Market Forecast for Summer: Cloudy with a Chance of Hardheadedness

A veteran commodity trader once urged me to remember that “People who say the market is wrong are usually on the wrong side of the market.”

That insight, he added, had been learned the hard way, “…as in hardheaded.”

His advice came to mind as the futures market carried its June swoon into the U.S. Department of Agriculture’s (USDA) dangerous June 30 doubleheader: an Acreage report and a Grain Stocks report.

Before the reports, market bulls had hoped, either–or, better yet, both–would slow (or, better yet, stop) the futures market rout that had lashed corn, soybeans, soybean oil, and wheat markets lower since mid-June. After all, there’s a global famine on tap as well as reduced 2022 U.S. corn and soybean acres, right?

Yes, but growing recession fears and already-high futures prices quickly pushed aside the reports’ bullish news–4 percent fewer corn acres this year and 2.6 million less soybean acres than what USDA predicted in March.

That added speed to an already steep dive. December corn futures dropped from $7.31 per bu. on June 17 to $5.78 on July 5. Likewise, November soybean futures cracked from a contract high of $15.82 on June 9 to $13.16 on July 5, a 17 percent drop in under a month.

Futures prices for wheat, a crop said to be in such short supply that most hunger groups predict widespread famine, had an awful May and June. On May 17, November hard red winter wheat futures closed at $12.77 per bu. By July 5, November futures were 37 percent lower at $8.04 per bu.

Worse–or, if you’re a grain farmer, better to some degree–widespread Fourth of July rains added to the market’s willingness to take futures lower. Also, according to the newservice DTN on July 5, “The U.S. Dollar Index is… (at ) its highest price in 19 years,” making it a deepening threat to slow U.S. ag exports well into 2023.

And the price-bending action of the last month might carry on as summer heats up.

For example, on June 30, USDA’s National Agricultural Statistics Service (NASS) announced it will gather “updated information on 2022 acres planted” for 10 crops in three states hit hard by weather-driven planting delays this spring–Minnesota, North Dakota, and South Dakota.

“If the newly collected data justify any changes,” NASS added, it “will publish updated acreage estimates” in its almost always explosive August Crop Production report, to be released Aug. 12 this year.

It’s hard to see how any “newly collected data” won’t “justify” changes in August. USDA’s June estimates show North Dakota’s 2022 planted corn acres 1.1 million less than 2021 and the state’s planted soybean acres also lower: 5.9 million this year compared to 7.25 million in 2021.

Expect both acreages to grow.

Likewise, USDA’s June acreage report noted that tillable acres “left to be planted” nationwide was a stunning 4 million for corn and 15.8 million for soybeans. For comparison, both are well over more typical unplanted acres found in June reports like those from 2021: 2.2 million for corn and 9.8 million for beans.

Those strikingly large, 2022 unplanted numbers go a long way to explain both the rise in last spring’s corn and soybean futures–Wow, where did those acres go?–and the June swoon: Uh oh, they didn’t go anywhere; they’re still hanging over the 2022 market.

None of these numbers hold much comfort for market bulls already winded after a late winter drought, a soggy planting season, an export-market disrupting war, the highest inflation in nearly a half century, a too-strong dollar, and now widespread worry over an upcoming economic recession.

But they do explain why June was a bummer and July started out by making June look like an underachiever. And next comes August and its updated numbers.

Which only proves that markets are like the weather: If you don’t like ‘em, wait, they’ll change. People, however, as my trader friend suggested, often don’t.

© 2022 ag comm