While there are multiple reasons for ag markets to move up and down, the main excuses in July tend to be weather related because so much of global grain production is in the Northern Hemisphere. It’s too hot someplace, too dry, too wet (flooding) or too windy (tornados, hurricanes, derechos and sukhovy). The markets sold off hard on July 6 after holiday weekend rains were more abundant than anticipated. We rallied this week because North Dakota, Montana and most of the PNW are getting no relief, and the Canadian Prairies seem to be guilty by association.
While it is certainly not typical to have 95 and 100 degree temps in the northern US and Canada while seeing more moderate 80’s and low 90’s south of there, it IS July for gosh sakes (as my grandmother would say). I would make a couple observations. 1) The Corn Belt has been moving north, with corn/soy acreage expanding northward because the growing season has on average been getting longer. One source indicates that North Dakota has gained nearly a week of growing season with earlier spring and later first freeze dates. North Dakota and Canada are getting typical Nebraska July peak temps, but without the typical humidity fed Nebraska July rains. That is a problem that in this case even the spring wheat crop can’t handle. 2) The map of record high US temps for June showed those highs mostly in New England and in the Rockies. At least for this year, it seems like the cooler areas are getting warmer. The entire western US has been in an extended drought, and would be expected to be hot until the pattern changes. 3) Stocks/use ratios look tight, but are very contingent on world buyers paying up (vs. year ago) for their purchases. That is not the way price rationing usually works. December corn and November soybeans were both more than 50% higher than a year ago on July 12. Keep that in the back of your head when you are subtracting bushels from the balance sheet.
Corn futures continue to ride the roller coaster, this week posting a solid 5% gain despite late session weakness on Friday. An update to USDA’s WASDE report showed old crop US cord ending stocks down another 25 mbu to 1.082 bbu. New crop stocks were raised 75 mbu with the larger acreage to 14.32 bbu. USDA did cut the Brazilian crop by 5.5 MMT to 93 MMT, with other private analysts still sub-90. Monday’s Crop Progress report showed the US corn crop was 26% silking, with the 5-year average at 30%. Condition ratings up 1% to 65% gd/ex, with the Brugler500 index 2 points higher at 369. Export sales data showed old crop bookings at just 138,800 MT for the week of July 8. Accumulated exports are now 83% of what USDA has forecasted, 1% below the average pace. Shipped and unshipped sales are still 97% of that figure vs. the 101% 5-year average pace. New crop sales were just 133,200 MT, though full year forward sales are nearly triple what they were last year. The weekly Commitment of Traders report indicated managed money spec funds cutting another 10,572 contracts from their net long in corn futures and options as of 7/13. They were still net long 208,799 contracts on Tuesday.
Wheat futures were the leader this week, as persisting dryness and outlooks for warm temps in the Northern Plains were the support. MPLS led the way, up 12.65% and now over $9/bu. Chicago SRW wheat was up 12.6%, with KC HRW 9.68% higher. Crop Progress data showed the winter wheat harvest moving along to 59% harvested, still 6% behind normal. The spring wheat crop advanced to 83% headed, now 2% faster than normal, in part due to the warmer/drier conditions. Condition ratings continue to deteriorate for HRS, unch at 16% gd/ex but another 9 points lower to 249 on the Brugler500 index (100-500 point scale). For reference 98% of the spring wheat crop in in an area experiencing drought. WASDE data showed US carryout for 21/22 at 665 mbu, down 105 mbu from the previous report mainly on smaller production. Crop Production data from NASS showed a 152 mbu cut to the estimated crop, with winter wheat actually up 55 mbu. Spring wheat was the main driver, at 344.6 mbu in the initial projection from NASS. That was more than 100 mbu below the trade estimates. Weekly US wheat export sales through July 8 were the largest so far in the short MY at 424,700 MT. CFTC data vis the Commitment of Traders report showed spec funds in Chicago wheat expanding their net short by a total of 10,019 contracts in the week ending July 13, taking them to a net short 23,636 contracts. In KC HRW, they added just 787 contracts to their net long position for the week, to net long 21,667 contracts.
