Grain Markets and Other Stuff
Joe Vaclavik and Mackenzie Johnston discuss the grain markets, the business of farming, news related to agriculture, and a variety of other topics.
Grain Markets and Other Stuff
Corn Prices SURGE on Forecast for Extended US Heat Wave
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🌧️ Heavy rain triggered major flooding across Iowa, with over 15 inches falling in central areas and I-35 shut down near Ames. More storms are on the way this week, though the recent extreme heat is expected to ease as the heat dome shifts west toward the Plains. 🌽
📊 USDA's latest drought monitor showed improvement in the southern Corn Belt thanks to heavy rain, while drier conditions expanded drought in western Iowa and southern Minnesota. High Plains states like South Dakota, Nebraska, Kansas, and Oklahoma also saw drought conditions ease. 🌾
🇺🇸🇨🇳 The US and China have agreed in principle to cut tariffs on agricultural goods, potentially making US soybeans more competitive with Brazil. Traders remain cautious though, waiting for real sales rather than just diplomatic headlines. 🌱
🛢️ OPEC+ is boosting oil production again as shipping traffic through the Strait of Hormuz recovers post-ceasefire. WTI crude sits near $68/bbl, down nearly 40% since its April peak amid glut concerns. ⛽
📉 US corn and soybean export sales fell sharply last week, with soybean sales hitting a marketing-year low. Mexico led in corn and wheat purchases, while China topped the soybean buyers list. 🚢
US Flooding, Heat, Europe
SPEAKER_01Morning guys. It's Monday, July 6th, 5 30 a.m. Central Time. Grain markets are sharply higher this morning. December corn futures up 13 and a quarter cents at 454 and three-quarters. November soybeans up 34 and 3 quarters at 11.82 and a half. September Chicago wheat up 10.5 cents at 610.25. September Kansas City wheat up eight and a quarter at 646 and three quarters. September spring wheat up five and a quarter at 624. We've got a number of weather issues to discuss, and we're going to tie this all back to the higher prices this morning. Let's get started.
SPEAKER_00So heavy rainfall late last week dumped more than 15 inches across parts of central Iowa, triggering flash flooding in some areas. Looking ahead, additional rounds of thunderstorms are expected to bring more rainfall to the Corn Belt this week. Meanwhile, last week's extreme heat is expected to ease, with temperatures across much of the region returning to near or slightly above seasonal averages. The heat dome responsible for last week's intense temperatures is expected to shift westward this week, bringing well above uh bringing well above average temperatures to the plains and much of the western U.S.
SPEAKER_01These heavy rains over the weekend were not super isolated. There were some fairly widespread areas that caught three, four, five, six inches of rain over the last 72 hours. And if you look at the last seven days, there are quite a few areas, a lot of Iowa, uh southern Minnesota, parts of Illinois, parts of uh Wisconsin that caught a ton of rain. So this is one of the issues here this morning. Now there's going to be a little bit of debate as to why prices are higher this morning, and I will give you my thoughts. Bloomberg said last night that this uh rally has to do with crop damage in Europe, which I don't buy at all. That would not be my headline. Um, the European Union's going to account for ballpark 2.2 billion bushels of corn production. The U.S. is going to account for damn near 16 billion bushels of corn production. And France in a vacuum is like 500 million bushels of corn production. So, guys, I mean, look at the calendar. It's July 6th. We've got U.S. weather problems. We've got heat. We've got uh some flooding potentially. This rally is U.S. weather centric. This is not a European corn weather rally. Let's look at uh some maps here. This is from our friends at Crop Profit to explain my deal with crop profit since uh I've always been very transparent with you guys. I don't pay for crop profit, but they don't pay me anything either. It's like I get to use their stuff. And um in the flip side is that I I do some advertising for them. But you guys should buy crop profit. I look at this stuff every single day. Anyways, over the next seven days, based on Euro model data, U.S. coronary is expected to see 75% of normal rainfall. I don't think that's a big problem, especially considering uh the rainfall that we've seen recently. Here's the problem this heat just won't go away. We're coming off a week of heat, and this is actually the relief. 2.3 degrees above normal on average over the next seven days based on Euro model data. That's the relief in the heat. You go out to the 8 to 14 day, and you start to see the problem here. 60% of normal rainfall expected during the 8 to 14, and the heat accelerates again, 5.8 degrees above normal on average expected across U.S. corn areas during the 8 to 14 day period. And this heat is supposed to, based on the weather models, and I know I don't I don't trust the weather models always either, but through week three, uh 4.2 degrees above normal, and through week four. So you're now talking an entire month of July in which Corn Bell temperatures are going to run probably on average three to four degrees above normal. I know it's July, it gets hot, right? But that is statistically
Grain Charts
SPEAKER_01significant and it will absolutely have an impact on corn yields. I would imagine negatively. And I think that's why prices are higher this morning. Um, looking at the charts, this stuff looks a hell of a lot better. These are big spikes higher. Here's Dece corn, you're right up against uh a little bit of trend resistance. 455 would be kind of your um line in the sand this morning. If you could close above that today, I think you got a shot at that old April low at 469 and a quarter. I wouldn't be surprised if there's a little bit of China interest out there. Maybe that's part of what's going on here this morning. I haven't heard anything personally, but I know that that talk was floating around last week. Um here's a weekly corn chart, which is interesting. We had an um an open gap at 405 and a quarter on a continuation basis. We filled that gap last week, and now we've got a new gap. We gapped higher to start the week. Um, kind of interesting stuff, gaps all over the place. The snow soybean chart looks much, much better to start the week up above some trend resistance. I wouldn't be surprised at all if we uh took a look at that 1214 high from back in May, uh wheat market kind of being dragged along by the row crops. But um I believe, guys, this is a uh good old-fashioned crop scare event or
Drought Monitor
SPEAKER_01the start of it. Now, I could be proven wrong. There could be a China headline out later, and maybe that that's all for now. But this this looks to me to be a U.S. weather thing.
