Perspective: Mid-Day Commentary for July 25

By: Arlan Suderman, Chief Commodities Economist

Thu, 25 Jul 2024, 16:41

Perspective: Mid-Day Commentary

Arlan Suderman

Chief Commodities Economist

July 25 - Tech stocks led losses early, once again today, but then the Dow was able to lead most stocks higher in a big rebound of much of yesterday's losses by midday after this morning's data suggested that the U.S. economy regained upward momentum in the second quarter of this year. The VIX is trading back below 17 at midday after rising to a three-month high above 19 earlier this morning, while the dollar index is trading near 104.3. Yields on 10-year Treasuries are trading near 4.24%, while yields on 2-year Treasuries are trading near 4.43% as they rally into midday. Crude oil prices are trading modestly higher, while the grain and oilseed complex is mixed. Wheat prices are under pressure again on strong U.S. production prospects and cheap Russian wheat, while corn and soybean prices are pushing higher, led by new-crop soybeans after this morning's better-than-expected new-crop sales and on rising concerns about the Midwest weather forecast over the next two weeks. Heat is expected to be most pronounced over northwestern areas of the Midwest, while the western 20% of the belt is most at risk of missing out on rains.

Exporters sold just 3.3 million bushels of old-crop soybeans in the week ending July 18, but they also sold 30.5 million bushels of new-crop soybeans during the week, with the bulk of that going to "unknown destinations." That reflects a dramatic improvement in new-crop soybean sales, as shown below, although sales to date still remain at historically low levels. USDA data shows that exporters have commitments for 107 million bushels of new-crop soybeans for the year that begins September 1, more than doubling the total seen just three weeks ago, but nearly half the pace seen a year ago, which was then considered to be a slow sales year. In fact, last year's slow start for selling new-crop soybeans ended up with total sales for this marketing year falling by 14% year to date, with sales to China down 22%. One can name many reasons for the decline in sales to China, including geopolitical risks. But the bottom line is that Brazil's cheap currency gives it a big price advantage for much of the year, making its soybeans more attractive. This trend is expected to continue to shift market share toward Brazil going forward until/unless the market slows Brazilian soybean production. The good news is that increased U.S. crush capacity increases the supply of soymeal available for export, and new-crop commitments for soymeal are very strong for this time of year.

Corn export sales for the week ending July 18 totaled just 13.0 million bushels of old-crop, while new-crop sales were stronger at 29.3 million bushels. The featured buyer of both old- & new-crop corn was Japan and Mexico who combined for 9 million bushels of old- and 16.8 million bushels of new-crop sales, although "unknown destinations" added another 6 million bushels of new-crop to the total. New-crop corn sales for the marketing year that begins September 1 now total 192 million bushels through July 18, which matches last year's total, although it is still on the slow side, albeit picking up the pace a bit. Longer-term, exports for the 2024-25 marketing year will hinge on final production numbers from Argentina, Brazil and Ukraine.

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