Market Thoughts 7/10/2022
September corn gained 13’4 this week to finish at 633’2, having rallied over 50 cents from a 582 low on Wednesday morning. August soybeans gained 3’4 to close at 1513’2 and similar to corn, posted a massive rally after falling all the way to 1494 on Wednesday morning. Spring wheat was actually the strongest performer on the week, adding 43’6 to close at 991’6. September spring wheat had fallen all the way to 870 on Wednesday, a decline of 536 cents (!!) from mid-May highs before bouncing over a dollar to close out the week.
Grains finally post a correction after a staggering drop the past three weeks that included spring wheat closing lower 12 consecutive days. The first phase of the decline, back in late May/early June, was certainly tied to grain fundamentals as risk premium eroded following most acres getting planted, favorable early crop conditions, poor export sales, more evidence of grain leaving Ukraine, etc. The past two weeks though appear to have little to do with fundamentals and more to do with the large speculator indiscriminately leaving the market as energy, metals and nearly all commodities have posted big losses recently. The June 30th report was incredibly bullish to beans and neutral to wheat/corn. Weather certainly hasn’t been bearish and winter wheat yield reports have been abysmal. While southern Illinois and Indiana did get forecasted and much needed rains, a big chunk of the eastern Corn Belt remains too dry heading into a stretch of hot weather. Stocks posted lows a month ago and have been trending higher. It sure appears there’s enough support here for grain prices to hold up if the fund liquidation is finally over.
So what happens next? We’ve been talking about the seasonal comparison to 2008 for nearly a year. We recently began adding in 2011 as similarities to that year also exist. We said a couple weeks ago we’d have an idea soon which year it was going to more closely follow – 2008 with losses all the way into harvest or 2011 with a major rally off an early July low. Today’s not looking too bad for 2011. 2022 and 2011 closed at near identical prices on this date (apropos of nothing but still kind of cool) after both made early July lows and then bounced sharply. 2022 also has at least the making of a late season “flash drought” story like the one that propelled 2011’s rally.