Evening Report | June 27, 2022

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Corn crop conditions slip more than expected… USDA rated 67% of the U.S. corn crop either “good” or “excellent” as of Sunday, down from 70% a week earlier and slightly under trader expectations for a combined reading of 69%.

Soybeans ratings also deteriorate… USDA rated 65% of the U.S. soybean crop good-to-excellent as of Sunday, down from 68% a week earlier. The good-to-excellent number was expected to hold unchanged. The soybean crop was 98% planted, 1 percentage point above the five-year average for this date.

Cotton ratings erode futures… USDA rated just 37% of the U.S. cotton crop good-to-excellent as of Sunday, down from 40% the previous week. Cotton rated “poor” or “very poor” rose to a combined totaled of 30% from 26% a week earlier. USDA said 33% of the crop was squaring, even with the five-year average for that date.

Spring wheat condition ratings largely steady… USDA rated 59% of the spring wheat crop good-to-excellent as of Sunday, unchanged from the previous week. The amount rated poor-to-very-poor rose slightly to 8% from 6%.

Winter wheat harvest over two-fifths complete... The U.S. winter wheat crop was 95% headed as of Sunday, 3 percentage points behind the five-year average. Harvest was 41% complete as of Sunday, up from 25% a week earlier and 6 percentage points ahead of normal. Harvest stood at 80% in Texas (versus a five-year average of 79%), 90% in Oklahoma (82%) and 59% in Kansas (40%).

Corn futures tumble to three-month low on crop-favorable weather… December corn futures fell 21 cents to $6.53, the new-crop contract’s lowest settlement since March 29, after needed rains fell in much of the Midwest over the weekend. Nearby soybeans jumped sharply on corrective buying after last week’s sharp losses and support from strength in soymeal. Wheat futures dropped sharply.

Shortages forcing U.S. farmers to reduce herbicide use… U.S. farmers have cut back on using common weedkillers, hunted for substitutes to popular fungicides and changed planting plans over persistent shortages of agricultural chemicals that threaten to trim harvests, Reuters reported. Spraying smaller volumes of herbicides and turning to less-effective fungicides increase the risk for weeds and diseases to dent crop production at a time when global grain supplies are already tight because of the Ukraine war. Interviews with more than a dozen chemical dealers, manufacturers, farmers and weed specialists showed shortages disrupted U.S. growers' production strategies and raised costs.

Brazil’s second corn crop gets boost from weather… Hotter and drier weather in key Brazilian corn growing areas gave a boost to harvesting work, especially in Brazil's top grain state Mato Grosso, according to a survey by AgRural. The consultancy said 20.3% of the area cultivated with second corn was harvested in the Center-South of the country through last Thursday. This compares with 11.4% in the previous week and 5.3% in the same period last year, said AgRural, which raised Brazil's total corn forecast to 113.8 MMT citing expectations of a bigger corn output in the north and northeast.

Transportation delays mounting again... Shipping containers are piling up again at major freight hubs including Chicago, the Wall Street Journal reports, and delays in getting inbound boxes onto trains at the ports of Los Angeles and Long Beach are stretching to days and even weeks. BNSF Railway is limiting the boxes it will carry out of the region as it copes with the backups and some importers are turning to trucks to keep their supply chains moving. That is raising shipping costs and adding complications for many shippers and illustrate how pandemic-driven disruptions of the past two years aren’t resolved. The rail backups come as the backlog of container ships off the Southern California ports has drifted to a nearly two-year low. But getting goods through inland distribution networks remains a challenge.

Russian strike on Kyiv looms over G7 summit... Leaders of the Group of Seven (G7) nations said Sunday they would stop buying gold from Moscow and discussed a new U.S. proposal to undercut its oil revenues, even as Russian forces rained missiles on Kyiv for the first time in weeks. Gold is Russia’s second-most valuable export after energy products. Most of those exports go to G7 countries, particularly Britain, through the gold trading hub of London. Russia did nearly $19 billion in gold exports in 2020, almost all of it going to Britain.

Russia defaults on sovereign debt… For the first time in a century, Russia has defaulted on its foreign-currency sovereign debt following significant Western sanctions that shut down payment routes to overseas creditors. For months, the country found paths around the penalties imposed after the Kremlin’s invasion of Ukraine. But on Sunday, the grace period on about $100 million of interest payments due May 27 expired, a deadline considered an event of default if missed. Focus shifts to what investors do next.

Food prices forecast by USDA to rise by most in more than 40 years. USDA projects food inflation at 7.5% to 8.5% in 2022, the highest since food prices rose 8.6% in 1980. The latest rise marks a fifth straight monthly increase in the forecast, according to USDA’s Economic Research Service (ERS). Food at home (grocery) prices are expected to rise 8.5% to 9.5% for the highest level of grocery price inflation since an increase of 10.8% in 1979. Food away from home (restaurant) prices are looked to increase 6% to 7%, unchanged from last month, but still the biggest rise since an increase of 9% in 1981.

U.S. consumer sentiment fell to its lowest point on record… Reflecting elevated inflation weighing on Americans’ moods and adding to indicators that point to a slowing in the world’s largest economy, the University of Michigan’s gauge of consumer sentiment reached a final reading of 50 in June. That was the lowest reading on record going back to 1952. A souring mood for consumers is a concerning sign because household spending accounts for about 70% of U.S. economic output.

Several big importers buy wheat… Saudi Arabia purchased 495,000 MT of wheat, with the seller having the option of sourcing from the EU, Black Sea region, North America, South America or Australia. Bangladesh tendered to buy 50,000 MT of optional origin milling wheat. Jordan tendered to buy 120,000 MT of optional origin milling wheat. Taiwan tendered to buy 40,000 MT of U.S. milling wheat and up to 65,000 MT of corn that can be sourced from the U.S., Brazil, Argentina or South Africa. Egypt contracted to buy 180,000 MT of wheat from India.