Market Thoughts 7/17/2022
September corn lost 29 cents to close at 604’2 on Friday. That contract gapped nearly 22 cents higher on the open last Sunday and proceeded to quickly trade as high as 667’0 before immediately starting to collapse. Corn had a low of 584’6 on Wednesday, a decline of 82’4 from that Sunday night peak but still a couple cents above last week’s low. August beans finished at 1466’0, down 47’2 for the week. Similar to corn, August beans gapped sharply higher on Sunday night and traded all the way to 1552’6 before collapsing. Spring wheat managed to pull off something even more extreme, trading up to 1044’4 on Sunday night, 174 cents higher than the 870’4 low just three days prior, before quickly fading, closing lower all five days and finishing the week at 906’6.
Our 5/22/2022 edition of Market Thoughts made a detailed case for that week’s highs (and strong sell signals) being the seasonal highs for corn and wheat. On June 9th we had a sell signal for beans and suggested the same for them. Each day that passes makes those predictions look more certain. But as for what happens next, we’ve continued to point to the seasonal similarities 2022 shares with both 2008 and 2011. Each of those years saw grains post early spring highs followed by major losses into late summer. From that point, 2008 proceeded with a period of consolidation before more severe losses into harvest while 2011 saw grains rally back and make new highs. 2008’s extreme losses that fall were a combo of the crop generally finishing ok and total economic collapse as decades-long systemic mortgage fraud finally blew up. 2011’s gains were the result of a late summer flash drought and a “crop getting smaller with already tight carryout” rally. Last week we were feeling pretty good about the 2011 path, this week not as certain...
A few things happened fundamentally this week. The July WASDE report, while not shockingly bearish did see all three old crop carryouts increased month over month and toward the high end of trade guesses. This is not the sort of thing the managed money crowd wants to see – carryouts increasing late summer in what was previously a demand bull market is a bad sign. It was announced that Turkey, Ukraine and Russia have agreed to some sort of deal in principle to allow Ukrainian grain shipments to resume. This month’s inflation report came in at 9.1%, a new 40 year high and well above trade guesses. A new round of ugly economic news came out of China, including reports of banks not letting depositors withdraw funds. This helped push energies to new short term lows and the U.S. dollar to a fresh 20 year high. And weather continues to be the only real bullish fundamental for grains right now.
We still see legitimate weather issues making the crop smaller – extreme heat in the southwestern Corn Belt likely causes a decent chunk of acres to just get abandoned. Dryness and heat in the eastern Corn Belt is hurting yields and heat during pollination isn’t helping even the acres that are good moisture-wise. Late-planted northern corn acres remain a freeze risk and there are plenty of late-planted, average looking beans. All of this points to a crop that isn’t getting bigger with already tight new crop carryouts predicted. With new crop futures off 20-35% percent, this should be enough to hold off further losses even with the tough economic/macro news at the moment.
DEC CORN SEASONAL – 2022, 2011, 2008