Evening Report | July 15, 2022
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Your Pro Farmer newsletter is now available... Price action is volatile in the grain and soybean markets as traders juggle weather forecasts, the Ukraine grain export situation and macroeconomics. Forecasts signal conditions will be generally hot and dry across the Corn Belt over the next week, spurring concerns with pollination in some areas. But World Weather Inc. doesn’t expect a 2012-like situation. Ukraine, Russia, Turkey and the United Nations reportedly agreed to a framework deal to restart Ukrainian grain exports, which could be signed during the next week, though there will still be hurdles to normalizing grain shipments. On the economic front, inflation continues to soar, increasing odds the Fed will get more aggressive in raising interest rates. The U.S. dollar is also surging, pushing to new 20-year highs on a near-daily basis. Meanwhile, USDA’s July crop reports included no bullish surprises. We cover all of these items and much more in this week’s newsletter, which you can access here.
Impressive heat coming to U.S. Plains, western Corn Belt... A high-pressure ridge is expected to expand while drifting temporarily into the heart of the Plains and portions of the western Corn Belt this weekend and early next week resulting in what may be the hottest temperatures of the summer for these areas. World Weather, Inc. believes the stage is being set now for extremes in the Plains to range from 108 to 112 degrees late this weekend into Tuesday of next week with a possible extreme of 113. The western Corn Belt will not be quite so hot, but will still manage to see extremes of 96 to 105 with the hottest readings near and west of the Missouri River. The forecaster says Monday should be hottest in the Northern Plains, Tuesday will be hottest in the Central Plains and western Corn Belt and Wednesday will be hottest in the Delta. Some warming will also occur in the eastern Midwest, but it will be followed by a quick cool off as a deep trough of low pressure follows the heat wave frontal boundary across the northern Plains and Midwest.
World Weather says there is potential for the entire process to be repeated one more time at the end of next week and into the following weekend as the same scenario evolves. The two waves of excessive heat will warrant significant rain to replenish soil moisture that will be lost in key agricultural areas during the heatwave. Without moisture replenishment, the heat may be quick to return late next week when the ridge attempts to build up again and there will be more stress to the western Corn Belt because of the already depleted soil moisture at that time.
World Weather says as of the midday weather model run, most of the western Corn Belt and much of the Central and Southern Plains will not receive much more than a few scattered showers and thunderstorms that will likely fail in replenishing soil moisture. Soils will be drier 10 days from now than they are today in South Dakota, the southwest half of Iowa, Nebraska, Missouri and eastern Kansas. Areas from Texas to western Kansas and eastern Colorado will remain extremely dry.
Ukraine hurrying to get grain export deal... Ukraine is hurrying to clinch a deal with Russia, Turkey and the United Nations next week to export grain via its Black Sea ports, a senior Ukrainian official source said on Friday. Asked if it was realistic for the deal to be signed next week, the source said: “We really hope so. We’re hurrying as fast as we can.”
“An agreement on export of grain from Ukraine by sea may be signed in Istanbul with the UN’s mediation next week,” an EU source told TASS news agency. “Of course, after that, the agreement will require implementation, and our expectations are not too high,” he said.
A Russian negotiator says any agreement to restart Ukrainian grain exports will not lead to the resumption of Russia/Ukraine peace talks.
Russia raises wheat export tax... Russia’s wheat export tax for July 20-26 will be 5,984.9 rubles ($103.19) per metric ton based on an indicative price of $386.80, up from 5,558.9 rubles the previous week. The tax, however, is well below levels when it was pegged to the U.S. dollar.
USDA withdraws daily corn sale to China... USDA has withdrawn the daily corn sales announcement it reported earlier this morning totaling 133,000 MT to China for 2022-23. In the correction notice, USDA cited “updated information received from the exporter” as the reason.
NOPA June soy crush a little stronger than expected... Members of the National Oilseed Processors Association (NOPA) crushed 164.7 million bu. of soybeans in June, just above the average pre-report estimate of 164.5 million bushels. The crush pace dropped 3.7% from May but rose 8.0% from last year. NOPA implies the full June crush at 175.0 million bushels. At that level, we estimate crush for the first 10 months of 2021-22 at 1.848 billion bu., meaning it would have to total 357 million bu. over the final two months of the marketing year to hit USDA’s forecast of 2.205 billion bu., which was reduced by 10 million bu. earlier this week. Even if the crush pace slows in July and August, that level is achievable.
Soyoil stocks at the end of June totaled 1.767 billion lbs., the smallest inventory since September but 63 million lbs. more than traders anticipated. Soyoil stocks rose 230 million lbs. (15.0%) versus year-ago.
