Grains Are Sharply Lower. Oversold?

MORNING OUTLOOK

Grains are sharply lower. More technical selling below key support. Grains oversold. SU is down 39 cents and near 14.53. Overnight high was 14.93. SX is near14.37. SMU is near 393.4. BOU is near 67.09. CU is down 20 cents and near 6.81. Overnight high was 7.00. CZ is near 6.71. WU is down 19 cents and near 9.67. Overnight high was 9.87. KWU is down 24 cents and near 10.21. Overnight high was 10.44. MWU is down 17 cents and near 10.88.

US stocks are mixed. US Dollar is higher. Crude is lower on new recession concerns. Gold, silver, copper, coffee, sugar and cotton are lower.

Investors are shedding demand-based assets due to growing concerns that efforts by the Federal Reserve to bring inflation under control could take a toll on the economy. Investors are growing less optimistic that the Fed can engineer a soft landing, whereby interest rates rise to curb inflation without pushing the economy into a recession.

Some feel China’s financial system, paired with its population decline, suggest it may not be consumption-led, or even export-led, but lending-led. Fresh new Chinese lending in calendar year 2020 was about 34.9 trillion yuan (roughly $5.2 trillion), about 40% of GDP. The best guess is that as of calendar year 2022, total outstanding corporate debt in China has reached 350% of GDP, or some 385 trillion yuan ($58 trillion). It is the largest and most unsustainable credit boom in human history.

UK inflation is also highest in 40 years with consumers rationing food and fuel expenses. Germany raised risk concern and could ration declining energy supplies. Wage inflation still a drag on global economies and company margins.

Some look at strong seasonal that grain markets top late in June as trigger for continued grains selloff. US Midwest temps have or will moderate leaving few money managers any spark to either continue to be long or become new buyers. Still US 2 week forecast is dry. Demand worries are compounded by slow increase in US export demand despite declining competitors supply.

Charts suggest steep risk off. SU has dropped from a high near 16.06 to overnight lower near 14.56 while US carryout could drop below 200 mil bu. SMU dropped from 453 to 388. China soymeal values are down 6 pct and steepest drop in 10 years. Soyoil continues to fall and is following steep losses in palmoil. CU has dropped from 7.78 to 6.80 on benign US Midwest weather. WU has dropped from 12.85 to 9.69 on hopes of increase exporter supplies and slow importer buying due to drop in economies and ability to but needed basis food for import.

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