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3 Big Things Today, July 27, 2022

Wheat Futures Rise Overnight; ADM Sees More Demand For Soymeal Than Corn

1. Wheat Futures Higher in Overnight Trading

Wheat prices were again higher on skepticism about how much grain will make its way out of Ukraine as uncertainty reigns in the Black Sea region.

Ukraine and Russia came to an agreement on shipping grain from the war-torn country after continued Russian attacks since February. The deal, brokered by Turkey and the United Nations, was agreed to last week.

Over the weekend, however, Russian forces attacked the port city of Odesa, a move that Ukrainian President Volodomyr Zelenskyy called "barbarism" while Moscow claimed it was merely attacking Ukrainian troops.

Russia also has cut the flow of gas to parts of Europe, partly in retaliation for western sanctions that are reportedly hurting the country's economy.

Soybean and corn prices were higher overnight as moisture stress builds in some parts of the U.S. Midwest.

Moisture stress is expected this week in parts of North Dakota, South Dakota, Nebraska, Iowa, Minnesota, Illinois and Indiana, composing about 30% of the soybean and corn crops, Commodity Weather Group said in a report.

In the six- to 10-day outlook, temperatures will be slightly above average through much of the Corn Belt, while precipitation levels will likely be below the average for this time of year, CWG said.

Warmer, drier weather is expected to lead to increased stress that will spread to about 40% of the northern Plains wheat areas, the forecaster said.

Wheat for September delivery rose 9 3/4¢ to $8.13 ½ a bushel overnight on the Chicago Board of Trade while Kansas City futures added 7 1/4¢ to $8.84 a bushel.

Soybean futures for November delivery jumped 13 1/4¢ to $13.97 a bushel. Soymeal fell 80¢ to $417 a short ton, while soybean oil futures added 1.6¢ to 59.55¢ a pound.

Corn futures for December delivery were up 3 1/2¢ to $6.04 ¼ a bushel.

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2. Soybean Meal May Have More Upside Potential Than Corn, ADM CEO Says

Soybean meal has the potential to outpace corn in terms of demand as consumers shift to poultry rather than beef due to inflation, Archer Daniels Midland Chief Executive Officer Juan Ricard Luciano during an earnings presentation yesterday.

Animal feed has been impacted by increased demand as consumers shift to chicken from beef, he said.

"(Poultry) is a more affordable protein," Luciano said, according to a transcript from the earnings call. "And chicken is where we get all the soybean meal mostly sourced. If you think about what's happening with soybean meal, it is -- it has a cost advantage to corn. So it continues to have ... more demand right now."

ADM reported revenue of $27.3 billion in the three months that ended on June 30, up from $22.9 billion a year earlier. The cost of sales rose to $25.2 billion from $21.5 billion.

The company reported earnings of $2.15 a share on an adjusted basis, up from $1.33 a year earlier.

Looking forward, ADM is going to keep a close eye on demand, Luciano said.

"I would say we have seen demand substitution, demand shifting here or there," he said, according to the transcript. "And you see it in retail, maybe to private label. We've seen a little bit of people looking into smaller packaging to make things more affordable."

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3. Flood Warnings Remain in Effect For St. Louis Area

Flood warnings remain in effect for areas around St. Louis after at least one person was killed yesterday as more than 9 inches of rain fell in the area, according to data from the National Weather Service.

Heavier-than-expected rain caused river levels to rise over their banks.

As of yesterday evening, the Dardenne Creek at St. Peters was at 23.5 feet, well above flood stage of 22.5 feet. Water levels are expected to recede throughout the day.

Still, a flood warning will remain in effect in the area until Thursday evening, the NWS said.

Further south, more extreme heat is expected in eastern Oklahoma.

Heat indexes today will hit 112 degrees Fahrenheit with actual temperatures of around 106 degrees, the agency said.

"Extreme heat and humidity will significantly increase the potential for heat related illnesses, particularly for those working or participating in outdoor activities," the NWS said.

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