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Limit Up

By Tori Uhland

June 21, 2023

There’s been a lot of weather-related hysteria in the market over the last week, driving prices higher before the long weekend (markets were closed on Monday for the Juneteenth holiday) and a lack of rain in the forecast for the Midwest. We are certainly trading a “weather market” and there isn’t much other news to go on. However, the thing about a supply-driven rally like this is that they are usually pretty short-lived. On the other hand, in a demand-driven rally, we usually see the market rising at a slower pace but is more sustainable for a longer period of time. With poor exports across the board and low cattle numbers, there is just poor demand across the grain/oilseed complex and very little information to trade outside of the weather. Two-thirds of the corn belt and 40 percent of the Midwest is still significantly short of moisture. There is still time for the crop to recover, however if the corn doesn’t get a drink before the end of June, there could be trouble ahead.

The classic supply and demand signals aren’t really that important in the current weather market, so the poor demand in corn and beans is being discounted pretty significantly while the trade continues to embrace the idea that the weather across high-production states won’t improve in time to help the crop. A weather market means a lot of volatility, so keep in mind that these big rallies could see big corrections if we get some rain where it’s needed. We are still in the early stages of the production cycle.

Corn export sales last week were 10.8 million bushels and the highest in 7 weeks, but still below the needed 12.4 million bushels per week needed to meet the USDA estimate. Historically, U.S. exports dominate the first half of the calendar year, but Brazil’s record-sized Safrinha harvest is getting ready to start along with their exporting season, so our monthly shipment records will most likely start to fall soon. South American exports tend to dominate throughout the last six months of the year. The USDA has decreased their U.S. corn export estimate on eight out of the last eleven reports as a strong U.S. Dollar, strong corn basis, expensive transportation, and cheap South American supplies have kept us uncompetitive in the world market. Soybean exports were the highest in 13 weeks, coming in at 17.6 million bushels and well above the 3.5 million bushel needed pace.

While the U.S. weather forecast is helping boost the corn and bean markets, wheat is a follower. Hard red winter wheat harvest is picking up and Northern Europe is getting rains that should help ease the stress on their wheat crop, so gains could be limited across the wheat complex. Wheat export sales last week were lower than expected. The Black Sea export deal is still in question as the Kremlin is saying it sees no positive prospects for the future of the deal.

Hog futures have been gaining ground over the last few weeks. Low hog weights are helping to keep pork supplies tight and support prices. Proposition 12 in California is still a big question mark as no one really knows how that will play out or impact the pork market. Cash beef prices continue to rally but futures seem to be continuing their correction from the contract highs a couple of weeks ago. The USDA boxed beef cutout is on the rise and sharply higher beef prices are expected to push retail prices higher in July and August.

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