USDA Worksheet and A Heat Ridge is Building - Thursday, 29 June 2017

Pre-report short covering has developed in the market this morning in advance of tomorrow’s quarterly stocks data.  These reports have a tendency to create volatility and large price swings, a limit price move would not surprising.  Over the past 10 years this report has generated lower corn futures prices 6 times and higher prices 4 times, soybeans have seen higher prices 8 of those years and lower prices 2 times. A lot of the attention for tomorrow’s reports has been centered around acreage numbers and many analysts are not ruling out the possibility of an adjustment in the stocks number.  In addition, recent weather models are indicating a change may be in store in the near future that will add stress to crops that are already behind or damaged which is also gaining the attention of traders. At this point the trade appears to be expecting to find 500,000 to 1 million fewer planted corn acres and more soybean acres than the March report.  Unfortunately, the market reaction to this news may be moderated by the higher stocks numbers that the trade is currently anticipating in tomorrow’s report.

USDA June 30, 2017 Quarterly Stocks & Planted Acres

June Quarterly Grain Stocks

 

June #

Avg. Trade Est.

Trade Range

USDA March 1, 2017

USDA July 1, 2016

Corn

???

5.123

4.690 - 5.360

8.616

4.711

Soybeans

???

0.983

0.870 - 1.119

1.735

0.872

Wheat

???

1.137

0.968 - 1.185

1.655

0.976

June Planted Acres

 

June #

Avg. Trade Est.

Trade Range

USDA March 1, 2016

USDA Final 2016

Corn

???

89.903

89.000 - 91.005

89.996

94.004

Soybeans

???

89.750

88.466 - 90.500

89.482

83.433

All Wheat

???

46.070

45.700 - 47.404

46.059

50.154

Winter Wheat

???

32.830

32.505 - 33.752

32.747

36.137

Spring Wheat

???

11.206

10.990 - 11.589

11.308

11.605

Durum

???

2.002

 

1.900 - 2.219

2.004

2.412

 

The USDA overall corn conditions Good to Excellent rating remained the same from a week ago and sits at 67%.  Individual states saw conditions change from the previous week; 8 states saw improvement, 7 states declined and 3 states remained the same. While there is much to debate regarding crop conditions, future weather outlooks and USDA estimates, Kevin Van Trump of the Van Trump Report believes we can gain some valuable information from the current corn conditions rating.  Van Trump writes, “If we were to extrapolate out the current USDA crop conditions we could pencil in or forecast a yield that is close to trend between 165 and 168 bushels per acre.  Any way you slice it, it’s below the current USDA yield estimate of 170.7 bushels per acre.”

Oil World, is an independent global market analyst group that examines the world supply, demand and price outlook for several oilseeds, oils, fats and oil meals.  This group says that “Despite July soybean futures recently making new contract lows, additional downward pressure is limited due to weather and crop uncertainties ahead.  Weather markets and price volatility are likely in July and August, when most of the northern-hemisphere crops are made and subject to damage.” 

The USDA soybean conditions report showed a decline from last week from 67% Good to Excellent to 66%.

 

Reuters reported that the first shipment of American beef to China in 14 years was delivered last week.  Under the rules of the agreement made between the U.S. and China one month ago beef eligible for importing must meet specific criteria:

  • Can be boneless or bone-in
  • Cattle must be no older than 30 months of age
  • Must be able to trace the cattle back to their birth farm

Chinese importers are rushing to bring in American grown beef into their market to satisfy a growing demand for the premium meat in the $2.6 billion beef import market.

Late last week the USDA announced that the U.S. will be blocking all fresh beef imports from Brazil.  Over the past several months the USDA has had to reject 11% of the meat brought in from Brazil which has amounted to about 1.9 million pounds, typically only 1% of beef imports are rejected. The U.S. has had ongoing concerns regarding the importation of fresh beef from this South American country.

Recent cool temps and widespread rainfall could be followed by a hot and dry pattern according to the 6-10 and 8-14 day forecasts.  The most recent forecast models have a heat ridge centered over Nebraska, Iowa, Missouri and North and South Dakota.  This ridge is expected to bring more extreme heat and less rain which could likely cause a widening of current drought conditions in the Dakota’s into parts of northern Nebraska, western Iowa, and parts of Minnesota.  The possibility of any production issues associated with Iowa, Nebraska and Minnesota is likely to gain the attention of the trade and add some risk premium into the market.

 

Kevin Van Trump shared some thoughts regarding his recent travels that took him to several states and past hundreds of fields. In his words, “I was less than impressed”.  “I don’t think the crop looks horrible or extremely bad, just “different” than the past couple of years.  A sub 165 yield card is certainly in the deck.”  He noticed that plant stands were not consistent and there were lower plant populations than normal as well as shallow roots.  Producers in Australia, Canada, Europe, Ukraine and Russia are also facing production issues so the U.S. is not alone which may lead to more bullish markets in the months ahead. 

PLANTING PROGRESS

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