AgMaster Report 07/19/2023

SEPT CORN

Rain & a couple bearish reports from the USDA broke Sept Corn $1.50 (6.25-4.75) but a renewed “hot & dry” forecast & the termination of the Ukraine Grain Corridor put a spike low in the mkt & sparked a 45 cent rally (475-520)! On June 30, the USDA announced corn acreage at 94 MA – 2 MA more than expected & 5.5 more than 2022! Then on July 12, they estimated the US Corn Crop at 15.3 BB – over the June estimate! But that was the bottom, as the mkt figured there’s a lot of “water to pass under the bridge” before the crop is made & in! Also assisting the rally was a plummeting US Dollar (103-99) & a resilient DJI pushing the 2023 high despite regular IR increases! A rising tide floats all boats!

 

SEPT BEANS

Plain & simple, the June 30 Acreage Report was “gamechanger” for the Bean Mkt! following on the heels of a severe Argentine drought comes the USDA prediction of 2023 bean acres 4 million under the 2022’s 87.5 MA! So, all of a sudden, the mkt feels a tightness that could lead to rationing – should the US crop be sub-par! That would be 2 consecutive crops – one from South America & one from the US – that actually subtracted carry-out versus adding it to the severely depleted stocks! And the US Dollar has dropped hard in recent weeks adding to the chance that our exports would pick up! Already, domestic demand is strong! Further, the CPI last week came in at 3% – down form 9% a year ago & only 1% off the Feds 2% target! But thru all the interest rate increases, the DJI has strengthened – today trading just off the 2023 highs! So, there is clearly no margin for error for our 2023 crop!  Any yield issues mean current prices are too low!

 

SEPT WHT

The above chart reflects the old commodity cliché “buy the rumor – sell the fact”! For quite a while, there were widespread rumors & speculation that the Ukraine Corridor Deal would not be renewed – like it had two previous times & the mkt appropriately built in a premium as a result! When news broke over the W/E, that indeed the Deal was officially cancelled, the mkt faded with all that bullish news already dialed in! But the ramifications of “no deal” began to permeate the mkt environment!  With Ukraine one of the top exporters, much tighter supplies has to be the net result of the cancel! In addition, Russia attacked the major Ukraine port city of Odesa & Ukraine has talked of mining its harbors in retaliation! So, Ukraine’s ouster from that particular export mkt seems pretty final! So today, the mkt is engaged in installing both a War Premium & Weather Premium (too hot).

          

AUG CAT

Even in the stratosphere – at record highs, there still remains plenty of bullish fundamentals to support the “Raging Bull”! Cattle supplies are still tight, extreme heat in the Southern Plains have raised concerns about weight gains & we’re still amidst the best demand period of the year – “the grilling season”! As well, beef production last week was 511 MP down from last year’s 545!  However, demand questions linger – how long will the consumer support this record high price – when pork offers a much cheaper alternative! The jury is out on that one! Meanwhile, the mkt might pause the remainder of the week – in front of the July Cattle-on-Feed Report due out this Friday 7-21-23!

          

          

 

AUG HOGS

In the past 2 weeks, Aug Hogs have consolidated a $26 rally (74-100) from late may until late June, but warning lights are flashing – with a key reversal day Monday, concerns about Chinese Demand , higher hog weights & a 3% increase in pork production over a year ago! 2^nd Qtr Pork Production in China was 4.6% higher than a year ago & the highest production for the second quarter in a decade! So, there’s plenty of reason for the mkt to correct part of its $26 rally! The mkt has ridden a 66% increase in Pork Belly Cut-Outs in July! With the Cattle-on-Feed on Friday, the mkt may continue congest in the same area it’s been in for the past fortnight until after the report!

Questions? Ask Bill Moore today at 312-264-4337