The market is playing a waiting game as traders wait for the June 30 U.S. Department of Agriculture reports to provide direction. Last week there was not a lot of news or reports to help give the market direction. The only items of interest were the June 25 USDA Quarterly Hogs and Pigs report and the June 26 July option expiration.
It seems everyone is looking forward to this coming week’s reports and events. June 30, USDA will be releasing their Planted Acreage estimate and Quarterly Grain Stocks estimate. That will also be end of month and end of second quarter. To top that off, it’s a short week of trading as the markets will close at noon on Thursday and remain closed Friday. Regular trading will resume Sunday night at 7 p.m.
This will be a lot of information for the market to absorb, especially with the holiday so close. At the time of this writing, average trade estimates had not been released, but the trade is expecting to see an increase in spring wheat acreage, decrease in corn acreage and an increase in soybeans acreage. Martinson Ag is mostly in agreement with those expectations, except we are looking for spring wheat acreage to drop close to half a million acres, corn acreage to be down 2 million to 3 million, and soybean acres to be up only half a million. We think the prevented planting situation in the Northern Plains is worse than most expect and most of the acreage decrease will be due to those acres being prevented from being planted.
Let’s also toss in Stats Canada’s Planted Acreage Report which will be released June 29. This report will dictate the direction spring wheat trades as well canola and durum.
One indication that the market was not paying attention to news last week was that USDA’s Crop Progress report was bullish spring wheat. But instead of seeing a rally, spring wheat faded. Spring wheat conditions were 5% lower than expected by the trade, coming in at 75% good/excellent. Not only have the dry conditions in the western part of North Dakota caught up to the spring wheat, but the early cold wet conditions in the east half of the state have now turned dry. With very little root system development, the spring wheat crop is showing signs of stress. Crop condition rating changes by state: South Dakota, +7; Montana, +1; Washington, -2; Idaho, -6; Minnesota, -7; and North Dakota, -9.
Wheat was hit hard June 22 by the unwinding of spreads as traders started to unwind the long Minneapolis/short winter wheat spreads ahead of July’s first notice day. A lot of traders in wheat were playing the lack of premium between spring wheat and the Chicago market. But with the July contract going into delivery next week, those positions have to be unwound at the expense of Minneapolis wheat.
Minneapolis continues to see support from deteriorating spring wheat conditions in the Northern Plains as western North Dakota continues to see crop under heat stress. The winter wheat exchanges were under pressure from advancing harvest activity. Even though harvest reports are starting to show lower yields in the southwest corner of Kansas, the overall crop appears to be coming in as average.
Corn is the market that seems to be the most lost when it comes to direction. And there just does not seem to be a bright light at the end of the tunnel. The early planting of corn in the Corn Belt has likely led to not much adjustment in planted acreage in the Corn Belt. And with weather so far being non-threatening, it would seem logical that corn’s yield potential will increase. Corn conditions were expected to remain unchanged, but instead improved 2% coming in at 72% good/excellent. The recent rains and cooler temps have helped the corn crop. Rating changes for selected states were: South Dakota, +5; Nebraska, +3; Iowa, +2; Minnesota, +1; Wisconsin, -2; North Dakota, -3; Illinois, -4; and Indiana -8.
The bright spot for corn has been ethanol production. Ethanol production has increased for eight straight weeks while stocks have decreased nine straight weeks. Last week’s production was estimated at 893,000 barrels per day, up 6% (52,000 barrels) from the previous week but down 17% from last year. Stocks were estimated at 21 million barrels, down 1.5% (312,000 barrels) from last week and down 2.5% from last year.
Soybeans were the market in between. Soybean crop conditions, like corn, were expected to remain steady. But instead conditions slipped 1% to 70% good/excellent. Not a bullish report, but one that needs to be watched as soybeans have the tightest ending stocks estimate and at this point, every bushel of yield lost equates to a drop in ending stocks of 83 million bushels. The crop progress report showed the soybean crop condition rating dropping in the eastern Corn Belt states and increasing in the west. Rating changes for selected states: Kansas, +4; South Dakota, +3; Iowa, +2; Nebraska, -1; Minnesota, -3; Wisconsin, -3; Illinois, -4; North Dakota -4; Indiana, -8; and Ohio, -8.
The biggest hit soybeans took during the week came after White House trade advisor Peter Navarro said the trade deal with China was over, which caused soybeans to dive 15 cents. But the market quickly recovered once the president contradicted him, and soybeans held slightly lower for the rest of the session.
China continues to be a strong buyer of U.S. soybeans. That stands to reason as the U.S. remains the lowest priced soybeans in the world due to the lower U.S. dollar and strong Brazilian real. To add to that, China approved two more GM soybean varieties for feed use, one a Chinese developed variety and the other from Bayer/Monsanto.
The grains are entering into critical crop development stages and weather forecasts are starting to become more of a concern. The next two weeks will be the most important two weeks for the market for this growing season.
The cattle markets have been struggling the past few weeks. Cash bids and boxed beef prices have been on a downward spiral, which has kept a lid on futures. Cash sales have been reported between $95 and $97 this past week. The cold storage report showed stocks at the end of May were down 15% from April and just 2% higher than last year. To date there have now been 26 deliveries made against the June contract, which is trading at $93.30. Traders continue to show concerns about supply as most are expecting supplies to increase due to increased slaughter weights and slower demand due to a slowdown in the economy.
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