Nigeria approves GMO wheat from Argentina... Nigeria has approved imports of a drought-resistant, genetically modified wheat developed by Argentina’s Bioceres, a company spokesperson said on Friday. The permit issued by Nigeria’s National Biosafety Management Agency authorizes “the import of genetically modified wheat: IND-00412-7 for food, animal feed and milling” and is valid through July 2025. Nigeria joins the list of others who have already authorized the importation of goods made from Bioceres’ HB4 wheat, including Australia, New Zealand and Brazil.
U.S. consumer sentiment modestly improves... The University of Michigan’s consumer sentiment index rose 1.1 points in June but remains suppressed. The index of current conditions rose 3.3 points, while the index for consumer expectations dropped 0.2 point.
Director of consumer surveys Joanne Hsu said, “Consumer sentiment was relatively unchanged, remaining near all-time lows. Current assessments of personal finances continued to deteriorate, reaching its lowest point since 2011. Buying conditions for durables adjusted upwards, owing both to consumers who cited easing supply constraints and those who believed that one should buy now to avoid future price increases, which would exacerbate inflation going forward. Even with the adjustment, buying conditions remained 26% lower than a year ago. Consumers remained in agreement over the deleterious effect of prices on their personal finances. The share of consumers blaming inflation for eroding their living standards continued its rise to 49%, matching the all-time high reached during the Great Recession. These negative views endured in the face of the recent moderation in gas prices at the pump. Inflation expectations have held steady or improved somewhat. The median expected year-ahead inflation rate was 5.2%, little changed from the past five months. Median long run expectations fell to 2.8%, just below the 2.9% to 3.1% range seen in the preceding 11 months. Inflation uncertainty continued to grow, with 26% of consumers expecting prices to stay the same or fall over the next 5 to 10 years, up from 11% a year ago.”
Volatility in what Fed’s next rate hike will be... The odds of a 100-basis-point hike to interest rates stood at 83% early Thursday after June inflation data came in hotter than expected. But those odds dropped to about 45% following comments from Fed Governor Christopher Waller. “We don’t want to make snap policy decision based on some knee-jerk reaction to what happened in the CPI report,” Waller said.
Despite the stronger-than expected June inflation data, a 75-basis-point increase by the Fed at the conclusion of its July 26-27 monetary policy meeting seems most likely, but now there’s talk of an interim meeting in August. Fighting inflation is Washington’s top priority, despite negative impacts sharply tightening monetary policy could have on economic growth. That’s why recessionary concerns are mounting.
Long lines back at U.S. food banks as inflation hits high... The food banks, which had started to see some relief as people returned to work after pandemic shutdowns, are struggling to meet the latest need even as federal programs provide less food to distribute, grocery store donations wane and cash gifts don't go nearly as far, the Associated Press reports. The surge in food prices comes after state governments ended Covid-19 disaster declarations that temporarily allowed increased benefits under SNAP, the federal food stamp program covering some 40 million Americans.
Katie Fitzgerald, president and chief operating officer for the national food bank network Feeding America, is calling on USDA and Congress to find a way to restore hundreds of millions of dollars’ worth of commodities recently lost with the end of several temporary programs to provide food to people in need. USDA commodities, which generally can represent as much as 30% of the food the banks disperse, accounted for more than 40% of all food distributed in fiscal year 2021 by the Feeding America network. “There is a critical need for the public sector to purchase more food now,” said Fitzgerald.
Manchin denies pulling plug on Democrats’ reconciliation plan... Sen. Joe Manchin challenged reporting that he pulled the plug on negotiations over Democrats’ reconciliation legislation, saying he only wanted to see July’s inflation numbers before signing off on green energy items in the spending bill.
Reports Thursday evening said Manchin told Democratic leaders he could not support climate-related items in the Democrats’ reconciliation package. Manchin said in radio interview Friday he told Senate Majority Leader Chuck Schumer (D-N.Y.) he was concerned that inflation rose from May to June and that he wants to ensure Congress doesn’t do anything “inflammatory” to inflation. Manchin told West Virginia radio host Hoppy Kercheval that he’s not cutting off negotiations with Schumer. But when it comes to the legislation that would spend $500 billion and raise $1 trillion in revenues, he advised his colleagues, “come back the first of September and pass this legislation if it’s a good piece of legislation.”
“I said, Chuck, until we see the July inflation figures, until we see the July Federal Reserve interest rates — then let’s wait until that comes out so we know that we're going down the path that won't be inflammatory to add more to inflation,” Manchin said. “He took that as no, I guess, and came out with this big thing last night,” Manchin said.
July inflation numbers are expected to come down a bit from the June figures, so it could give Manchin some cover.
