Market Thoughts 6/12/2022
July corn gained 46’2 last week to close at 773’2, erasing nearly all of the prior week’s losses in a bounce very similar to the one from last year that we discussed last week. July soybeans finally took out the Feb 24th continuous chart daily high and reached 1784 on Thursday. In case you’re curious, that lands within 11 cents of the all-time high for soybeans of 1794’6 from September 4th, 2012. And spring wheat is back to acting like spring wheat, gaining 29’6 but performing by far the worst of the grains and at 1221’4 remains nearly 200 cents below its recent contract high.
Friday’s WASDE report was a little bearish to corn with both old crop U.S. stocks and new crop world stocks landing at the high end of expectations. Old crop bean stocks were ratcheted down as expected and now are forecast to be just 205 million bushels. Taking that carry into 2022 translates to only a 280 million bushel new crop carryout. U.S. and world wheat numbers featured minor changes despite massive uncertainty on wheat production and global trade flows.
Friday’s Consumer Price Index report revealed inflation increased again in May, coming in much worse than the trade expected and cratering equities. Outside market losses on Friday likely influenced more than a modestly bearish S&D report and grains held up fairly well considering. Two weeks ago we had a glimpse of what the future looks like if bearish news take hold for grains – enough acres planted, good early crop development and optimism toward a potential Ukrainian grain deal caused massive losses for corn and wheat. Last week quickly reinforced how far away we are from those factors being reality. Armchair quarterbacking the Ukraine/Russia grain deal continues to be quite difficult but it now looks extremely unlikely there will be a quick deal for Russia to allow passage of Ukrainian grain. Fighting intensified last week, including shelling of Kiev for the first time in weeks. And Russian demands accompanying the safe passage of ships makes it apparent the effort is not sincere but rather brinksmanship with global food security as a weapon. New crop corn/bean balance sheets are snug with no margin for error. We’ve been on this theme for quite some time but the soybean situation continues to look quite bullish. North Dakota likely PPs at least 2mln acres of soybeans, which by itself would drop carryout to around 200 million bushels, or in line with the carryout level that has old crop beans flirting with $18. Energy prices continue to rally, providing support for grains in the process. And Managed Money corn ownership has dropped to its lowest level since January. Managed Money sitting on buying power ahead of a growing season with zero margin for error; the last piece of the puzzle would be legitimate weather concern. We’re a ways from that currently with corn’s initial 73% good/excellent rating but it won’t take too many weeks with heat like this week to get the market excited. In the meantime, given the extreme volatility, it’s still possible the lows from two weeks ago are tested again in June but odds of major price collapse ahead of June 30th reports seem quite low.