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Perspective: Mid-Day Commentary for July 16

By: Arlan Suderman, Chief Commodities Economist

July 16 - Stocks traded quietly mixed this morning, while commodity prices drifted lower off their overnight lows. The VIX is trading near 16, while the dollar index hovers around 100.7. Yields on 10-year Treasuries are trading near 4.57%, while yields on 2-year Treasuries are trading near 4.16%. WTI crude oil is trading near $79, while Brent trades near $85 per barrel. The grain and oilseed sector slipped mostly into negative territory as it monitors updated weather models amid record high NDVI crop scores, and as traders monitor developments in the Black Sea.

Ukraine struck 147 Russian vessels in the Sea of Azov and the Black Sea in the past 11 days. It's unmanned drones hit another 11 vessels yesterday alone. The above total includes 117 vessels in the Sea of Azov and 30 vessels in the Black Sea, with the latest strikes including five oil tankers, one gas tanker and three dry cargo vessels, along with two tugboats. Some of the above vessels were near Russia's key grain and oil export facilities at Novorossijsk. Russia has primarily targeted Ukraine's export infrastructure, but it has also recently included grain vessels in or near ports as targets. The next anticipated / feared escalation step would be for Ukraine to start targeting grain vessels utilizing Russia's Novorossijsk port. Ukraine's grain exports are essentially shut down now, with shippers fearful of entering its ports. Attacks on grain ships near Novorossijsk could have a similar impact on Russian exports if that occurs.

Exporters sold just 12.4 million bushels of current-year corn in the week ending July 9, along with 12.3 million bushels of new-crop corn, 8.6 million bushels of wheat, and net reductions of 0.1 million bushels of grain sorghum. However, it sold 6.9 million bushels of current-year soybeans, along with 65.0 million bushels of new-crop soybeans. Chinese purchases accounted for 38.8 million bushels of those new crop soybean purchases, while unknown destinations (perhaps China) accounted for another 22.9 million bushels, accounting for 95% of the new crop purchases. The graphic below shows total new crop soybean sales through July 9th, which total 169 million bushels. Known sales to China account for 46 million bushels of the total, while sales to unknown destinations account for another 85 million bushels. China committed to import 25 mmt or 919 million bushels of U.S. soybeans in the next marketing year, whereas USDA's 2026-27 balance sheet appears to include roughly 16 mmt or 588 million bushels for China. My point is, looking at the graphic below, that China needs to be actively buying new crop supplies now if it's going to import any sizeable quantity of U.S. soybeans in the coming marketing year, but it will likely be several months before we know if it's going to import more than what USDA already has in its balance sheet.

 

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