Soybean futures joined the party with a August futures rallying a total of 5.47%. Soy Meal was up 2.57% for the week, with soybean oil carrying the complex, 9.56% higher. In Monday’s WASDE update, the US balance sheet for old (135mbu) and new crop (155mbu) soybeans was left steady for the carryout numbers (albeit a few S&D number were moved around). Crop Progress data shows 46% of the US soybean crop in the blooming stage, 6% above the normal pace. Soybean condition ratings as of July 11 were steady at 59% gd/ex and 355 on the Brugler500 index. USDA’s weekly Export Sales report had 21,700 MT of old crop soybean sales through the week that ended 7/8. Old crop shipments are now 95% of the USDA number, 7% faster than normal. Total commitments are 100% of the USDA projection, vs. 103% normally. For new crop, USDA’s report showed 290,800 MT were booked. Commitment of Traders data from Friday indicated managed money spec funds trimmed just 593 contracts from their net long position between July 6 to July 13. They were net long 82,773 contracts of futures and options on Tuesday afternoon.
Live cattle futures eked out a slight 0.8% gain on the week, as August was up 95 cents. Fat cattle cash trade was again divided this week with the North trading at a premium to the South. Sales reported by USDA were a steady $119-120 in the South and slightly weaker on the week at $123-126 in the North. Feeders failed to join the buying, as the slight gains in fats were more than offset by the strength in corn to pressure August 2.23% lower on the week. The CME feeder cattle index is $151.39, down $1.38 from the previous week. Wholesale beef prices were again down sharply this week. Choice boxes dropped $10.65 (-3.8%), with Select down $5.62/cwt (-2.2%). Choice is down more than $70 from the high back in early June. Weekly beef production was up 13.5% from last week, due to the holiday, but 0.8% lower than last year. YTD beef production is now 5.0% above year ago on 4.7% larger slaughter. Weekly Beef export sales were the 2nd lowest this MY at 9,253, with shipments taking a dip at 15,540 MT. CFTC data on Friday showed spec funds trimming another 7,767 contracts from their net long in cattle futures and options, taking it to 55,114 contracts as of Tuesday.
Lean hog futures found support near the $100 level, with futures up again this week by 4.01%. The CME Lean Hog index was back up $1.57 this week @ $111.34. The pork carcass cutout value was up $3.77 for the week, a 3.2% gain. The belly was the largest contributor, up 9.6% for the week, with the butt down 13.1%. Weekly pork production was up 17.8% from the previous holiday week. Pork production is now only 0.1% higher YTD vs. last year, with 0.2% fewer hogs slaughtered. Weekly pork export sales dropped to a 12-week low 10,585 MT. China saw net reductions of 1,316 MT, with shipments to China the lowest since May of 2019. In the weekly Commitment of Traders report, managed money spec funds added 2,239 contracts (net) back to their net long in lean hog futures for the week ending 7/13. They were net long 69,446 contracts on that date.
Cotton futures posted a solid 2.53% gain on the week, following the rest of the ag markets. On Monday, updated WASDE data showed the US new crop balance sheet for cotton with a larger supply via an 800,000 bale increase to production. That was partially offset by larger exports, but raised carryout by 400,000 bales to 3.3 million bales. Crop Progress data from Monday showed the US cotton crop 55% squared, 6% behind normal, with 16% setting bolls vs. the 20% average. Ratings were back up 4% to 56% gd/ex, with the Brugler500 Index 9 points higher to 358. Cotton export sales were the lowest this MY at 34,498 RB, though there is just a little over 4 reporting weeks left in the MY. Total export commitments are 107% of the full year WASDE forecast. They would be 112% on average, due to rollovers and deferrals. Export shipments are 7% larger than year ago at this point, and 93% of the USDA forecast, matching the last 5 years. New crop sales totaled 116,440 RB for the week of 7/8. Weekly Commitment of Traders data released on Friday showed large managed money spec funds net long 56,822 contracts on July 13, adding 4,105 contracts on the week.
Next week starts out fairly normal, with the Monday’s Export Inspections report in the morning and the Crop Progress report in the afternoon. EIA data will be released on Wednesday morning per usual. The weekly Export Sales report will be out on Thursday morning. Friday will be the busiest for the livestock section of NASS with the July Cattle on Feed report released in the afternoon, as well as the semi-annual Cattle Inventory report. August (serial) options for corn, the wheats and the Soybean complex expire on Friday. Later in the week on Thursday and Friday, Brugler Marketing & Management will be holding our Summer Seminar in Omaha, NE (LINK), with the Dayton Seminar the following Monday and Tuesday (LINK). You can sign up at the respective links!
Visit our Brugler web site at https://www.bruglermarketing.com or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.
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