Today’s Grain Market Update

by Andy Schwab

DTN reports:

Equities, energies, and metals all bounced early on Tuesday, following the recent financial market meltdown and the Federal Reserve’s aggressive interest rate hike. The U.S. dollar paused its nonstop rally to give grain and soy markets a much-needed boost. Wheat futures led the market higher, but the bullish euphoria appears short-lived, as the Fed is expected to remain hawkish in coming months. The equity markets ended up selling off late in the session, while the U.S. Dollar Index again approached the high. Corn and soybeans could not hold early gains, with beans closing lower.

Wheat:


Despite the U.S. Dollar Index recovering from the morning lows to once again challenge Monday’s contract high, wheat futures were able to salvage a higher close Tuesday. The dollar has lately been on a meteoric rise, as the Federal Reserve, to slow rampant inflation, has continued to aggressively raise lending rates. That has, in turn, made our already overpriced wheat too expensive for world importers. After two straight big down days, wheat was able to manage a solid higher close Tuesday. Both U.S. and world wheat supplies remain at multi-year lows, but due to aggressive offers from both Ukraine and Russia, U.S. wheat exports are lagging. The weather has provided a bullish tailwind for wheat, as the extreme drought in parts of the U.S. southwestern Plains continues to clip yield potential for hard wheat. However, winter wheat is just 31% planted at this point, with major producer Kansas just 19% seeded. There is plenty of time to replenish soil moisture, but the forecast for the next two weeks remains mostly hot and dry. Spring wheat harvest will wrap up this week, with only North Dakota to go, with 7% of harvest remaining as of Sunday. Expectations are for Sept. 1 wheat stocks to be 1.795 bb, compared to 1.774 bb last year. Although Ukraine continues to ship wheat from Black Sea ports, new-crop planting is not faring so well, with just 16% of the intended acreage planted thus far, as Russian occupation is likely to reduce wheat seeding; the Ukraine ag minister expects just over 10% less area for wheat. Wheat remains in a minor uptrend, but trade remains extremely volatile, impacted by war news, as well as world financials and the direction of the U.S. dollar. DTN’s National HRW Index closed at $8.88 — 42 cents below the Dec contract.

Corn:

Corn futures began Tuesday on solid footing, rising on the heels of recovering financial markets early. However, Dow Jones futures began to crumble midsession, dropping for the sixth consecutive day. The dollar, which was down early, recovered to again test Monday’s new 20-year high. Corn futures still managed to eke out a very small gain for the day. Demand for U.S. corn has left much to be desired lately, as U.S. corn offers are at a sharp premium to those of both Ukraine and South America. With the recent plunge in crude oil futures and lower gasoline demand, corn for ethanol usage has also declined. The weather ahead is mostly warm and dry, which will accelerate harvest efforts through the week. Corn is now 12% harvested nationally — a bit behind the five-year average. Basis levels, while still firm, are transitioning from old to new crop. China’s corn price is falling as well, and China interest in U.S. corn has been nonexistent. South Korean feed groups tendered for corn on Monday, with FLC reported to have bought 68,000 metric tons (mt) of South American corn, and MFG buying 137,000 mt of either South American or South African corn. So, while the emphasis was on tightening corn supplies in the U.S., it is the demand factor, especially in light of recession fears and slowing global growth, which has been a major headwind for corn prices. Friday features NASS’ quarterly Grain Stocks report; the average estimate for Sept. 1 corn stocks is 1.497 billion bushels (bb), according to the Dow Jones survey, compared to 1.235 bb a year ago. Funds remain net long in the corn market, estimated to be holding a net long, with options, of over 160,000 contracts. For now, December corn remains in a bullish trend, but look for a fall below $6.62 to result in increased selling. We closed just a nickel above that level. DTN’s National Corn Index closed at $6.74 — 8 cents over the Dec contract.