, the US is not out of the woods entirely yet when it comes to production potential but it is encouraging at least to have seen many of the driest areas get some type of moisture.

Looking ahead we will get updated export sales data this morning. Traders are expecting to see another round of cancellations in soybeans, especially after published reports of China washing out of US cargos throughout the week last week. If China were in yesterday making any type of purchase of corn or wheat as rumored, it would show up as an export flash at 9am eastern.

At the time of this writing wheat is up 19, with corn up 5--one final point worth nothing, we are now seeing the cash spread between corn and wheat making wheat a viable option for some feeders in the South. An astonishing feat considering how wide that spread has been throughout the year. It will be interesting to see if an increased availability in wheat can cool exceptionally hot cash values for corn in some regions. 

Corn up 8-13

Beans up 6-10