Morning report: Rising temps lift corn, soy. Plus – what you need to know about yesterday’s Federal Reserve rate hikes. (Comments are updated by 7:30 a.m. Central Time.)
Corn up 8-12 cents
Soybeans up 4-6 cents; Soymeal down $3.20/ton; Soyoil up $1.55/lb
Chicago wheat up 15-16 cents; Kansas City wheat up 12-16 cents; Minneapolis wheat up 12-16 cents
*Prices as of 6:50am CDT.
Good morning! Farm Futures is currently conducting its annual August survey, which will help farmers anticipate 2022 corn and soybean yield prospects as well as provide the first look at 2023 acreage intentions. The yield results of our survey will be announced prior to USDA’s August 2022 WASDE report, while I will announce the results of 2023 acreage findings at the 2022 Farm Progress Show.
If you would like to participate in our survey – which is one of the few exclusively farmer-sourced estimates on the market – you can click this link to join in the fun. Thank you!
Leading up to those yield results, my latest E-corn-omics column focuses on evaluating the significance of USDA’s annual August yield estimates. Since 2000, the August corn yield has eventually been revised higher 12 out of the last 22 years, or 55% of the time. This means that there is likely more uncertainty in banking on 2022 corn yields this far ahead of harvest.
There can be a little more certainty with soybean projections. In the past 22 years, USDA has only revised final soybean yields higher 8 times (36%) following the August yield report. That means that there is a higher chance for bullish price action for soybean crops this year, especially if USDA ends up cutting 2022 soybean yield forecasts in January 2023.
The recent heat wave could throw USDA’s August 2022 yields off historical paces. Plus, we know that NASS is currently resurveying June 30 acreage estimates for Minnesota and the Dakotas due to planting delays in that region this spring. The added variability in 2022 production is likely to increase the degree of difficulty in predicting final yields for the 2022/23 marketing season.
Feedback from the Field updates!
How does your farm’s crop conditions stack up against other farms around the country? Click this link to take the survey and share updates about your farm’s crop development. I review and upload results daily to the FFTF Google MyMap, so farmers can see others’ responses from across the country – or even across the county!
Corn
Corn prices traded $0.08-$0.12/bushel higher this morning as worries about heat stress over the next week threatened yield potential for the 2022 U.S. corn crop. Timely rains during peak reproductive stages for corn and soybean over the past couple weeks contributed to lower prices for both commodities, so the recent heat wave worries are a welcome reprieve for corn growers.
“The dry and hot weather expected from next week are worrying operators. The crops condition could deteriorate again,” French consultancy Agritel told Reuters this morning.
Weekly ethanol production volumes are beginning to taper off seasonal highs. Updated weekly production and demand data released by the U.S. Energy Information Administration (EIA) yesterday point to a 1.3% weekly drop in ethanol output volumes, which fell to 1.02 million barrels/day of output through the week ending July 22.
The four-week average dipped to 1.03 million barrels/day of production, marking the lowest point for the metric since the summer driving season began through the week ending May 27, 2022. A two-week decline in consumer fuel demand prior to the latest reporting week likely led ethanol producers to ease back production last week even though consumer gasoline demand rose 8.5% on the week to 9.2 million barrels/day – a three-week high.
This should not be interpreted as bearish price activity for corn markets. With school activities slated to resume in the next month, regular daily travel activities are likely to keep fuel demand steady this fall, provided prices do not continue to soar to prohibitive heights.
Soybeans
Soybean futures prices inched up $0.04-$0.09/bushel overnight as impending hot and dry weather for the Upper Midwest threatens to limit yield potential for the 2022 crop. It is peak pod development time for much of the U.S. soybean crop, so any extreme weather duress is likely to have a direct impact on yields.
Wheat
Wheat prices rallied this morning $0.12-$0.19/bushel higher as once again doubts crept back into the market about the ability for a Russian-Ukrainian grain deal to free trapped Ukrainian grain supplies.
