Editor’s note: Catch Randy Martinson every Friday after markets close on the

Agweek Market Wrap

at agweek.com.

The first week of August was not kind to the grains. The grains ended the month of July posting sharp losses with wheat dropping close to 40 cents, while corn was off over 17 cents and soybeans ended with over 50 cent losses. By the time the first week of August ended, wheat closed lower in all five sessions while corn dropped lower in the first four sessions and soybeans posted gains in three out of the five sessions, but still closed lower for the week.

Wheat gapped lower a few sessions as poor demand and reports of better-than-expected yields in the early harvested spring wheat added to the pressure.

Improving weather conditions

added pressure. Selling started from the lack of intense heat in the previous week. The last half of July was expected to bring temps into the 90s across much of the major growing regions of the U.S. but that forecast did not materialize and traders seemed fixed on needing to remove the weather premium.

On a positive note,

renewable diesel fuel production

hit 28 million gallons in 2021, with most of the production going to California (90%) and Oregon. Between 2011 and 2021, California has increased their renewable diesel fuel consumption from 1 million gallons to 28 million gallons.

Wednesday’s session started off decent as most of the grains posting small gains on the opening bell and extending session strength throughout the night and into the start of the day session. Support came from weather concerns as the heat has not broken as expected and rain events continue to be hit and miss. More reports of Russian aggression on Ukraine added some support.

But the wheels came off the markets once news broke that Fitch rating downgraded the U.S. credit rating due to concerns about growing fiscal deficit. That news took all of the markets from the grains to the financials lower turning Wednesday into a major risk off session.

The selling pressure was enough to push the grains down to major support as September Minneapolis wheat broke through $8.45 but managed to bounce off and close above that level. December corn tested the $4.95 level and bounced higher. November soybeans broke through its $13.25 support line, but like corn has bounced above that level overnight.

Something we have not seen in a long time is a good carry in corn. Now the carry might not be enough to pay for the added interest costs, but the spread between December and July 24 is at 27 cents right now, the best carry in almost two to three years.

Russia is back staging attacks on Ukraine, this time their focus was on the port of Izmail on the Danube River. The significance of this is it is the last major shipping corridor for Ukraine. At this point, Russia has damaged almost every major grain shipping facility in Ukraine.

Saudi Arabia reported that they will continue with their 1 million barrel per day production cut through September. This helped to turn crude oil higher Thursday, lending late session strength to soybeans and canola.

The second week of August started with the grains mixed. Wheat and corn managed to see strength due to war concerns but soybeans remained under pressure due to improving weather conditions.

The grains put in a mixed performance to start the week with wheat pushing higher while corn waffled around unchanged and soybeans crashed. Wheat was supported by the escalation in the Ukraine Russia war as both countries have started to take turns attacking each others ports. Ukraine has even been able to attack some of Russia’s vessels carrying war supplies. Russia seems on a mission to greatly reduce Ukraine’s movement of grain. And in retaliation, Ukraine is now striking Russia’s ports as well.

Minneapolis wheat did not have the same strength as the winter wheat contracts, partly due to harvest pressure as combines have been trying to get rolling on the northern Plains. Rain has slowed harvest down and has even started to cause quality issues in southwest North Dakota. Due to the recent heavy rains and warm temps, a lot of the barley and spring wheat in the southwest corner of the state is starting to sprout. This will result in a lot of the small grain in that region to either be abandoned or switched to feed.

Soybeans

were the worst performer as at this point it does not look like you could write a better weather forecast for soybeans. The recent rain has brought good moisture to most regions and temperatures are expected to return to normal to below normal as soybeans enter the last half of their critical crop development state.

Corn was stuck in the middle not knowing which direction to go. Support spilled over from the higher wheat complex while soybeans added to the pressure. Traders are not as comfortable with the weather’s influence on corn.

One item to note, both corn and soybeans have reached a price point that is encouraging exports. China was back in and bought 132,000 metric tons of soybeans while Mexico was in and bought 251,000 metric tons of corn.

Monday’s Crop Progress report was a little less friendly than expected. Traders were looking for conditions to decline again this week, and then start to show improvement next week due to last week’s weekend rain. But instead, most crop saw improvement this week, but not quite sure if I can completely understand the math. Corn’s crop rating improved 2% to now be rated at 57% good/excellent. But when looking at the state breakdown, it seems hard to come up with a 2% increase. The state breakdown was Illinois: +9%, Indiana: +1%, Iowa: 0%, Minnesota: -4%, Missouri: +4%, Nebraska: +4%, North Dakota: +4%, Ohio: +4%, and South Dakota: +5%.

Soybeans crop rating also improved 2% and like corn, took a new method of math to come with that rating. The state breakdown for soybeans was Illinois: +12%, Indiana: 0%, Iowa: -2%, Minnesota: -3%, Missouri: +4%, Nebraska: +2%, North Dakota: -1%, Ohio: +4%, and South Dakota: +4%.

Spring wheat conditions did drop 1%, but it should have seen a bigger decline. The state breakdown for spring wheat was Idaho: -4%, Minnesota: -7%, Montana: -4%, North Dakota: -1%, South Dakota: +4%, and Washington: -9%.

The grains opened Tuesday’s session lower and extended session losses early.

Forecasts calling for almost ideal conditions started the grains on the defense while Monday’s negative Crop Progress added fuel. Position squaring ahead of Friday’s August Crop Production report added selling pressure Tuesday. No reports of attacks in either Russia or Ukraine added pressure.

The squaring up of positions ahead of Friday’s August Crop Production report was also evident. Ahead of the report, USDA put out a statement saying that they will be using any and all methods (survey, FSA reporting, RMA reporting) to verify planted acreage for the small gains in this report and that it is likely acreage will be adjusted. Next month they will do the same for corn and soybeans.

Early estimates for Friday’s report have all wheat production at 1.739 billion bushels unchanged from last month. Winter wheat production was at 1.209 billion bushels versus 1.206 billion bushels last month. Other spring wheat production is estimated at 477 million bushels versus 479 million bushels last month. New crop ending stocks are estimated at 598 million bushels versus 592 million bushels last month. Look for USDA to leave production unchanged, however they might lower exports.

Estimates for corn have production at 15.135 billion bushels versus 15.320 billion bushels last month. Yield is expected to come in at 175.5 bushels versus 177.5 bushels last month.

Old crop ending stocks are estimated at 1.41 billion bushels versus 1.40 billion bushels last month. New crop stocks are estimated at 2.168 billion bushels versus 2.26 billion bushels last month.

The average trade estimate for old crop soybeans ending stocks is 252 million bushels versus 274 million bushels last month. For new crop, the average trade estimate for soybean yield is 51.2 bushels versus 52.0 bushels last month and production is estimated at 4.234 billion bushels versus 4.3 billion bushels last month, bringing ending stocks to an estimate of 260 million bushels versus 300 million bushels last month.

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