Perspective: Mid-Day Commentary for July 17

By: Arlan Suderman, Chief Commodities Economist

Mon, 17 Jul 2023, 16:55

Perspective: Mid-Day Commentary

Arlan Suderman

Chief Commodities Economist

July 17 - The major stock indices are generally firm today, consolidating around last week's multi-month highs. The VIX is very modestly higher, trading near 14 at midday. The dollar index is trading near unchanged at 99.9, while yields on 10-year Treasuries are trading near 3.81% and yields on 2-year Treasuries are trading near 4.74%. Crude oil prices are down by more than 1% on chart-related selling, as well as disappointing economic data out of China. The grain and oilseed market was mostly higher overnight on Russia's formal withdrawal from the Black Sea Grain Initiative, but corn and wheat prices quickly sold off following the morning pause in trade. Global wheat supplies remain adequate as long as Russia continues to dump cheap supplies onto the world market, and the same is true for corn as Brazil harvests its big safrinha crop and unloads it onto the world market. Soybean prices are well-off their session highs, but they continue to hang onto modest gains ahead of this afternoon's USDA weekly crop progress report. Soybean condition ratings have been slow to respond to improved Midwest weather, raising risks of a sub-trend yield this year that would leave the balance sheet quite tight in the months ahead. The Midwest weather models are coming in warmer thus far, while also maintaining expectations that we will see an overall drier pattern across much of the Midwest in the last 10 days or so of the month.

The National Oilseed Processors Association reports that its members crushed 165.023 million bushels of soybeans in June, down from177.915 million bushels in May, but up from 164.677 million bushels in June of 2022. The average trade guess going into today's report reflected expectations that NOPA crush would total 170.568 million bushels, but extra downtime for maintenance limited output during the month. Today's numbers suggest that total June soybean crush was likely close to 175.6 million bushels, keeping us on pace to meet or modestly exceed USDA's crush target for the current marketing year, unless the July and August numbers disappoint as well.

USDA inspected just 14.3 million bushels of corn for export shipment in the week ending July 13, as shown in the graphic below, along with 9.3 million bushels of wheat, 6.1 million bushels of soybeans and 5.5 million bushels of grain sorghum. Virtually all of the grain sorghum was loaded for shipment to China, whereas just 2.8 million bushels of corn was loaded for China during the week, and only minute amounts of soybeans and wheat. USDA slashed its corn export target another 75 million to 1.650 billion bushels in last week's updated WASDE crop report, while cutting soybean exports by 20 million to 1.980 billion bushels. But neither are seeing the pace needed to hit those recently lowered targets, although soybeans are a lot closer. Marketing year to date corn export inspections are down 33% from the previous year's pace, and they fall short of the seasonal pace needed to hit USDA's recently lowered export target by 35 million bushels, with the deficit still rapidly growing. Marketing year to date soybean export inspections are a little more than 5% below last year's pace. They exceed the seasonal pace needed to hit USDA's target by 35 million bushels, but that gap is rapidly narrowing at a time of year when the seasonal pace tends to pick up momentum with faster shipments. Unfortunately, that probably won't be the case this year, with Brazil still carrying notable cheaper supplies.

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