Morning Comments June 23, 2022

Sillouette Landus Cooperative Silo Sunrise

Wheat rallied big on the reports of two different export facilities receiving damage from a Russian missile strike in Mykolaiv, but struggled to maintain strength into the close, only finishing up a penny. Corn spreads exploded, with July corn closing up 7, while December corn finished down nearly 8. Selling in soybeans was relentless, taking July beans 28 lower, while November beans were down 34.

Weather remains dry for much of the Corn Belt in the short-term, but we are seeing more rain chances showing up for the Western Belt in the 1-5 day forecast, with widespread precipitation still evident in the 11-15 day. Temperatures are expected to moderate for the most part, with days of above normal offset by days of normal or below for highs.

Outside markets and economic news continue to capture the attention of traders as Fed chair Jerome Powell spoke yesterday, indicating a soft landing for the economy may not be as easy to achieve as he had initially thought. When pressed further on his thoughts regarding the risk of a recession, he pushed back saying the risk of not responding aggressively and letting inflation grow entrenched into the economy is far greater. 

Current market trends indicate the expectation of continued rate increases into mid-next year, topping out around 3.6%.

The risk of a recession and subsequent demand reduction pushed Goldman Sachs to lower their prices targets for a whole host of commodities yesterday, even backing off on their $140 oil projection, though they expect prices to remain elevated.

In addition to evolving market outlooks from Goldman Sachs, JP Morgan announced the layoff or reassignment of nearly 1000 employees in their home lending department yesterday. They have become the third lending company--and the largest--to make such a move, saying they expect the downturn in housing to be swift and last for an extended period of time.

Recession fears and lacking liquidity has prompted the exit of some speculators from the market, with commodities weakening from recent highs across the board. Interesting to note the lead month in Malaysian Palm Oil is now 45% off its recent record highs. With values still remaining elevated at double what they were a year ago, the fear has become that further liquidation with limited buying interest could exacerbate moves.

Both soymeal and soyoil have fallen off hard in China recently as well, with soybean meal down significantly overnight, while soyoil extended recent losses, losing another 4%. The drop in product value and limited demand as buyers wait to see if prices get cheaper, has pushed crush margins back to negative across the board, prompting Chinese traders to expect continued hand to mouth demand through the end of summer.

As mentioned, the confirmation of damage to two different port facilities in Ukraine yesterday pushed wheat futures higher before a late day sell off erased gains. Reports of positive talks between Russia and Turkey have been mostly brushed off as the likelihood of any substantial progress in opening a grain corridor seems limited. 

However, in an interesting twist, senior members of the Biden administration announced yesterday any countries struggling to source fertilizer or grains from Russia should reach out for help, again reiterating sanctions do not apply to those items.

Looking ahead, we will get updated energy info this morning, looking again at ethanol production numbers and stocks. Basis levels remain firm throughout much of the Corn Belt from Illinois to the West, with talk of strength starting to surface in Indiana, indicating continued strong demand for ethanol.

We will continue to monitor weather, though this morning with limited news we are seeing a relatively sharp sell off. It is possible we could be in for a bit of a reset as technical indicators start to turn negative and managed money starts to move to the sidelines. 

Meteorologist Eric Snodgrass, will be our guest today for peer group, make sure to set your reminders for 2:30 pm eastern for an awesome discussion about what to expect weather-wise in your neck of the woods. 

Corn down 13 to 17

Beans down 30 to 35