Grains traded significantly higher in reaction to Monday afternoon’s USDA Weekly Crop Progress data that showed corn planting at just 96% done, soybean planting only 85% completed & wheat harvest just 15% finished on June 23. USDA’s report that corn conditions declined 2% to a worst-since-2012 57% G-E, that winter wheat ratings dropped 3% to 61% G-E & that initial soybean conditions were pegged at a third-worst-ever 54% G-E also supported grains during the Monday night session. Positioning for Friday’s USDA Acreage revisions & June 1 Grain Stocks data eventually led speculators to pare back ownership on the fear that USDA may find more corn & bean acres were intended on June 1 than were actually planted. The grain stocks report is expected to show the largest June 1 corn stockpiles since 1988 & the record-high soybeans supplies for that date. When coupled with recent usage reports that suggest exports are falling short of previous forecasts & domestic hog production & ethanol margins have tightened due to rising prices, traders were wary the demand is falling in concert with potentially reduced output. With First Notice Day for July grain futures contracts also on Friday, recent longs in old-crop contracts had additional reason to exit positions on a rally. At Tuesday’s close, July corn futures edged 3/4c higher, Dec. corn ticked up 1/4c, July beans declined 5.5c, Nov. beans dropped 6.25c lower, July soymeal lost $1.90/ton, & July soft red winter wheat was down 2.25c. At their Monday night highs, July corn was up 6.25c, July beans were up 8.75c & SRW wheat was 7.5c higher.
Grains continued Tuesday’s day-session price break during Tuesday night trading. Despite Trump Administration officials trying to talk up markets with optimistic views towards Friday’s meetings between President Trump & China’s President Xi Jinping, grain markets continued to erode as traders took to the sidelines ahead of Friday’s data. Reports that the US Justice Dept. had launched a price-fixing investigation into the actions of the major US poultry producers/processors probably didn’t have much impact other than on market psychology. At the 7:45 am pause in electronic trading, July corn futures were down 4.25c, Dec. corn was 3.5c lower, July & Nov. beans were each down 4c, July soymeal was $0.60/ton lower, & July SRW wheat was down 1/2c.
Corn & beans maintained their negative bias during Wednesday’s regular session, but wheat reversed to solid gains by the noon hour as traders’ attention was focused on excessive heat across Western Europe during wheat berry fill. Positioning for Friday’s reports, the monthly & quarterly end & First Notice Day remained the primary motivations for corn & bean traders. Soybeans found little support from a daily export sales announcement, while corn mostly shrugged off this week’s EIA Petroleum Status data. That report showed ethanol output declined 2.646 mil.gal. (-0.83%) to 315.168 mil.gal. in the week ended June 21, & ethanol stockpiles also edged 1.554 mil.gal.
(-0.17%) lower to 906.192 mil.gal.—the least since May 25, 2018. Ethanol output was equal to last year, while ethanol stocks were down 4.097 mil.gal. (-0.45%). Stocks declined in the Midwest (-6.048 mil.gal.) & Rocky Mountain regions (-.336 mil.gal.), but were slightly higher at the Gulf (+0.714 mil.gal.), the East Coast (+1.092 mil.gal.) & the West Coast (+2.646 mil.gal). By Wednesday’s close, July corn futures were down 4.25c, Dec. corn was 3c lower, July beans were down 9.25c, Nov. beans were 8.25c lower, July soymeal was down $2.30/ton, & July SRW wheat was up 8c.
Crude oil was sharply higher on Wednesday as US-Iran tensions continued to bolster worries about global supplies. Today’s EIA report indicated the US produced 100,000 barrels per day less oil last week (12.100 MB/day), & supplies were more impacted by a daily reduction of .811 MB imports & .348 MB increase in exports. Net daily crude oil imports of 2.886 MB/day were the second-lowest on records dating to 1991. Commercially-owned crude oil inventories plunged 12.788 MB (-2.65%) to a 6-week-low 469.576 MB as the refinery utilization rate climbed 0.3% to a 23-week-high 94.2%. Refiners are still operating at 3.3% smaller capacity than last year in part due to a fire at the oldest refiner on the East Coast. The damage to the Philadelphia facility was so bad that it announced it will permanently shutter the facility which emerged from bankruptcy only recently. Total commercially owned petroleum supplies were down 11.886 MB (-0.61%) to 1,949.705 MB—4.62% above last year. Since summer driving season is fully underway, one would normally expect usage to improve. Gasoline stocks edged .996 MB (-0.43%) lower to 232.225 MB—down 3.72% from last year. Distillate stocks declined 2.441 MB (-1.91%) to 125.380 MB—up 6.78% from 2018. August crude oil futures were trading $1.47 higher at 59.30/barrel shortly after 1 pm.
