It Was A Disappointing Week, A Lot Of Market Questions Remain

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Market Commentary for 6/24/22

This past week many funds exited their long grain positions. Some in the market were concerned over a worldwide economic recession and the two-week weather forecast that suggests widespread good growing conditions.

Basis & Spreads

Record basis levels throughout the western corn belt suggest farmers are not selling cash corn. That’s why end users are increasing bids because they likely do not have all their July needs covered.

The July corn futures spread between September and December also increased, indicating strong demand for the immediate shipment of corn.

Both factors have likely forced commercial facilities to sell out of all remaining grain ownership, which means any grain still left in the US is likely owned by farmers who have not priced corn stored in the bins.

Farmer vs End User

Farmers who still have unpriced grain are telling me they are not selling anything until they know more about weather conditions in mid-July. Market inverses in the US suggest most end users do not have much coverage on for August. Depending on how quickly farmers sell their remaining grain after July 4^th, the next six weeks could get very interesting.

Ukraine

The ongoing conflict in Ukraine may have been minimized by trend traders this past week. Missile strikes damaged several large vessel loading facilities in the Odessa region, where 50% of Ukraine’s grain is exported from. Plus, there is still no progress in talks between the two countries. Even if something could be negotiated, it would take another month before ships would be able to load and leave. If grain cannot be moved out of Ukraine by ship, there will be global supply issues and the prices the market is currently trading are not enough to ration demand long term.

Biggest Report of the Year?

The June 30^th USDA acreage report is probably one of the most important and anticipated reports of the year, because it will give the market more price direction clarity. After it is released, the market will focus on corn pollination and the weather after July 4^th.

Bottomline

There are a lot of unknowns ahead, including acres, weather and war. Some answers to these questions will become available over the next couple of weeks. With that, price direction will also become clearer.