SPEAKER_00USDA released its weekly drought monitor data on Thursday. Heavy rainfall, heavy rainfall across the southern Corn Belt last week, improved drought conditions in Kentucky, southern Illinois, and southeast Missouri. Meanwhile, drier weather in the northern part of the region caused drought to expand in western Iowa and southern Minnesota. Across the high plains, widespread rainfall eased drought conditions in parts of South Dakota, Nebraska, Kansas, and Oklahoma. The only part of the region where conditions deteriorated was way up in northern North Dakota. When we look at the percentage of U.S. areas experiencing drought, corn country currently stands at 19%, soybeans also 19%, winter wheat 47%, spring wheat 19%, and cattle country 45%.
SPEAKER_01Mackenzie, look at Nebraska. Looks a lot better.
SPEAKER_00It does. We got a good amount of rain.
SPEAKER_01Yeah, I mean, uh, so we're going in the right direction. I don't think drought is going if there's going to
US/China and Tariffs
SPEAKER_01be a weather problem this year, I don't think it's going to be drought. I think it's going to be this heat that could persist through uh the month of July, but it's good to see a little bit of relief, especially out west.
SPEAKER_00Late last week, China's uh Ministry of Commerce announced that the US and China agreed in principle to reduce tariffs on agricultural products under a reciprocal tariff reduction framework. Chinese officials said purchases will be based on market conditions and demand. Although no further details, such as a timeline, have been announced. Despite the announcement, soybean futures were mixed last week as traders are looking for actual sales, not just broad diplomatic statements. Soybeans would likely be the biggest winner from a tariff, from any tariff reduction, although corn and wheat could also see stronger export demand if agricultural trade expands with China.
SPEAKER_01So the chart from the Bloomberg article essentially saying that U.S. soybeans are like competitive-ish for October delivery, and they need to be because uh that's our export window. We ship the most beans out of the United States uh directly post-harvest, October, November, December, maybe into January. That's our big window. Um, to look at broad diplomatic statements, as McKenzie mentioned, um US or the White House rather told us back in uh November that China would buy uh 12 million metric tons of U.S. soybeans for uh old crop delivery, essentially. And they did. It's actually we're actually getting close to 101%. They're actually over 12 million metric tons uh as of last week's export sales report, which is interesting. Moving forward, you got to look at the next White House fact sheet, which was from May 17th, and we're looking for supposedly $17 billion per year in U.S. ag uh purchases, and that's non-soybean purchases. So we're hoping to see some corn uh purchases in here, and I think that we will if they're gonna hit 17 billion, it's gonna have to include some corn. Um, new crop purchases of soybeans by China uh haven't really taken off yet. We're still at like 200,000 metric tons. We've got a long, long way to go. I hope that uh hope that we get there.
SPEAKER_00If you guys have not checked out our premium content, you sure need to do so. Joe, can you tell our viewers about some of last week's premium videos?