Looking ahead to Friday’s Acreage data, the Wall Street Journal survey of analysts indicates that average trade guess looks for USDA to report US farmers intended to plant 87.026 mil.ac. of corn, 84.592 mil.ac. of soybeans & 45.674 mil.ac. of all types of wheat on June 1. In the March Prospective Planting report, USDA had forecast US farmers would plant 92.792 mil.ac. of corn, 84.617 mil.ac. of beans & 45.754 mil.ac. of soybeans. In its June WASDE report, USDA later downwardly revised its corn planting estimate to 89.8 mil.ac. to reflect spring weather delays. Although the debate still rages as to the amount of acreage farmers decided to take on their prevented planting insurance, trade analysts generally expect that 7-9 mil.ac. will ultimately be shifted into that option. Ahead of Friday’s data, trade surveys suggest the bulk of prevented planting will be allocated to corn. In the Great Flood of 1993, USDA had difficulty getting both acreage & yields accurate. Higher than expected June intentions led to weakness into the third week of July following a July 7th high that accompanied the nationally televised Monroe County, IL Mississippi River levee break. Prices then slowly rebounded until the October & November WASDE reports recognized potential yield problems & finally peaked for the year within a couple days of the January WASDE report that confirmed major production problems. We see a lot of parallels to 1993 in both supply & demand, & would not discount a repeat of that price action.
USDA is likely to confirm that grain stocks remain burdensome on Friday. The WSJ survey indicated that average trade guess sees June 1st corn stocks at 5,332 mb—the largest since the Farm Depression days of 1988’s 5,839 mb & 1987’s 6,332 mb. Stocks as a percentage of usage were far larger in those previous years, but traders understand that ample stockpiles provide cushion for acreage & yield losses in 2019. June 1 soybean stockpiles are projected at a rally-halting, record-high 1,856 mb. If realized, 2019 stockpiles would be 637 mb higher than the previous record of 1,219 mb set in 2018. With China buying fewer soybeans due to US tariffs & disease-related sharp reductions in their hog herd, traders remain reluctant to bid up beans until they see the possibility of sharp US yield losses. Average trade guess pegs June 1 wheat stocks at 1,092 mb—10 mb below USDA’s June 11 WASDE estimate. As with the other grains, traders see wheat stocks as providing amply cushion for less-than-major yield problems.
In export news, USDA reported on Wednesday morning that 5.328 mb of 2018/19 US soybeans were sold to unknown destinations. It was the first daily export sales announcement since last Thursday. A Taiwanese food processor purchased a grain cargo for 0.591 mb of US corn & 0.551 mb of US soybeans to be shipped in August-September on Wednesday. Philippine feed mills are seeking 7.349 mb of optional-origin feed wheat for July-September shipment on Wednesday. China announced late on Tuesday that it was suspending meat imports from Canada effective on Wednesday due to the discover of what it claims were 188 “forged” veterinary documents on exported Canadian meat products.
In production news, Statistics Canada updated Canadian farmers’ planting intentions on Wednesday, forecasting more corn & barley acreage & fewer wheat & canola seedings. The agency now forecasts all wheat acreage at 24.595 mil. (-0.139 mil. vs. 2018), including 18.772 mil. of spring wheat, 4.894 mil. of durum & .929 mil. of winter wheat that has survived into summer. Canola plantings are estimated at 20.952 mil. (-1.862 mil. vs. last year), barley acres at 7.402 mil. (+0.909 mil. LY), soybeans at 5.714 mil. (-0.606 LY), lentils at 3.780 mil. (+0.011 mil, LY), corn for grain at 3.694 mil. (+0.067 mil. LY), & oats at 3.606 mil. (+0.553 mil. LY). The South African government’s Crop Estimates Committee estimates 2019 South African corn production will decline to 10.933 mmt from last year’s 12.510 mmt. The agency expects farmers in Africa’s largest corn producer/exporter to harvest 5.488 mmt of white corn & 5.445 mmt of yellow corn. Most of South Africa’s corn exports typically are sent to neighboring African nations. French-based crop analyst Agritel now expects Russian farmers to harvest 81.7 mmt of wheat in 2019—up 13% from last year. Believing recent hot/dry Black Sea region conditions has had little impact, winter wheat yield is pegged at 59.925 bu/ac.—up 11% from 2018 yields. Using trendline results, the firm forecasts spring wheat yield at 24.832 bu/ac. China’s ag ministry reported on Wednesday that fall armyworms have now been discovered in 19 provinces, & called prospects for control of the pest “grim.”
Locally, corn & wheat basis levels rose 4c & soybean basis jumped 4.5c on Tuesday as river terminals become more confident they will be able to resume deliveries by next week. Barge company operators report that the St. Louis harbor reopened daylight only northbound barge traffic on Tuesday afternoon, but southbound traffic potential still remains under review. Bridge clearance is likely to be an issue until the Mississippi River reaches 36-37’ during the first half of next week.
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"Closing Comments" are written by David Marshall, First Choice Commodities LLC, Nashville, IL. To learn more about his farm marketing advisory or commodity brokerage services, contact him at firstname.lastname@example.org or call (618) 327-4370 (voice/fax) or (618) 314-0918 (cell). This commentary is not intended for specific trading strategies. We strive to insure this information is reliable, but we cannot guarantee its accuracy or completeness. Commodity trading involves risks. You should fully understand those risks before trading.