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329715

3 Big Things Today, June 23, 2022

Soybeans, Grains Drop Overnight; Lower Gas Prices May Again Boost Demand

1. Soybean and Grain Futures Drop Overnight

Soybean and grain futures dropped in overnight trading on concerns about demand amid fears of a global recession and as the world wheat harvest continues, adding to supplies.

Recession fears have increased globally as central banks, including the U.S. Federal Reserve, have increased interest rates in a bid to stave off inflation and cool the world economy.

The rout is on in commodities as oil futures also were lower in overnight trading.

Soy oil and soybean meal prices plunged in China Thursday and palm oil futures in Malaysia earlier this week hit the lowest since December, all pushing soybean prices lower.

Wheat futures dropped overnight as the U.S. winter harvest continues, as does collection of the grain in Europe.

About 25% of the U.S. winter-wheat crop was harvested as of Sunday, up from 10% a week earlier and ahead of the prior five-year average of 22%, the Department of Agriculture said in a report earlier this week.

Thirty percent was in good or excellent condition, down from 31% a week earlier and well below the 49% that earned top ratings at this point last year, the USDA said.

The European wheat harvest, meanwhile, is underway, as is collection in Russia, adding to global supplies and weighing on prices.

In the U.S., meanwhile, corn and soybeans continue to grow as almost the entire corn crop and 83% of soybeans had emerged from the ground at the start of the week, government data show.

Seventy percent of the corn crop was in good or excellent condition as of Sunday, down two percentage points but ahead of the 65% that earned top ratings at the same point last year. About 68% of soybeans were in good or excellent condition, down from 70% a week earlier but up from 60% in the same week in 2021.

Soybean futures for November delivery dropped 37 1/4¢ to $14.39 ¼ a bushel overnight on the Chicago Board of Trade. Soymeal lost $11.40 to $388.50 a short ton, while soybean oil futures fell 0.76¢ to 66.71¢ a pound.

Corn futures for December delivery were down 18 3/4¢ to $6.75 a bushel.

Wheat for September delivery plunged 14 1/4¢ to $9.74 ½ a bushel while Kansas City futures dropped 20 1/4¢ to $10.25 ½ a bushel.

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2. Oil Price Declines May Actually Boost Gas Demand, Prices

Oil prices have slid with U.S. West Texas Intermediate futures nearing $105 a barrel and Brent at about $111 a barrel.

Representatives from the oil industry are scheduled to meet tomorrow with U.S. President Joe Biden, who's been extremely critical of the industry amid rising gas prices, according to a report from Commerzbank's Carsten Fritsch.

"Biden had harshly and publicly criticised refineries last week, accusing them of producing too little gasoline and taking advantage of the record-high crack spreads to pocket profits at the expense of car drivers," Fritsch said. "A number of market participants clearly believe that the oil industry will comply with Biden's wish and expand the supply of gasoline significantly.

"The fact that this will hardly be possible given the limited spare refining capacities is another matter."

Biden has called for the 18.4-cent gas tax in the U.S. to be suspended, and while that may offer little relief to consumers, it's a step in the right direction, analysts said.

While lower prices at the pump are ultimately the goal, that could increase demand as drivers continue to take to the roads, Fritsch said.

"The problem is this is more likely to support prices by stimulating demand for gasoline," he said. "If gasoline prices do not fall sharply in response, or dip only briefly, the oil industry is likely to face growing criticism."

RBC analysts said in a note to clients that oil demand hasn't fallen despite the extremely high prices, and that's a trend it expects will continue if prices come down.

"There are minimal major signs of material demand destruction despite elevated crude price and record U.S. retail gasoline pricing, and the strength in crack spreads reiterate that notion," RBC said.

Consumers, however, are buying from discount gas outlets rather than conventional stations where sales remain below pre-covid levels, the bank's analysts said.

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3. Storms Expected in Parts of Kansas and Missouri Thursday

Scattered thunderstorms are expected in parts of eastern Kansas and central Missouri this morning and this evening, while the afternoon looks mostly clear, according to the National Weather Service.

The biggest threat will be in parts of Kansas where quarter- to half-dollar-sized hail and wind gusts of up to 60 miles an hour are possible, the NWS said in a report early this morning.

Locally heavy rainfall also is likely in the area.

Rain also is expected in parts of eastern Iowa and northern Illinois tonight, the agency said.

There's a "marginal risk" for severe weather heading into the week and for parts of Saturday with the primary risks being large hail and damaging winds, the NWS said.

In the southern Plains where farmers are collecting winter wheat, it's expected to be extremely dry with "brief periods of critical fire weather conditions" possible in western Oklahoma, the agency said.

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