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Markets keep a watchful eye on weather and reports

Pressure on commodity markets was also due to concerns of the U.S. economy falling into recession. This concern is adding to the fund selling spree as traders take money off the table in both the commodities and in the financial world and head for the sidelines.

A field of corn
Weather is a primary driver of commodity prices during the growing season.
Nick Nelson / Agweek file photo
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The fourth week of June was one that most would like to forget.

The grains started the week under heavy selling pressure and continued to see heavy pressure for the rest of the week. Selling was tied to improving weather conditions and position squaring ahead of USDA’s reports at the end of the month.

The grains opened the short week under extreme pressure but calmed slightly by mid-week.

Wheat and corn were higher off of news that Russia attacked two separate grain terminals in Ukraine. Seems to be a strange way of showing you want to help export grain out of the country.

Both corn and soybeans have been seeing heavy bull spreading as end users continue to try and pry supply out of the producer’s hands.

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This is the time of year when the grains retreat and this year is no different.

The funds have been unloading positions aggressively due to improving weather conditions as well as from the seasonally tendency for the market to fade in June. The selloff has pushed the grains below support lines, which in turn triggered sell stops helping to accelerate the downward push.

Pressure was also due to concerns of the U.S. economy falling into recession. This concern is adding to the fund selling spree as traders take money off the table in both the commodities and in the financial world and head for the sidelines.

The last week of June started the way the fourth week ended, under pressure. Improving weather conditions added to the pressure as better-than-expected weekend rains moved across much of the central Corn Belt.

The last week of June weather forecasts were expected to have the Corn Belt return to hot and dry for the first three to five days of the week. The Northern Plains is expected to see normal to slightly above normal temps. But the six-to-10 and eight-to-14-day forecasts are negative, if realized. Both long term forecasts are showing above to much above temps with above to much above precip, which virtually creates a greenhouse effect.

Wheat and corn took a hit Monday with both posting heavy losses while soybeans managed to end the session with gains.

Wheat was under pressure from the lack of demand and harvest pressure as well as from spring wheat’s unchanged crop condition ratings estimate.

Corn opened lower and extended session losses early with most of the selling tied to better-than-expected rains over the weekend in the Corn Belt and from estimates looking for an acreage increase.

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Soybeans were higher from start to finish with most of the strength coming from expectations for lower acreage in the Planted Acreage estimate. Light support was also due to technical buying.

Technical selling teamed up against the wheat and corn market as well as seasonally as both of those markets tend to retreat in June as the market transitions from planting concerns to growing concerns.

Corn was also pressured by reports that AgRural increased Brazil’s corn production estimate to 113.8 million metric tons from their previous estimate of 112.3 million metric tons.

The grains were able to shake off Monday’s poor performance and find strength Tuesday, except for Minneapolis wheat. Support came from Monday afternoon’s Crop Progress report. The report was friendly as crop ratings came in lower than expected. Traders are already expecting a decline in crop ratings this week due to last week’s hot and dry conditions.

Corn’s crop rating was estimated at 67% good/excellent, a decline of 3% vs expectations of 1% decline. The biggest decline in ratings came from the far eastern Corn Belt as Indiana and Ohio both dropped 11%. North Dakota was the best performer, improving by 1%.

Soybean conditions were estimated at 65% good/excellent, a decline of 3%. The biggest declines came in Indiana (-9%), Ohio (-7%), and Nebraska (-6%). North Dakota improved 5%.

The Crop Progress report was also friendly to wheat. Winter wheat harvest progress was much lower than expected. Traders were looking for wheat harvest to be close to 45% complete, but instead the report put harvest progress at 41% complete, 4% less than expected. Winter wheat conditions were left unchanged at 30% good/excellent, 1% lower than expected.

Spring wheat continues to lag in crop development as 8% of the crop is headed vs 34% average. Conditions were unchanged last week, which was 1% lower than expected.

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Soybeans saw support from reports China was relaxing its COVID restrictions. Reports have China cutting its travel quarantine time in half. This will help get China’s economy moving again, and likely result in an uptick in demand.

But the market still has to deal with the 800-pound gorilla in the room, USDA’s June 30 reports. Not to mention position squaring ahead of end of month and end of quarter.

Early estimates for the Quarterly Grain Stocks estimate have wheat stocks estimated at 655 million bushels versus 845 million bushels last year. Corn stocks are estimated at 4.343 billion bushels versus 4.111 billion bushels last year. Soybeans were estimated at 965 million bushels versus 769 million bushels last year.

For the Acreage Estimate, the average trade estimate has all wheat acreage at 47.02 million versus 47.35 million in March and 46.7 million last year. Winter wheat acreage is estimated at 34.3 million versus 34.24 million in March and 33.65 million last year. Other spring wheat acreage is estimated at 10.84 million versus 11.2 million in March and 11.42 million last year. Corn acreage is estimated at 89.86 million versus 89.49 million in March and 93.36 million last year. Soybean acreage is estimated at 90.45 million versus 90.96 million in March and 87.2 million last year.

Martinson Ag is looking for spring wheat acreage and corn acreage to decline while soybeans and other later season crop acreage increase due to the late cold wet spring seen in the Northern Plains.

Once the report is out of the way, the market will go back to trading weather, but first the market will have to get through another long weekend. The grains will put in a full trading session on Friday, but the market will remain closed Sunday night, all day Monday, and Monday night in observance of the Fourth of July holiday. Regular trading will not resume until Tuesday, July 5, at 8:30 AM.

Weather will take the lead once the market reopens July 5. At this point, the two different weather models are not in agreement. Both are calling for temps to be above to much above normal, but the disagreement is coming in the amount of rain. One model is looking for below normal rainfall while the other is looking for above normal rain. It will be interesting to see which model is verified on Monday.

Cattle lost ground by the end of last week and so far, this week has seen a continuation of that trend. USDA’s June Cattle on Feed report was friendly and tried to give the cattle market support, but economic concerns have kept a limit on cattle’s ability to push higher.

Cash bids have rebounded and were trading near futures, but if domestic demand does not rebound, it is likely cash bids will retreat. Supplies of cattle will continue to shrink throughout the year, but with the consumer discretionary spending dollar shrinking due to higher energy costs, higher interest rate costs, and higher food costs, it won't matter as the average consumer can’t afford to buy beef.

Editor's note: Catch Randy Martinson every Friday after markets close on the Agweek Market Wrap at agweek.com.

“The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results.”

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