Welcome back to the D&D AG MarketMIX newsletter! This newsletter is exclusively for you - our D&D customers and associates. Our goal is to provide you with a monthly summary of the Ag market reports to keep you updated on relevant, vital news that may impact your business.

With corn and soybean crops in the ground, all eyes are on US weather conditions, particularly as an El Niño pattern sets in. 

Currently, the US Drought Monitor shows abnormally dry and moderate drought conditions across much of the Corn Belt, with more severe dryness – including extreme and exceptional drought – in parts of Nebraska, Kansas, Oklahoma and Texas. USDA expects a few showers to develop in the western part of the Corn Belt over the next several days, but dry weather is expected to persist across much of the Midwest, South and Plains region.

Adding to weather worries are hazy conditions caused by Canadian wildfires, as lingering smoke is reportedly impacting regions east of the Mississippi River. Storm systems could clear up conditions soon, but air quality remains a concern. Possible impacts on grain and dairy production have yet to be assessed.

Another watch factor: A report by the National Oceanic and Atmospheric Administration has declared the onset of an El Niño weather pattern, with conditions expected to persist into winter. While predicting the impacts of El Niño has proven difficult in the past, some analysis suggests the pattern brings slightly cooler temperatures to the Midwest, while rainfall levels are largely unchanged. Later in the year, the pattern could bring a warmer and slightly drier winter. The current summer dryness concerns in the Midwest will make the El Niño effects that much more impactful, if a dry winter follows a dry summer.

Weather conditions may already be impacting this year’s crop. As of the week ending June 11, 61% of corn was rated as good or excellent, down from the five-year average of 70%. Soybean condition reached 59% good or excellent, compared to the five-year average of 71%.

Still, grain stocks remain abundant. USDA’s latest World Agricultural Supply and Demand Estimates pegged old-crop corn inventories at 1.452 billion bushels, while new-crop stocks were forecasted at 2.257 billion bushels. Both exceeded pre-report expectations. Similarly, old- and new-crop soybean stocks topped estimates at 230 million and 350 million bushels, respectively.

Weakening Crude Oil Prices, Long-Term Debt Ceiling Deal Increases Pressure on Grain Prices

While weather is already dictating grain market movement this summer, other factors are also impacting prices. Crude oil remains under pressure as fuel demand in China remains weak. Still-hot inflation is strengthening the US dollar and could deter global buyers from picking up US goods. And long-term concerns remain around the debt ceiling deal brokered earlier this month, which suspended the US debt limit until 2025.

Those factors, along with recent bank failures, are fueling fears of an economic recession. Analysts suggest the US could dip into a recession during the second half of the year, though the economy has remained relatively resilient.

Dairy Margins Projected to Improve as Prices Remain Stable & Feed Costs Fall

With milk prices expected to remain relatively stable, bottom lines could benefit, with current estimates pegging second-half margins at $8.25 per hundredweight, compared to $6.08 during the first half. Producers covered by DMC at the $9.50 level also received a payout of $3.66 per hundredweight in April, the largest since August 2021.

This monthly report is brought to you by Ever.Ag’s Feed Foundations Team. The risk of loss trading commodity futures and options can be substantial. Investors should carefully consider the inherent risks in light of their financial condition. The information contained herein has been obtained from sources to be reliable, however, no independent verification has been made. By law we must state the information contained herein is strictly the opinion of its author and not necessarily of Ever.Ag and is intended to be a solicitation. Past performance is not indicative of future results.

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