MORNING MARKET UPDATE
Futures Prices 8:30am CT
Overview
Grains sharply lower overnight and to start this morning, after the week-long rally. Pressure coming from the announcement early this morning that Ukraine's first shipment of grain has left out of the port of Odessa.
The first shipment is 26,000 metric tons of corn. It is a four-way grain deal. Will be sent to Istanbul, Turkey for inspection. With its final destination being Lebanon. Ukrainian Infrastructure Minister, Oleksandr Kubrakov said Ukraine would start consultations to try to open up the port of Mykolaiv if the grain deal holds in full. The Ukrainian officials said that there were 17 ships docked in Ukraine’s Black Sea ports with nearly 600,000 metric tons of cargo. 16 of which held Ukrainian grain totaling 580,000 metric tons. Ukraine expects to reach full capacity for transporting agricultural goods within a few weeks.
This is the first grain shipment to leave Ukraine since the deal was made between Russia and Ukraine by Turkey and the U.N. last month. If this first shipment goes well, it would likely be the start of moving up to 20 million tons of Ukraine’s grain that were estimated to be stuck within their ports
Today's Main Takeaways
Corn
Corn lower in the overnight and to start off the morning. Dec-22 is now back down near the 20-day moving average. Pressure coming from the news of Ukraine shipping its first export.
However, it appears we are looking at another wave of heat and dryness across the majority of the Midwest for the next two weeks. This is the main support carrying the corn and bean markets currently. Last week we saw the USDA lower overall U.S. crop conditions from 64% down to 61% rated good/excellent.
The next two to three weeks should be interesting. As we did see some rain in a few areas last week so we may not see all that big of a reduction in ratings this week. If the drought continues conditions ratings will continue to drop and we will see demand pick up, leading to higher prices. If the rain comes and crop conditions raise, prices will follow lower. We will continue to be in a weather market for the next couple of weeks.
Demand currently hasn’t been amazing. U.S. exports on the slightly disappointing side.
It was announced this morning Ukraine's first shipment has departed. The shipment was 26,000 metric tons of corn.
According to the Bloomberg, corn-for-ethanol use is expecting an increase. Expectations totaling 449.9 million bu., which would be an increase of 0.9% or 3.8 million bu. from May. 2.3% higher than last year.
Nearby Dec-23 resistance is around that $6.50 to $6.75 range. We haven’t seen a close above $6.75 in over a month. Contract high was in May at $7.66 1/4. Will still likely be a lot of ups and downs and choppy trading.
Soybeans
Soybeans sharply lower this morning. Pressure coming from the news of Ukraine shipping it’s first export. As well as some technical selling and profit taking following last weeks rally.
Last week was on for the books. As it was a historical rally. Soybeans closing the week up over $1.50, being one of the best weeks we’ve had in over 20 years. Weather will dictate if we can push past $15 and possibly test the contract high of $15.84 3/4.
There is a ton of factors playing into the soybean market going forward. U.S. weather drought scares will be the largest factor. As well as concerns in the European Union and economic problems in Argentina.
Last week, the USDA lowered overall crop conditions from 61% down to 59% rated good/excellent.
Similar to corn, if weather and drought keep being a concern. We will see crop conditions continue to drop, and potentially rally back up to our contract highs. If forecasts change and we see an end to the drought concerns, the rally will come to an end.
June soy crush is expected to decline from May. According to the Bloomberg, the USDA is expected to report a June soybean crush at 174.6 million bu. Which would be down 3.5% or 6.3 million bu. from May. But an increase of 7.9% from last year.
Indonesia has removed all palm oil export restrictions on all types of palm oil products as well as cooking oil. Palm oil farmers have recently been suffering from low prices caused by the government's attempts in keeping food prices lower.
Soymeal & Soyoil
Soymeal down -9.5 to 409.0
Soyoil down -1.65 to 64.01
Wheat
Wheat sharply lower to start the morning. All three contracts fell below the green line. Pressure coming from the Ukraine exports this morning, and the potential for more supply to be hand with the situation.
There is still obvious concerns surrounding Ukraine and its exports. As this headline has dominated the wheat market for some time now. The concerns being the question marks surrounding the safe passage of exports. With some more military strikes hitting Mykolaiv, which caused quite a bit of damage. These concerns follow into more worries for the bulls. What does this mean for next year’s production, and how much grain does Ukraine have sitting around.
Last week the USDA lowered overall spring crop conditions from 71% down to 68% rated good/excellent
The USDA reported that 77% of the US winter wheat crop was "harvested" vs. 80% on average.
There have been some recent rains in several regions of Russia that have hurt the quality of winter wheat but improved yield prospects for spring wheat.
Crude Oil
Crude oil down very hard this morning, over -$5. Currently at $93.44
Inflation
In July, the stock market had its best gains since November of 2022. A large part of this being the belief that recession has eased and inflation will be pulling back.
NASDAQ rose +12%
S&P 500 rose +9%
Dow rose +7%
This leads many to believe we may not see the Feds need to raise rates and high as once was feared. Jerome Powell (Fed Chair) made some comments last week that brought some optimism that the Feds will pull back on rate increases.
Many are questioning if we are really in a recession. However, last weeks GDP showed negative growth for the second consecutive quarter. Many are hopeful Feds will only increase rates half a point next meeting.
News
The Ukrainian grain tycoon Oleksiy Vadatursky, founder and owner of the agriculture company “Nibulon”, was killed in his home by a missile strike on Sunday. Headquartered in Mykolaiv, Nibulon specialized in the production and export of wheat, barley and corn.
Strategie Grains has lowered its forecast for this year’s EU sunflower seed crop to 10.35 million metric tons from 10.87 million metric tons from a month ago, due to impacts of drought. They previously projected the sunflower seed crop would surpass last year’s record volume.
The USDA supply and demand report will be out next Tuesday.
Closing Thoughts
If demand keeps surging for both corn and soybeans. We could very easily see the markets try to push and test the highs we saw here in May and June. However, if we see any rain in August and these drought concerns ease, this could not happen until spring. Any rain will cause a ton selling, especially given last weeks rally. On the other hand, if drought continues and we don’t see that rain, corn and beans will both keep climbing higher. Weather, drought, and rain will dictate which way we go. With the addition of inflation and recession. Many believe we may have already made our lows, time will tell.
Weather
Weather as if recently, currently remains a crucial factor as we begin the month of August. Which is typically a critical month.
We expected to see extreme heat across most of the Corn Belt this week. Precipitation is somewhat mixed. There is however some additional rain expected in Kentucky today, as they suffered from floods over the weekend.
The 7-day precipitation forecast has rain later in the week for part the eastern Corn Belt. Central and Western areas of the Corn Belt still looking pretty dry.
Source: National Weather Service