The trading activity the last half of June was not for the faint of heart. After coming off two weeks of hefty losses the grains had some minor technical buying emerge. A flip-flopping weather forecast added to the support as rain was added and removed from the short term and intermediate term forecasts. But the week really belonged to U.S. Department of Agriculture and their friendly reports.

After the close Monday, June 28, USDA released their weekly Crop Progress report. The report was expected to show another week of declining conditions in spring wheat but improving conditions for corn and soybeans, due to improving weather. The report continues to surprise the trade as it once again was opposite of expectations.

Corn’s crop rating was expected to improve by 2% but instead conditions dropped 1%, putting conditions 3% below expectations. Improvements were seen in the eastern Corn Belt as Illinois, Indiana and Iowa all saw improvements but the declines in Minnesota (-7%) and South Dakota (-10%) overshadowed the small improving states. Nebraska also dropped 1%. North Dakota did see a 1% improvement in ratings. Corn is now 4% in silk.

Soybean conditions were also expected to improve 2% but managed only to remain unchanged from the previous week. Like corn, the eastern Corn Belt saw small improvements (Illinois, Indiana, and Iowa all improved by 1%) while the western Corn Belt and Northern Plains declined. Again Minnesota (-8%) and South Dakota (-7%) took the biggest hit in ratings while North Dakota (+2%) and Nebraska (unchanged) saw little change from the previous week.

Winter wheat harvest continues to trail behind average due to rain delays. As of Sunday, 33% of the nation’s winter wheat crop was in the bin versus 40% average. Winter wheat conditions continue to decline as well with most of the decline continuing to come from the Pacific Northwest which is still seeing all-time record high temps. Winter wheat conditions dropped 1% to 48% good/excellent.

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Spring wheat conditions continue to decline and at this point have most producers ready to throw the towel in on the 2021 spring wheat crop. Conditions dropped another staggering 7%, putting conditions at 20% good/excellent, the second lowest rating for this time frame on record. North Dakota (+1%) and South Dakota (+5%) were able to see conditions improve this week, but all of the other states saw large declines. Idaho’s crop dropped 6%, Minnesota declined 19%, Montana slipped 22%, and Washington dropped 3%. At this point, Minnesota has the highest rated crop at just 29% good/excellent.

Pasture and range conditions also declined this past week, now rated at 31% good/excellent, down 1%. Topsoil moisture condition improved 4% to 59% surplus to adequate. Subsoil moisture conditions also improved, but only 2% to 59% surplus to adequate.

Stats Canada released their Planted Acreage estimate early in the week. Wheat planted acreage was estimated at 23.36 million versus expectations of 23.3 million and 24.98 million last year. Canola acreage was estimated at 22.5 million versus 21.53 million in April and 20.783 million last year. The report’s timing was perfect as canola traded limit up on Monday, so canola had expanded limits of $45 on Tuesday for the release of the report.

But the show was stolen by USDA’s Quarterly Grain Stocks estimate and Planted Acreage estimate. The Quarterly Grains stocks estimate was friendly as it showed lower stocks on hand for all three of the major crops. Wheat stocks were estimated at 845 million bushels, 14 million bushels lower than expected and 183 million bushels lower than last year. Corn stocks were estimated at 4.1 billion bushels, 32 million bushels below expectations and 891 million bushels below last year. Soybean stocks were estimated at 767 million bushels, 20 million bushels below expectations and 614 million bushels below last year. It is likely USDA will make adjustments to the old crop supply and demand numbers to accommodate the lower stocks.

The big surprises came in the acreage estimate. The acreage report was negative wheat as USDA found more winter wheat acreage. What makes that even more negative is that it was an increase in Southern Plains winter wheat, where the crop is above average. The report found another 600,000 acres of winter wheat since the March estimate, which was 650,000 above expectations. This could result in a slowdown in wheat’s rally. Spring wheat acreage was also higher than expected as acres increased 170,000 more than expected. The big question left to be answered now is how many spring wheat acres will get harvested?

The corn and soybean numbers more than made up for the negative wheat estimate. Corn acreage came in 1.1 million acres below expectation, only showing an increase of 1.87 million from the previous year. That will leave corn stocks tight. What was also interesting was acreage decreased in the Corn Belt while the Northern Plains and Delta region increased acres. Both regions are experiencing adverse weather conditions, with flooding in the Delta and drought in the Northern Plains. That will make it hard for trend line yields to be obtained. As a result of the bullish report, the front four corn contracts all traded lock limit up.

Soybeans also saw a much lower than expected acreage estimate. Soybean acres came in at 87.56 million, 1.4 million lower than expected by the trade, 40,000 lower than March, and only 4.48 million above last year. The talk in the spring was that soybeans were going to have to add at least 5 million to 7 million acres just to make the supply and demand tables work. We fell short of that goal. But unlike corn, almost every state saw as least a small increase in soybeans acreage. The problem with that is 60% of the new soybean’s acres came from North Dakota, South Dakota, Minnesota and Iowa, which are right in the middle of the drought.

Overall the reports told us that old crop demand was better than expected (or that production was not as good as reported) and that the U.S. did not plant enough acreage of corn and soybeans to build stocks to a comfortable level. This will keep the volatility in the grains high and cause big market moves with every little potential change in production estimates.

Corn is just starting to enter into its critical crop development stage so weather forecasts will be watched closely for the next few weeks. At this point the Northern Plains weather is bullish as hot and dry conditions are expected to linger. This includes the western Corn Belt. The central and eastern Corn Belt continue to be the garden spot of the U.S. It’s going to be an interesting July and August.

Ethanol production for the week ending June 25 was estimated at 1.058 million barrels per day, up 10,000 barrels from the previous week. Stocks were estimated at 21.57 million barrels, 452,000 barrels above the previous week making this the fifth straight higher stocks estimate.

Minneapolis wheat came under heavy selling pressure early in the week. Profit taking and the unwinding of spreads as traders tried to keep the classes of wheat somewhat in line was the main reason for the retracement. But it points out an interesting fact. Spring wheat cannot trade too high above the other classes of wheat. This will limit spring wheat’s ability to rally unless the winter wheat contracts rally at the same time.

In other news this week, Russia increased their wheat export tax by $3.20 per metric ton. Taiwan bought 55,000 metric tons of U.S. wheat overnight. Ikar increased their Russian wheat production estimate to 83.6 million metric tons versus 82 million metric tons last month and versus USDA’s estimate of 86.0 million metric tons.

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