The first grain shipment from Ukraine since February is expected to depart in the coming days. Meanwhile, SovEcon upped 2022/23 Russian export forecasts, though early season volumes have been lower than anticipated as European originators remain the world’s preferred wheat supplier at the moment.
International wheat demand remains strong, with Bangladesh issuing an import tender overnight. The demand for wheat across the globe continues to prop up prices in the U.S., where this morning’s export report is expected to show favorable 2022/23 sales prospects even as the dollar showed signs of strengthening overnight.
Weather
Temperatures remain moderate across much of the Corn Belt today, especially as showers continue to douse areas of the Southern Plains and Southern Corn Belt, according to NOAA’s short-range forecasts.
More showers are expected to sweep through the Southern and Central Plains today, with some southern edges of the Eastern Corn Belt benefiting from the cross-country rain system as well. The system is likely to hover over the region through Saturday, which bodes favorably for depleted soil moisture volumes in the drought-stressed Southern Plains.
Between an inch and two inches of accumulation are forecast over the next 24 hours from Eastern Colorado and New Mexico to Southern Indiana through Tennessee.
Above average temperatures continue to plague NOAA’s 6- to 10-day and 8- to 14-day forecasts updated yesterday. The persistent dryness in the Heartland is expected to continue through the first week of August.
Financials
Federal Reserve officials lifted the key federal funds interest rate by 0.75% yesterday. The unanimous decision by Fed governors brought the fed funds rate to 2.25%-2.5%. Fed chairman Jerome Powell’s comments following the interest rate hike announcement suggested that the rate increases could slow down in the future, though the chairman offered fewer details about upcoming rate hikes.
It was the second consecutive month the Fed implemented a 0.75% increase in the fed funds rate. Prior to last month, the last time the Fed hiked rates by such a high increment was in 1994. “With Wednesday’s action, the central bank has raised rates since March as much as it did between 2015 and 2018 and returned the fed-funds rate to a level last seen three years ago, before a slowing economy led the Fed to cut rates slightly,” the Wall Street Journal observed.
Markets rallied following Powell’s comments, with the S&P 500 closing yesterday’s trading session at $4,023.61 – the highest point since June 8. The S&P 500 index clawed back out of bearish territory a week ago as some recessionary pressures abated.
Powell noted that the Fed’s interest rate increases had not yet showed signs of curbing inflation, though noted that slowing consumer spending and house purchases, as well as business hiring, had slowed during the second quarter. However, cooling economic data is not likely to trigger slowing Fed rate hikes just yet, especially as inflation remains elevated at 40-year highs (the June 2022 Consumer Price Index rose 9.1% higher from year-ago values).
“These rate hikes have been large, and they’ve come quickly,” Powell said yesterday. “And it’s likely that their full effect has not been felt by the economy, so there’s probably some significant additional tightening in the pipeline.”
To that end, the U.S. Commerce Department will release U.S. GDP projections through the second quarter of 2022 today, which is likely to reflect slower spending and production in response to inflationary and more broad economic pressures.
The Wall Street Journal expects to see a 0.3% annual increase in GDP through Q2 2022. It points to a modest economic expansion as historically low unemployment levels (currently at 3.6%) suggest that not all aspects of the economy are suffering from inflationary pressures that could in turn trigger a recession as the Fed raises interest rates.
“I do not think the U.S. is currently in a recession,” Powell noted of the recent job growth. “There are just too many areas of the economy that are performing too well.”
U.S. GDP shrank 1.6% in the first quarter of 2022 from the previous year due in large part to a widening trade deficit thanks to the dollar notching 20-year highs and slower inventory replenishment by companies.
S&P 500 futures edged 0.22% lower this morning but still held steady above the $4,000 benchmark at $4,015.50. Today will be a big day for corporate earnings on Wall Street. Results from Amazon, Apple, Comcast, Microsoft, and Honeywell expected today could influence stocks’ direction today, especially if the outlooks factor in current economic data.
