6/28/2019 Morning Comments

Good Morning,

A sizable system in western North Dakota as well as a band moving across NE-Iowa, S-Wisconsin and Michigan this morning, otherwise the Midwest is quiet.  Weather models weren’t in great agreement yesterday on temperatures for week 2 with the Euro trending cooler while the GFS trended a bit warmer.  Mostly similar on precip with little change from the previous runs.  Crop Prophet is still looking for things to be mainly wetter than average for corn and soybean production areas, especially in the Northern Plains.  The dryness will allow HRW harvest to accelerate across the Southern Plains, although fall crops could be trending a bit dry in NE/KS/MO/W-IA.  NOAA’s CPC maps continue to point toward above normal precip for the entire Midwest with temperatures normal to above normal.  Ideal forecast as long as corn is still in the vegetative stage.

The long-awaited USDA reports are finally here.  Mixed markets heading into the numbers with soybeans posting small gains while wheat and corn are lower.  Wheat suffered a notable reversal during Thursday’s session, rallying as much as 7-9c higher before giving all of the gains back and KC charts posting noticeable reversal candles.  Wide open week of harvest with anecdotal reports of good yields and improving quality will add hedge pressure.  Some big HRW total crop ideas being thrown around after analysts were in a rush to cut production as recently as two weeks ago due to excessive rain.  USDA was 794mbu on the June WASDE for HRW production but some are suggesting the crop could be 875-900mbu.  We will reserve judgement on that at this time.  Today’s USDA reports will end up being all about the stocks report given the skepticism toward the acreage report.  Given the timing of the survey, and the fact producers are still trying to plant soybeans, it will be difficult to know what to do with this round of acreage guesses.  It is very likely we won’t have a good handle on fall crop acreage until combines roll in October.  Corn open interest fell 18,604 contracts yesterday with just 29,040 remaining inn the July. Soybean open interest fell 965 contracts with 11,463 in the July.  SRW open interest was down 5,289 with 3,958 in the July while HRW was down 2,250 with 1,657 contracts still in the July.

Today is First Notice Day with delivery receipts going to the exchanges last night.  The notable move included Cargill registering a fresh 790 receipts and delivering same.  The move was interesting considering the river is trading above gross delivery equivalence, not to mention the record interior basis levels being paid at some major ethanol plants.  As is usually the case, commercials can have something work for them which doesn’t work for anyone else based solely on space and logistics.  The pertinent thing is there were no strong commercial stoppers and the receipts could get kicked around for a few days.  Also noteworthy, there were 862 deliveries in Minneapolis, the bulk of which were put out by Wells Fargo customer, but LDC also through out 211.  CHS House stopped 533 of them, all of which were 2.0 vomotoxin or under.  Not much reaction Minneapolis on the news.  As the great Charles Soule used to say, “buy heavy deliveries and sell light deliveries… or something like that.”  There were five deliveries in Kansas City, five soybean deliveries and none in Chicago wheat.

Export sales were a mixed bag yesterday with wheat strong and the others just ho-hum.  All wheat sales totaled 22.5mbu vs. the 12.5mbu needed weekly to hit the USDA forecast.  Total commitments now stand at 255.3mbu, up 25% on the year with the HRW book specifically up over 112% from a year ago.  Corn sales were poor at 11.6mbu vs. the 23.0mbu needed weekly.  Total commitments of 1.918bbu are down 15% from a year ago and at risk of seeing a cut on the July WASDE.  Export sales have missed the level needed the past four weeks.  Commitments for the 2019/20 marketing year are 125.1mbu vs. 168.8mbu a year ago.  Not off to a good start and the South American competition should be fierce for the foreseeable future.  Soybean export sales totaled 6.2mbu which continues to raise total commitments further above the USDA’s target.  Total commitments of 1.751bbu are already above the USDA’s 1.700bbu export target with 10 weeks left in the marketing year.  The concerning part remains shipments which are at 1.363bbu vs. 1.786bbu a year ago and only 80% of the USDA’s target.  We have to ship 20% of the export deck in the final 10-weeks of the marketing year with the Upper-Mississippi just now opening.

As far as today’s report goes, we fell the trade will be quick to dismiss the acreage report, regardless of what it actually says.  As we noted yesterday, market participants would do well to remember these acreage numbers today are completely independent from anything issued in March or on the June WASDE.  This data is comprised of a separate survey which was conducted in late May and early June, a time in which both corn and soybeans were still being planted heavily.  So while the data will certainly not pick up all of the prevent plant data, it also isn’t likely to pick up all of the planted acreage.  There is a slide in the USDA powerpoint which will show estimated acres left to plant.  Normally, this shows something around 1-2% left to plant on corn, but it is likely to show much more than that on this report and the final figure could be telling.  The true nature of soybean acreage isn’t likely to be known for weeks or even months.  The more important data on today’s report will be the stocks in our estimation.  Lots of speculation about June 1 corn stocks and why they could be higher or lower than trade estimates, hence the 720 million bushel range in pre-trade estimates.  The record basis levels being paid suggest stocks should come in smaller than trade ideas, although how tightly farmers are holding on to grain could have a lot to do with basis being paid.

Bottom Line: Not much else to say until we get the USDA’s numbers behind us.  Strap in and make sure you’re comfortable with levels sold and risk-management in place before the report.

Good Luck Today.

Tregg Cronin

Market Analyst




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