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Limit Up

By Tori Uhland

June 8, 2023

Hello again, everyone. It’s been a minute.

I apologize for my absence over the last couple of months, and I sincerely appreciate everyone that has reached out to ask if I’d be writing again. I didn’t initially plan on taking that long of a hiatus, but I have been juggling too many things lately and had to let something go for a while.

As you may recall, I accepted a new job and moved to the Kansas City area. My new gig has a lot of similarities, but some notable differences as well. The company I am with now trades primarily grain byproducts. I’m at the soybean meal and canola meal desk. Other products include dried distillers grains, corn gluten feed, corn germ, beet pulp, alfalfa meal, wheat midds, cottonseed meal, cottonseed hulls, soybean hulls, and several more. It’s been really interesting learning about this part of the industry! Part of my time off also consisted of trying to figure out what direction to go with this column. I’m still not exactly sure, so like most of my decisions…I’m just going to wing it.

Old crop and new crop corn contracts traded in 30+ cent ranges for the week of May 29th, closing higher for the week. Most of the rally is weather-based, which we know can change quickly. The Plains have finally gotten some much-needed rains (yay!) but the Midwest is a little dry – particularly the eastern part of the corn belt. In 2012, corn futures made record highs above $8.40 due to dry weather in the corn belt. We did come close to those levels when Russia invaded Ukraine, getting up to $8.30. This is something to keep an eye on, but planting conditions were great, and if the forecast changes, the weather risk premium in the market will change, too. The first corn crop condition ratings of the year came out last week at 69 percent. This was two points lower than the average trade guess and also the lowest initial corn condition rating in four years, which added to the bullish theme last week.

Wheat harvest is rolling in Texas and Oklahoma with harvest progress at 18 percent and 3 percent respectively as of last week. Yields have ranged from 20-40 bushels per acre and so far the crop seems to have high protein and test weight again this year. Recent rains will slow harvest progress, but have improved crop condition ratings by 3 percent to 34 percent Good to Excellent. I don’t think anyone is expecting the U.S. to have a bumper crop this year.

Speaking of bumper crops, China was expecting a huge wheat crop this year, which was part of the reason the export market was putting pressure on prices. However, they have received torrential rains during harvest, damaging much of the crop and making it unfit for human consumption. In “normal” times, whatever those are, this could be good for our export program. However, European wheat is being imported into the East Coast of the U.S. cheaper than it can be shipped from Kansas…telling us that our wheat is still overpriced in the world market. That situation will continue to put pressure on the wheat futures.

On the other hand, tensions in the Black Sea seem to be heating up again, although that seems to go back and forth too. The grain export agreement was extended, but now there are reports that Russia is refusing to register new vessels to load. This is helping support wheat futures.

There were also reports out Sunday night that Russia thwarted a large Ukrainian attack in southern Donetsk, one of the four Ukrainian regions that Russia had illegally annexed.

Soybeans also traded in crazy ranges last week – over 80 cents – down to the lowest levels since January 2022 before rebounding. The amount of soybeans sold but not yet shipped is at historically low levels, which is positive news, but we do still have a lot of beans left to sell. Both domestic and export demand is slow, and Brazilian soybeans are over $1.35 cheaper through the summer than U.S beans. Dry weather concerns are also helping support the soybean futures.

Despite gains in corn, feeders and fed cattle made new all-time highs last week and are in a solid uptrend. This could continue despite the futures being overbought as there has been no indication of a top. The rally is coming from the expectation of lower production and strong cash cattle and beef markets. While you could sit and watch to see how high it will go, be cautious, as futures prices often retreat after making new highs, and that goes for all commodities.

Futures are mixed to start the week, and all eyes are on the June WASDE report which the USDA will release on Friday, June 9th, so be on the lookout for that as well as any changes in the weather forecast as those are the big things the market is watching this week.

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