• jcrist18

Market Thoughts 7/24/2022

Brutal week for corn with September futures off 40 cents to close at 564’2. Corn easily broke through support at lows from two weeks ago and proceeded to fall another 20 cents, making this the lowest close for nearby corn since November 10th. Soybeans didn’t fare much better, dropping 31’4 and also taking out the lows from two weeks ago, though beans did mount a slight comeback on Friday. This was the lowest continuous close for beans since late January. Spring wheat actually managed to perform somewhat better, only losing 35 cents with an 871’0 closing price that was right at the lows from two weeks ago.

Several things contributed to this week’s declines. Crop-saving rains fell in southern Indiana/Illinois while crop condition ratings nationally were better than expected. Forecast models shifted to less severe heat as we head toward peak pollination. And then the Ukrainian wheat deal. It was announced on Friday that Russia and Ukraine had agreed to a deal allowing up to 25mln bu of old crop grain (mostly wheat) to be shipped out starting immediately. That’s certainly bearish grains but more troubling was the market reaction to it. This deal had been expected for nearly two weeks and grains had been sliding all week leading up to it. The market should bounce (or at least level off) following confirmation of news that had been rumored. It’s a very bad sign that corn and wheat were sharply lower on Friday following the announcement.

U.S. new crop wheat exports are at a 9 year high for this date and the market should be skeptical on this Ukraine deal until wheat actually starts flowing. There was a story over the weekend that Russia bombed grain infrastructure in the port city of Odessa, possibly causing the deal to be tossed. (We don’t know if that’s even true, have only seen it on a couple obscure news sites, but that’s the sort of news the market should still be sensitive to. Price Signals are into strong buy territory for corn, wheat and canola and it seems likely at least a modest bounce. But our hopes are all but diminished now for a 2011-style late summer bounce to new highs.

It’s a good time to revisit goals for a recovery/bounce on all three crops. The new crop corn seasonal that we’ve been taking about for months gave us optimism for a 2011-style recovery three weeks ago but since then the 2022 chart looks decidedly similar to 2008. From this point forward 2008 featured a brief spike back above 6 in mid-August before collapsing to new lows while 2011 fell all the way back to 601 by expiration. It would seem at this point values over 600 Dec are opportunities.

Similar exercise for beans, with 1350-1450 likely being the upper limit of any bounces from this point forward.

Spring wheat closed at nearly identical price to this date in 2008 and is actually higher than 2011 on same date. The seasonal comparison suggests a recovery to the 950-975 area on last bounce.

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