What else I’m reading this morning on our website, FarmFutures.com:
AgMarket.Net’s Jim McCormick explains how to price in weather risks from the U.S., South America, and Europe into current commodity market pricing.
Ed Usset’s latest marketing character, Terry Timer, aims to price grain before harvest, but holds off if the price is lower than production costs. Does this strategy work?
Dave Kohl explains why taming inflation and stopping a recession is difficult for the Federal Reserve.
Bryce Knorr forecasts the chances of corn and soybeans becoming collateral damage from another Federal Reserve interest rate hike expected today.
Morning Ag Commodity Prices – 7/28/2022
Contract
Units
High
Low
Last
Net Change
% Change
SEP ’22 CORN
$ / BSH
6.14
6.0125
6.1225
0.12
2.00%
DEC ’22 CORN
$ / BSH
6.1725
6.0375
6.1525
0.1225
2.03%
MAR ’23 CORN
$ / BSH
6.2375
6.1075
6.21
0.11
1.80%
MAY ’23 CORN
$ / BSH
6.2725
6.145
6.25
0.11
1.79%
JUL ’23 CORN
$ / BSH
6.265
6.1475
6.245
0.1075
1.75%
SEP ’23 CORN
$ / BSH
5.8675
5.7875
5.8675
0.075
1.29%
DEC ’23 CORN
$ / BSH
5.6975
5.635
5.685
0.04
0.71%
AR2 ’24 CORN
$ / BSH
5.77
5.755
5.7675
0.0475
0.83%
MAY ’24 CORN
$ / BSH
0
#N/A
5.7525
0
0.00%
AUG ’22 SOYBEANS
$ / BSH
16
15.7875
15.815
0.0275
0.17%
SEP ’22 SOYBEANS
$ / BSH
14.505
14.275
14.345
0.1
0.70%
NOV ’22 SOYBEANS
$ / BSH
14.34
14.125
14.1975
0.0975
0.69%
JAN ’23 SOYBEANS
$ / BSH
14.405
14.19
14.2475
0.0825
0.58%
MAR ’23 SOYBEANS
$ / BSH
14.3425
14.155
14.205
0.08
0.57%
MAY ’23 SOYBEANS
$ / BSH
14.305
14.1225
14.1425
0.04
0.28%
JUL ’23 SOYBEANS
$ / BSH
14.25
14.0825
14.115
0.06
0.43%
AUG ’23 SOYBEANS
$ / BSH
13.8825
#N/A
13.7875
0
0.00%
SEP ’23 SOYBEANS
$ / BSH
12
#N/A
13.275
0
0.00%
NOV ’23 SOYBEANS
$ / BSH
13.205
13.0275
13.0325
-0.0325
-0.25%
AN2 ’24 SOYBEANS
$ / BSH
11.5
#N/A
13.0925
0
0.00%
AUG ’22 SOYBEAN OIL
$ / LB
62.82
61.18
62.81
1.63
2.66%
SEP ’22 SOYBEAN OIL
$ / LB
61.64
59.9
61.6
1.75
2.92%
AUG ’22 SOY MEAL
$ / TON
496.5
484.2
485.6
-3.3
-0.67%
SEP ’22 SOY MEAL
$ / TON
448.6
440.1
440.7
-5.3
-1.19%
OCT ’22 SOY MEAL
$ / TON
430.3
420.9
421.4
-6.5
-1.52%
DEC ’22 SOY MEAL
$ / TON
428.8
419.1
419.9
-6.2
-1.46%
JAN ’23 SOY MEAL
$ / TON
426
416.8
417
-6.3
-1.49%
