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Wheat Falls as Crop Conditions Improve — Daily Grain Highlights

By Kirk Maltais

 

--Wheat for September delivery fell 3.2% to $7.74 3/4 a bushel on the Chicago Board of Trade Tuesday, with the USDA crop ratings showing a surprise uptick for spring wheat while geopolitical uncertainty pressured the agricultural complex.

--Corn for December delivery fell 2.5% to $5.94 1/4 a bushel.

--Soybeans for November delivery fell 1.4% to $13.86 1/2 a bushel.

 

HIGHLIGHTS

 

Better Condition: Despite concerns about hot and dry weather hurting U.S. crops, the USDA reported that the condition of U.S. soybean and spring wheat crops actually improved last week. 60% of U.S. soybeans are now in good or excellent condition, up one point from the previous week. Spring wheat in good or excellent condition is up 2 points to 70%, and corn condition remains unchanged at 61% good or excellent. The surprise improvement put pressure on CBOT futures today, but it's not expected to linger long. "Despite this positive element, the dry and hot conditions ahead need to be monitored," said AgriTel in a note.

Combustible Situation: Grain futures across the board were pressured by concerns over China's potential retaliation to House Speaker Nancy Pelosi's visit to Taiwan -- which could include new roadblocks for U.S. grain imports. "The last thing the world needs right now is a flare up between the U.S. and China, given what is already going on between Russia and Ukraine," said Richard Buttenshaw of Marex in a note. "More specifically for ags products, if things were to deteriorate we could go down the road of China avoiding U.S. imports - which as we know from the Trump years is not great for price action."

So Far, So Good: The first on-water shipment of corn out of Ukraine since the start of the war - which departed from Odessa yesterday - has so far progressed without incident, opening the door for more shipments to make their way out of the war-torn country. "Another 15 ships are lined up to follow it as they seek to finally exit Ukraine ports after being trapped there since February," said Arlan Suderman of StoneX in a note, adding that each of these ships are carrying roughly 10,000 metric tons to 60,000 tons of grain. However, Mr. Suderman adds, it's still unclear about the path vessels will take on their journey back to Odessa, and issues about insuring the ships and hiring adequate crews to run them remain.

 

INSIGHTS

 

Mixed Message: Even with increased volatility present in the macro markets, U.S. farmers are slightly more positive about their current and future outlook this month, according to the latest data from Purdue University and the CME Group. But while their Ag Economy Barometer says expectations for current and future conditions became more positive, they're still nearly 25% lower than this time last year. "Even though we saw a slight uptick in sentiment this month, there is still a tremendous amount of uncertainty in the agricultural economy," said James Mintert of Purdue University, the barometer's principal investigator. "Key commodity prices, including wheat, corn and soybeans, all weakened during the month and producers remain concerned over rising input prices and input availability."

Land Bust?: The record values for farm acres seen in 2021 have continued into this year - but the pressure from higher interest rates may soon turn that around, Curt Covington from agricultural lender AgAmerica tells the WSJ. The upticks in interest rates by the Federal Reserve may make farmland less attractive to non-traditional buyers that have been flocking to it in recent years, Mr. Covington said. As a result, farmers who have been using their land as equity to secure loans for procuring needs like fertilizer could be in trouble. "When there's pressure on land values, that puts pressure on the farmer," he said, who adds that it's too early to tell what kind of strain those values may be facing.

Fueling the Fire: Demand for more ethanol in the U.S. has Green Plains operating at nearly full tilt, the company said in its second-quarter earnings release. The Omaha-based ethanol producer says that 97% of its production capacity was in operation this quarter, in order to meet the 21% uptick in gallons sold for the quarter versus this time last year - with 231.4 million gallons of ethanol being sold versus 190.9 million gallons last year. As a result, Green Plains said it consumed 80.2 million bushels of corn, versus 65.4 million bushels in 2021. The company calls the run rate 'historic', and says that it is bringing several new locations online in the second half of the year, with another facility due to come online in mid-2023.

 

AHEAD:

 

--The EIA will release its weekly ethanol production and stocks report at 10:30 a.m. ET Wednesday.

-Zoetis Inc. will release its second-quarter earnings report before the stock market opens Thursday.

--The USDA will release its weekly export sales report at 8:30 a.m. ET Thursday.

--Beyond Meat Inc. will release its second-quarter earnings report after the stock market closes Thursday.

--Corteva Inc. will release its second-quarter earnings report after the stock market closes Thursday.

 

Write to Kirk Maltais at kirk.maltais@wsj.com

 

(END) Dow Jones Newswires

August 02, 2022 16:06 ET (20:06 GMT)

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