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Due to the extreme heat index our locations will have hours of 5:30a-3p through 7/1/22.  The office will be closed Monday July 4th.

June 24, 2022

Futures stabilized today as the selling that has taken place all week finally subsided, especially in corn and soybeans. A decline in Managed Money liquidation was a primary reason for the firmer markets, although renewed concerns over US weather forecasts was also a factor. Temperatures are forecast to moderate into July, but rainfall is expected to remain light. This comes at a time when crops are starting to need more moisture. This week’s break did not attract buying interest which was discouraging for market bulls. The US remains the highest priced source of commodities in the world market which is hampering buying interest. 

Trade is receiving mixed weather outlooks. Temperatures across much of the Corn Belt are forecast to recede from recent highs, providing at least some relief for crops. Precipitation is becoming more of a concern than heat though as 19% of the US corn and 11% of the soybean production areas are listed as being in moderate to severe drought. Most attention is being given to Illinois as drought expanded to cover 47% of the state. This is up 30% in just the past week and comes just ahead of the pollination time frame of development. 

Export sales for the week ending June 16th were mixed. Corn sales rebounded considerably from the previous week with 26.45 million bu (mbu) on old crop and 14.1 mbu for new crop. Soybean sales were a marketing year low on old crop at just 1.08 mbu. This was largely in part from several cancellations, including from China. Soybean bookings for 2022/23 were better at 9.7 mbu. Wheat sales came in at 17.56 mbu for this year and 20,000 bu for next year. All sales were above the volume needed to reach yearly USDA projections, even on soybeans. 

Beef sales for the week were down 36% from last week at 11,200 metric tons. Pork sales were also down on the week, declining by 8% for a total of 25,400 metric tons. Japan was the top US beef buyer and Mexico took the most pork for the week. We did see small sales of both beef and pork to China. 

Chinese officials have released their soybean import data for the first five months of 2022 with a noticeable shift in where soybeans are being sourced from. Through May China imported 20.5 million metric tons (mmt) of soybeans from Brazil and 16.7 mmt from the United States. For the same period in 2021 China had imported 21.5 mmt from the US and 15.6 mmt from Brazil. A slow start to the Brazilian harvest reduced their imports from that source last year as did the Chinese buying from the US to meet Phase 1 obligations. 

Basis values across the United States have been mixed for the past several weeks and are showing no sign of changing. Basis values remain firm in the Western Corn Belt where very little movement is taking place, especially on corn. Basis is weaker in the Eastern Corn Belt as last year’s crops were larger than normal and stocks remain plentiful in most areas. As we approach the next harvest basis values will likely start to soften across the board as buyers anticipate new crop deliveries. 

One of the primary driving factors of trade for the past several months has been managed money participation. Buyers saw commodities as a means of investing last spring and steadily added to their long positions. These buyers are now showing less interest in the commodities as inflation is starting to cause economic concerns around the world. There are economists who believe that this lack of managed money interest will continue which will pressure futures, even with supportive fundamentals. 

The cold storage report for May showed the US supplies of beef and pork continue to grow. At the end of May the United States had 519.2 million pounds of beef in storage. This was down 2.5% from April, but still a record volume for the month. It was also 103 million pounds more than May 2021 reserves. Pork in cold storage came in at 543 million pounds, a 17% increase from last May’s 462.5 million pounds. This was the 5th consecutive of expanding US pork reserves, but the total was still under what was stored pre-Covid. Pork belly inventory at the end of May stood at 56.4 million pounds, a sizable 20 million pound increase from May 2021.