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Planting wraps up and weather takes center stage in the markets

The trade will now focus on weather and USDA’s Weekly Crop Progress reports for the next few weeks. The main event of course will be the June 30 reports, but until then, it will be weather.

A close up of a young corn plant, with others blurred in the distance.
Corn sprouting
Mikkel Pates / Agweek file photo
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Editor's note: Catch Randy Martinson every Friday after markets close on the Agweek Market Wrap at agweek.com.

The grains wrapped up the second week of June posting modest gains. Corn and soybeans were subject to bull spreading as tight old crop supplies and production concerns helped to bring the buyers out. The July contract in corn has significantly outpaced the September contract, and as of Thursday’s close, July soybeans were at an 89 cents premium to August, the highest amount in over 20 years. Not to mention, July soybeans closed at their highest price ever in history. Weather forecasts calling from hot and dry conditions to dominate the eastern two-thirds of the U.S. the second half of June added support.

Another market attention grabber was USDA’s June Crop Production report on June 10. Normally this report is not significant as USDA does not want to steal the thunder from their June 30 Planted Acreage report and Quarterly Grains Stocks estimate. But this report held a few surprises for the trade.

Early estimates for old crop wheat had USDA lowering wheat export pace slightly. USDA had just increased wheat exports 30 million bushels last month, but wheat’s old crop marketing year ended at the end of May and wheat exports fell short of USDA’s projections. The trade was also looking for USDA to increase soybeans exports by about 30 million to 50 million bushels (export sales are currently 65 million bushels above USDA’s projection now). Corn old crop numbers are not expected to be adjusted.

USDA’s Crop Production report brought a few surprises to the market, but in the end, there was nothing earth shattering in the numbers. The biggest surprise came in wheat. USDA did not lower old crop wheat exports as expected. This left the old crop numbers for wheat unchanged and friendly. USDA was not expected to increase yield in new crop, which made the new crop numbers slightly negative. World wheat ending stocks were trimmed slightly from expectations. This rounded out the wheat numbers to being neutral to friendly.

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The report was negative corn. The only change made to the U.S. numbers were a slight increase in food demand in both old crop and new crop (5 million bushels each year) but the 50 million bushel decrease in old crop exports resulted in an increase in both old crop and new crop ending stocks. World corn ending stocks were also negative as old crop stocks were higher than expected due to no changes being made to South American production and new crop world stocks were sharply higher due to a 5.5 million metric ton increase in Ukraine production.

The U.S. soybean supply and demand numbers were friendly as USDA increased old crop exports 30 million bushels which followed through to reduce both old crop and new crop stocks more than expected. But that was offset by a negative world estimate as stocks were increased slightly due to higher South American production estimates.

The trade will now focus on weather and USDA’s Weekly Crop Progress reports for the next few weeks. The main event of course will be the June 30 reports, but until then, it will be weather.

Weather forecasts are calling for the intense heat to start building this weekend and last through the weekend in the northern Plains but for the rest of the month for the Corn Belt. If realized, this could bring some risk premium back into the grains. Temps are expected to reach between the 90s to 100 in the northern Plains for three to four days, but it’s the seven to 10 days of temps in the 90s in the Corn Belt that will be the market mover.

Attitudes changed once the third week of June got under way. The grains turned to trade mixed to lower during the start of the week with profit taking and thoughts that the forecast heat will help the crop advance.

USDA’s Monday Crop Progress report brought mixed news to the gains. For winter wheat the report was neutral as crop conditions came in as expected at 31% good/excellent. Harvest pace was behind expectations coming in at 10% complete versus expectations of 14%.

Spring wheat’s crop progress numbers were also mixed. Planting progress for spring wheat came in above expectations. As of Sunday, 94% of the nation’s spring wheat crop was planted, 3% above expectations. North Dakota’s planting progress was estimated at 91% complete while Minnesota was estimated at 92% completed. The 6% left to plant equates to about 672,000 acres, with 468,000 acres being in North Dakota. The spring wheat condition rating came in at 54% good/excellent, which was 17% higher than last year at this time, but it came in 9% below expectations.

For corn, the numbers were friendly. Planting progress came in at 97% complete, which is equal to the five-year average, but it was 2% below expectations. North Dakota is estimated to be 90% planted versus 97% average. That equates to 2.68 million acres left to plant in the U.S. with North Dakota contributing 360,000 acres to that estimate. Corn’s crop condition rating fell 1% to 72% good/excellent. The trade was expecting conditions to be left unchanged.

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Soybean’s numbers from the report were friendly. Planting progress was estimated at 88% complete, equal to the five-year average, but again 2% lower than expected by the trade. North Dakota reported planting progress at 75% complete versus 94% average. Minnesota was 88% planted versus 96% average. This was a week that a lot of states fell behind in planting progress. As of Sunday, 10.9 million acres of soybeans were unplanted with North Dakota having 1.75 million acres left to plant while Minnesota still had 960,000 acres left to plant. The crop insurance final planting date for soybeans was Friday, June 10. Soybean’s crop condition rating came in as expected at 70% good/excellent, 8% above last year at this time.

Traders were also watching the Federal Reserve meeting closely. The sharply lower stock market early in the week was a signal that the financial district was confident that the Fed was looking at increasing rates more than expected. The sharply lower stock market added pressure to the grains. The selloff in the indexes was enough to push most of the indexes to enter bear market territory. The S&P 500 and Nasdaq traded to 52-week lows before finding strength. The Fed on Wednesday, June 15, did increase the interest rate by 0.75%.

The grains appear to be looking to see a retracement. And at this point, with planting progress almost complete, it is normal for the grains to retreat. For the most part weather has been good, but what is on the horizon could be troubling. At this point the extremely hot temps in the forecast are not expected to result in much damage. The northern Plains saw rain showers move across the region late week which should have brought enough moisture to get through the three to four days of intense heat.

Cattle closed out the second week of June with small gains and had posted only small gains after the first three sessions of the third week of June. Futures have finally rallied to be in line with cash, but once the June contract was able to push to be in line with cash, the buying strength has evaporated. Cattle are still seeing some selling pressure from the troubled stock market. Supplies remain tight, which is helping to keep cattle from selling off hard. Traders are hoping domestic demand will surge this weekend as this is a long weekend combined with Father’s Day. A perfect time to start the grill.

“The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results.”

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