SPEAKER_01Absolutely fantastic stuff from our friend Chris Barron at AgView Solutions last week. More input inflation, corn and soybean budgets. Chris has a uh a large customer base and he they they run um farm budgets through his program, and he's able to aggregate the data and spit us out crop budget numbers. We talked about 2025, which would be old crop bushels. We talked about 2026, new crop bushels. Uh, we talked about 2027 based on the preliminary information that we have. And this is not necessarily fun stuff to talk about because inputs are going to rise again. Chris has specific numbers and percentages for every single budget category and then a broad, like kind of here's your input inflation number. Um, it's it's super interesting stuff, and it's it just speaks to the difficulty that the U.S. farmer is facing right now. Um, low commodity prices are part of the problem, but the just continued and rampant uh inflation and input costs is, in my opinion, the bigger problem. Uh, we did a 20 questions mailbag with my new business partner, Matt Bennett, on uh Wednesday last week. It's always fantastic stuff. We have questions that uh come in from our premium subscribers about grain marketing, about demand, about the size of the crop, about things like capture and carry and kind of like hardcore grain marketing information. It's really fantastic stuff. If you guys want to see the premium stuff, go to standardgrain.com. You can sign up this morning. This is a $50 per month subscription. You can cancel at any time. No other fee, no other obligation, nobody will try to sell you anything else. If you are the decision maker in your farm operation, this information
OPEC
SPEAKER_01is uh is extremely valuable and uh will help you to compete in a very competitive environment. Um, check that deal out this morning, guys.
SPEAKER_00OPEC Plus is increasing oil production as traffic through the Strait of Hormuz rebounds. Seven members of the group will raise production by roughly 188,000 barrels per day in August. The increase is the fifth consecutive monthly hike as the group continues to roll back production cuts implemented in recent years. While traffic through the strait continues to improve, hundreds of vessels are still waiting to pass, and questions remain about how it will be governed going forward. Meanwhile, WTI crude has fallen nearly 40% since peaking in early April. And some analysts warned that the surge uh in oil exports could create a short-term supply glut, putting additional pressure on crude prices.
SPEAKER_01I decided to enjoy my weekend and I didn't look at the markets last night. But when I did look at the markets this morning and I saw, okay, grains are sharply higher, the first thing I looked at was crude, and crude is lower this morning. So, no, this is not a crude or straight of hormous or Middle East uh thing in the grain markets this morning. It appears as if things are moving normally and if things continue to move normally without any major disruption. I know there's still a little bit of conflict there, but these crude prices
Export Sales
SPEAKER_01could very well continue to leak lower. So the grain markets are doing their own uh weather thing, I think, this morning. Again, China possibility, but it appears to be a weather thing.
SPEAKER_00U.S. corn export sales declined last week for the weekending June 25th. Net corn sales were reported at 29 million bushels. The print was down 2% from the excuse me, 2% from the previous week and down 23% from the prior four-week average. Mexico was the largest buyer for the week. Net soybean sales were well below pre-report expectations and also set a marketing year low at 2 million bushels. The print was down 91% from the previous week and down 88% from the prior four-week average. China was the largest buyer. And then wheat sales were near the lower end of expectations at 11 million bushels. The print was down 41% from the prior week with Mexico as the largest buyer.
SPEAKER_01U.S. corn export sales for the current marketing year, which is these are old crop bushels, best ever of all time. Um, there is one interesting note, and we talked about this I think last week. USDA is projecting that corn exports during the new crop marketing year will decline. And I wouldn't even, I guess projection is the word, but they have no idea. They're just kind of starting off with the balance sheet, and they're not talking a big reduction. They're talking 3.3 billion bushels this year, which I think is close to reality, down to 3.15 this year. And 3.15, I think, would have to be the second best of all time. So they're still projecting a big export program. And I think it's just because the crop's gonna be a little bit smaller than last year that uh they're working with that projection. Soybean export sales are terrible. We're gonna start to focus our attention for both corn and soybeans on new crop export sales rather than old crop. We're gonna stick with the old crop charts for another couple of weeks. Uh wheat export sales, we're sitting, what, toward the second worst of the last 10 years? That's not good. I thought we were closer to average. Anyways, um, part of that probably has to do with a sharp rally that we saw in wheat prices. We priced ourselves out of the market for a little bit, but I think we're a little bit more uh closer to being competitive right now. What did cattle prices do last week?
SPEAKER_00Cattle futures were lower on Thursday. Live cattle were 205 to 260 lower. Feeders saw losses ranging from 273 down to 380. Cash cattle trade was limited to the north last week, and it was also lower week over week, with a majority of the trade being reported in the 255 to 256 range, which was lower than the prior weeks, 262.
SPEAKER_01U.S. equities are higher this morning. Um, happy birthday, America. The SP's up uh half a percentage point, not a big rally. Crude oil's off just a little bit. So pretty, really fairly quiet in the outside market this morning. This is this is um just a grain specific deal this morning. It's not a crude deal, it's not a US dollar deal. This is a uh this is a crude deal or uh a grain deal. Sorry. Everyone have a uh wonderful weekend, and uh we'll be back on Tuesday.