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Turner's Take Ag Markets | Corn Higher and Soybeans Lower After Pro Farmer Yield Estimates

By: Craig Turner, Senior Risk Management Consultant

Turner's Take Ag Markets
 
Craig Turner
Senior Risk Management Consultant
Turner's Take Podcast

MACRO MARKETS | Fed Chairman Powell spooked the markets on Friday after pledging the Fed will be aggressive in bringing down inflation.  He said some will feel “pain” as they try to bring down inflation from 40 year highs to their 2% target rate. The stock market has taken the biggest hit so far and energy has been holding up surprisingly well.  US grain and oilseeds are most likely capped on any rallies due to lingering demand concerns and a high US Dollar. 

The Fed things inflation may have peaked but it is not yet reversing lower.  The Fed overnight rate could be at 3.5% to 4% by the end of the year.  US corporations are starting to lay-off employees due to low growth, high costs, and building inventories. 

For now the momentum is bearish for equities and it should be bearish for energy. The fact that Crude and Natural Gas are holding up so well is a sign that supply is a real problem and potentially sets up for a significant bullish move higher once the economy recovers.

 

GRAINS | Corn is leading the market higher after a bullish Pro Farmer corn yield estimate. PF puts the US corn crop at 168.1 bpa and the trade was looking for 171-173.  The USDA is at 175.9.  While the number was released after the close on Friday, some traders think the estimates got into the market early and helps explain the rally on Friday.  PF is usually below the USDA final estimate but the important part of their survey is the direction.  The trade will most likely look for the USDA to lower corn yields to 172, give or take a bushel, in the Sept WASDE.

We are hearing more about government-to-government wheat deals.  The latest is Bangladesh looking to import 500K tonnes of wheat from Russia at $430/tonne C&F through Jan. Russian Aug grain export estimates are now at 4.2 MMT, up from 2.65 MMT in July.  This includes 3.5 MMT of wheat in Aug vs 2.3 MMTs in July.  Improvements in the Black Sea trade are benefiting both Ukraine and Russia.

Wheat should feel price pressure as Black Sea wheat export capability improves and as US, Canada, and Russia spring wheat harvest ramps up.  

 

OILSEEDS |  Pro Farmer puts soybeans at 51.7 bpa and is only 0.2 bpa off from the Aug WASDE at 51.9.  Acreage could expand about a half million due to late planting/switching and the soybean yield is likely to get bigger with the better rains in August. The rains this weekend in the Midwest should improve conditions and the warmer temps in Sept will extend the growing season in N. America.

I would not be surprised if the soybean yield is eventually 52.0 or higher and the new crop soybean to corn price ratio goes to 2:1.  With Nov soybeans at 14.53 and Dec corn at 6.74 the ratio is 2.125.  A large Canadian canola crop and a record number of S. American soybean acres could put a lot of pressure on soybeans and canola later this fall/winter.

 

 Craig Turner
800.958.9470 Toll-Free
312.706.7610 Local
312.706.7510 Fax
craig.turner@stonex.com
@Turners_Take
 
 
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