The month of June was a better month for the grains than expected for corn and soybeans, not so much for wheat. But toward the end of the month even wheat started to show signs of a bottom forming.
The first solid sign that wheat may be bottoming came June 29 with the September Minneapolis market staging a technical key reversal up (higher high, lower low, and higher close than the previous session). This move was followed by a friendly Crop Progress report, which showed another decline in crop ratings. Spring wheat conditions dropped 6% and North Dakota, the nation’s leading spring wheat production state, had conditions drop 10% for the second week in a row. Drought concerns in western North Dakota and the return of intense heat have resulted in the dramatic decline in ratings. Gains were limited by rain as by midweek there were rain systems in eastern Montana, northwestern South Dakota, and western North Dakota.
Corn and soybeans crop ratings were neutral to friendly. The average trade estimate has conditions for both crops increasing 1% to 2%. Both increased by 1% with the biggest improvement coming in the central and eastern Corn Belt states. The corn and soybean crops are rating very high with both crops rated above the five- and 10-year averages.
This was the week for reports starting off with Stats Canada’s Acreage report June 29. The report put all wheat acreage at 24.97 million versus expectations of 25.2 million, 25.4 million from earlier in the spring, and 24.6 million last year. Durum acreage was estimated at 5.7 million versus expectations of 5.5 million, 5.2 million from this spring and 4.9 million last year. Spring wheat acreage was estimated at 17.93 million versus expectations of 18.77 million and 18.78 million last year. Stats Canada’s put canola acreage at 20.78 million versus expectations of 20.7 million, April’s estimate for 20.6 million and 21.0 million last year. All numbers were friendly to the US grains.
The U.S. Department of Agriculture on June 30 released its Planted Acreage Estimate and Quarterly Grains Stocks reports. The stocks report gave the market direction on where old crop demand has been. There has been a ground swelling of support for the idea that 2019 production was not as strong as expected and that supplies of grain are smaller due to lower production. This theory is being fed by strong basis levels as it seems end users are having a tough time enticing farmer to sell product.
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The stocks estimate threw a wet blanket on that thought as stocks were much higher than expectations and in line with last year’s levels. The Quarterly Grain Stocks estimate was neutral wheat, putting stocks at 1.044 billion bushels versus expectation of 980 million bushels and 1.08 billion bushels last year. The report was not friendly for corn, putting stocks at 5.224 billion bushels, 273 million bushels higher than expectations and 22 million bushels above last year. Soybean stocks were as expected with June 1 stocks at 1.386 billion bushels, just 6 million bushels lower than the trade expected and 397 million bushels lower than last year.
The bullishness came from the Planted Acreage Estimate. Spring wheat acreage came in at 12.2 million, 350,000 less than expected, 390,000 less than in March, and 460,000 less than last year. Durum acres were estimated at 1.5 million, up 200,000 from expectations, up 210,000 from March, and up 160,000 over last year. Winter wheat acreage was estimated at 30.55 million, 300,000 lower than expectations, 230,000 lower than March and 610,000 lower than expectations. North Dakota spring wheat acres were estimated at 6 million, 700,000 less than last year. Minnesota spring wheat acres were at 1.3 million down 150,000 acres from last year.
Corn’s acreage was estimated at 92 million, 3.2 million less than expected by the trade, 4.9 million less than the March estimate, but 2.3 million acres above last year. That equates to a loss of 875 million bushels from the May Crop Production estimate. Assuming no other adjustments the lower acres would put corn ending stocks at 2.45 billion bushels, a much more manageable estimate than the current 3.3 billion bushel estimate. From the March report, North Dakota acreage dropped 800,000 to 2.4 million. Minnesota increased 300,000 to 8.1 million and South Dakota's corn acreage dropped 600,000 to 5.4 million.
And to everyone’s surprise, soybean acreage also saw only a small increase from the March intentions. Soybean acreage came in at 83.83 million, 315,000 acres more than March but 891,000 acres lower than the trade expected. North Dakota had the biggest change from the March estimate, with acres dropping from 6.6 million in March to 6 million while Minnesota was unchanged, and SD was 200,000 acres lower than in March.
U.S. canola planted acres were reported at 1.868 million, 172,000 lower than last year. North Dakota's acres dropped 150,000 to 1.55 million. U.S. sunflower planted acres were reported at 1.544 million, 193,000 more than last year. North Dakota's acres increased by 85,000 to 620,000.
Weather will now take the lead as the main driver for the grains. So far, weather has been non-threatening, but that can change in a heartbeat. That was the case at the end of June. Heavy rains had covered the central and eastern Corn Belt and it seemed that the weather pattern was going to remain non-threatening. But by midweek, weather forecasts were calling for hotter temperatures and drier conditions for the Corn Belt. That forecast, along with the bullish Planted Acreage estimate, spooked the funds out of short corn positions. Just how strong will this weather rally be? That is let to be determined. Weather rallies usually last five to seven days.
Martinson Ag was expecting the acreage estimate to come in as released. The reason we thought acreage would decline more than the average trade estimate and less switching of acreage to soybeans was due to the lack of incentive to aggressively plant a crop this spring or to switch acreage over to another crop. With the cold wet spring the best alternative was to choose prevented planting in the Northern Plains as April and May made it nearly impossible to get a crop planted timely or in good condition. Northern Minnesota, northern South Dakota, and most of North Dakota was in this situation.
The market also had an eye on trade tensions with China. The market was slightly surprised that China went ahead, a full day earlier than expected, and approved Hong Kong’s Security Law on June 30. The U.S. has promised sanctions for the Communist Party members who are responsible for this move. It will strain relations with China, which just recently said they will be stepping up purchases of U.S. corn, ethanol and soybeans.
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For the month of June, September Minneapolis wheat was down 15.75 cents, September Chicago was down 31.75 cents and September Kansas City was down 37.25 cents. July corn was up 12.75 cents, and December corn was up 11.75 cents. July soybeans were up 43.5 cents, November soybeans were 30.5 cents higher, and July soybean meal was up $2.90. November canola was up $6 for the month.
For the first six months of 2020, Minneapolis wheat was down 12%, Chicago and Kansas City wheat were off 13%, corn was down 16%, soybeans were down 10%, soybean meal off 8%, soybean oil down 21%, and canola down 6%.
For June, August live cattle were down $3.325 and August feeder cattle were down $2.50. For the first six months of 2020, live cattle were down 17% and feeder cattle were down 13%.
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