The grain and oilseed sector of the commodities market declined 3.46% in Q2 but was still 14.65% higher than the level on December 31, 2021. Over the first six months of 2022, CBOT wheat futures reached an all-time high, and corn and soybean futures came within striking distance of the 2012 record levels. However, prices turned lower in late Q2 and continued to fall in early Q3.
The war in Ukraine poses a unique risk to the world’s food supply for the coming months and years as Ukraine and Russia are Europe’s breadbasket. While agricultural commodity prices have come way down from the recent highs, the war continues to threaten a return of higher prices and shortages. Expect lots of volatility in the agricultural products that feed the world over the coming months. Ukraine and Russia are significant producers and exporters of wheat, corn, and other products the world depends on for nutrition.
In early July, the weather across the critical growing regions in the Northern Hemisphere is typically the most significant factor for prices. However, the 2022 growing season is anything but an ordinary year.
Soybeans move higher in Q2 but turn lower in early Q3
Nearby CBOT soybean futures moved 3.51% higher in Q2 and were 26.06% higher than the closing level at the end of last year on June 30. July soybean futures reached a high of $17.84 in June, just 10.75% below the 2012 all-time high.
While the July contract closed the quarter at $16.75 per bushel, the new-crop November beans were in backwardation and settled at the $14.58 level.
The chart shows the November soybean futures reached a low of $13.0250 on July 6 and recovered to the $13.9650 level at the end of last week. Beans were lower from the Q2 closing price in early Q3.
Corn corrects lower
Corn futures on the CBOT edged 0.67% lower in Q2 but were still 25.37% higher over the first half of 2022. The nearby July futures contract settled at $7.4375 per bushel after reaching a high of $8.27 in April, 16.75 cents below the 2012 all-time high.
The backwardation in corn caused the new crop December futures to settle around the $6.1975 level on June 30.
The chart highlights the decline to a low of $5.6650 per bushel on July 6. December futures settled slightly above the Q2 closing price at the $6.2350 level on Friday, July 8.
Corn is the primary ingredient in US ethanol. Chicago ethanol swap prices closed Q2 at $2.57 per gallon wholesale, and the August price was at the $2.51 level on July 8 on the back of lower gasoline and corn prices. Ethanol gained 7.76% in Q2 and 13.22% higher over the first half of 2022 on the back of higher fuel prices over the period.
Wheat tanks after reaching an all-time high
Nearby CBOT soft red winter wheat prices reached a record $14.2525 high in March. In Q2, they fell by 13.64% but were still 12.71% higher over the first half of 2022, settling at the $8.6875 per bushel level. New-crop September CBOT wheat futures settled at $8.84 per bushel on June 30.
The chart of September futures shows the decline to a low of $7.8525 per bushel on July 6. The price was over $1 per bushel higher at over the $8.90 level at the end of last week and was marginally above the Q2 closing price.
KCBT hard red winter wheat fell 7.87% in Q2 but was 18.37% higher over the first half of 2022. Nearby KCBT wheat settled at $9.4875 per bushel, with the new-crop September futures at $9.5175 on June 30. September KCBT futures were lower at the $9.4575 level on July 8. Nearby KCBT wheat rose to $13.7925 per bushel in May, only 5.5 cents below the record 2008 peak.
MGE spring wheat fell 8.50% in Q2 but was 0.82% higher over the first half of 2022. Nearby MGE wheat settled at $9.8775 per bushel, with the September futures at $9.90 on June 30. September MGE futures were slightly higher at the $9.9175 level on July 8. Nearby MGE wheat rose to $14.1275 per bushel in May, well below the 2008 $25 per bushel all-time high.
Oats fall while rough rice rises
In other grain markets, oats declined while rough rice futures posted a small gain.
Nearby oat futures settled at $6.6125 on June 30, down 9.11% in Q2 and 3.18% below the price at the end of 2021. Oats reached a record high of $8.11 per bushel in
April 2022 before turning lower. Active month September oat futures settled at $5.1550 on June 30 and were lower at the $4.9275 level on July 8. September oats reached a low of $4.5700 on July 6.
Meanwhile, nearby rough rice futures were at $16.425 on June 30, 2.59% higher in Q2 and 12.27% above the end of 2021 closing price level. September futures settled at $16.745 on June 30 and were lower at the $16.455 level on July 8 after reaching a low of $16.05 on July 6.
The prospects for the agricultural commodities in Q3 and beyond
The wild bull markets in grain and oilseed futures that took prices to multi-year and, in some cases, all-time highs in March and April ran out of upside steam. Bull markets rarely move in straight lines, and corrections, as we have witnessed, can be ugly.
Meanwhile, the war in Ukraine, sanctions on Russia, and Russian retaliation will have far-reaching consequences for the grains and oilseeds that feed and increasingly power the world via biofuels. We are now in the heart of the 2022 growing season in the northern hemisphere, and weather conditions will determine the crop yields. However, the war that has turned Ukrainian acreage into a battlefield and the Black Sea ports, a critical logistical hub for Europe’s breadbasket, into a war zone continues to threaten global supplies. Expect lots of volatility in the grain and oilseed sector as the war makes supply and demand fundamentals more than cloudy in early Q3 2022.
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