SEP ’22 Chicago SRW
$ / BSH
8.0975
7.8625
8.065
0.1625
2.06%
DEC ’22 Chicago SRW
$ / BSH
8.28
8.06
8.245
0.16
1.98%
MAR ’23 Chicago SRW
$ / BSH
8.4425
8.225
8.41
0.16
1.94%
MAY ’23 Chicago SRW
$ / BSH
8.5175
8.3925
8.4925
0.16
1.92%
JUL ’23 Chicago SRW
$ / BSH
8.45
8.225
8.425
0.16
1.94%
SEP ’23 Chicago SRW
$ / BSH
8.43
8.33
8.4225
0.155
1.87%
DEC ’23 Chicago SRW
$ / BSH
8.46
8.3525
8.46
0.17
2.05%
SEP ’22 Kansas City HRW
$ / BSH
8.81
8.6
8.765
0.1475
1.71%
DEC ’22 Kansas City HRW
$ / BSH
8.875
8.6725
8.83
0.14
1.61%
MAR ’23 Kansas City HRW
$ / BSH
8.9025
8.71
8.85
0.1225
1.40%
MAY ’23 Kansas City HRW
$ / BSH
8.915
8.76
8.8625
0.1225
1.40%
JUL ’23 Kansas City HRW
$ / BSH
8.74
8.62
8.74
0.13
1.51%
SEP ’23 Kansas City HRW
$ / BSH
8.6425
8.5825
8.6425
0.07
0.82%
DEC ’23 Kansas City HRW
$ / BSH
8.7425
#N/A
8.585
0
0.00%
SEP ’22 MLPS Spring Wheat
$ / BSH
9.25
9.09
9.24
0.14
1.54%
DEC ’22 MLPS Spring Wheat
$ / BSH
9.3625
9.2
9.36
0.14
1.52%
MAR ’23 MLPS Spring Wheat
$ / BSH
9.4525
9.3075
9.4525
0.125
1.34%
MAY ’23 MLPS Spring Wheat
$ / BSH
9.54
9.395
9.54
0.1275
1.35%
JUL ’23 MLPS Spring Wheat
$ / BSH
9.58
9.58
9.58
0.1375
1.46%
SEP ’23 MLPS Spring Wheat
$ / BSH
9.2
9.2
9.2
0.0925
1.02%
DEC ’23 MLPS Spring Wheat
$ / BSH
9.255
9.255
9.255
0.08
0.87%
SEP ’21 ICE Dollar Index
$
106.82
105.925
106.78
0.449
0.42%
SE ’21 Light Crude
$ / BBL
99.56
97.59
99.41
2.15
2.21%
OC ’21 Light Crude
$ / BBL
97.55
95.64
97.42
2.13
2.24%
AUG ’22 ULS Diesel
$ /U GAL
3.8
3.721
3.796
0.0787
2.12%
SEP ’22 ULS Diesel
$ /U GAL
3.7308
3.6371
3.7128
0.069
1.89%
AUG ’22 Gasoline
$ /U GAL
3.45
3.4227
3.4419
0.0131
0.38%
SEP ’22 Gasoline
$ /U GAL
3.1907
3.1476
3.1786
0.025
0.79%
AUG ’22 Feeder Cattle
$ / CWT
0
#N/A
179.1
0
0.00%
SEP ’22 Feeder Cattle
$ / CWT
0
#N/A
181.85
0
0.00%
AU ’21 Live Cattle
$ / CWT
0
#N/A
136.8
0
0.00%
CT2 ’21 Live Cattle
$ / CWT
0
#N/A
142.325
0
0.00%
AUG ’22 Live Hogs
$ / CWT
0
#N/A
118.6
0
0.00%
OCT ’22 Live Hogs
$ / CWT
0
#N/A
96.45
0
0.00%
JUL ’22 Class III Milk
$ / CWT
22.53
22.53
22.53
0.02
0.09%
AUG ’22 Class III Milk
$ / CWT
20.63
20.53
20.55
-0.12
-0.58%
SEP ’22 Class III Milk
$ / CWT
20.21
20.21
20.21
-0.11
-0.54%
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