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Market Report

Monday June 11th, 2018

July corn closed down 10 ½ at $3.67 ¼ and December closed down 9 ¾ at $3.88 ¼. July soybeans closed down 15 ½ at $9.53 ¾ and November closed down 16 at $9.73 ¾. July wheat closed down 5 ½ at $5.14 ½ and September closed down 6 at $5.30 ¾. Crude oil closed down $.06 at $66.03.

The corn bulls likely breathed a small sigh of relief when the corn market traded steady/better after a wet weekend. That relief proved short-lived. Corn went “full red” into the dawn, and retreated all day long, eventually closing more than $.10 lower for the day in the July contract. Since peaking at the end of May, July has quickly surrendered $.45 off that high.  Managed Money funds were estimated net sellers of 35,000 today.

Crop Progress data after the close likely did not raise too many eyebrows, at least when glancing at the national ratings. US corn Good-Excellent down ticked for a second week, falling -1% G-E to 77% G-E. Poor-Very Poor up-ticked by 1% to +4% P-VP.  This compares to 67% G-E and 8% P-VP seen this time last year.  There were a lot of states with small declines, a few with rather large drops, and only a few net gainers. Traders were a little surprised the national average didn’t dip further.  Notable was the 11% G-E declines in Missouri, 13% in North Carolina, and 7% in South Dakota. Only MN and KS were up 2% G-E, while IL/MI/OH, were each up 1% G-E?  Emergence moved up to 94%; only Michigan and Pennsylvania are significantly behind average.  As noted in the opener, rains were pretty good over the weekend, significantly improving soil moisture in Eastern Iowa and indeed most of the Eastern Belt. Southern Corn Belt areas (KS/NE/MO) tended to dry out. Not all perfect, but there is more than enough good to offset the bad.

The weekly grain inspections report mid-day remained consistently good for corn. 1.41 mmt of corn were shipped for the week ended 6/7, which compares to 1.56 mmt last week, and 1.07 mmt in the year ago week. Shipments are rapidly catching up with year ago levels. Total YTD just under 41 mmt versus last year at 45.4 mmt. Maintaining the current pace for the balance of the marketing year will easily reach current USDA sales projections, and we have more than enough outstanding sales on the books to do exactly that.

Elsewhere, it was a rather rough day in the meats, with both hogs and cattle finishing $1 lower. Macros and “Trade War” watchers will be watching for progress out of the North Korea-US summit tomorrow. Dairy and ethanol were both lower as well, the latter tracking the corn decline. USDA monthly S&D is due out tomorrow. The June report is usually not a market-mover, as there will be no “real” production data. It is not unheard of for the USDA to adjust yields based on crop conditions, though we note they already started quite high. Further downgrades are likely on world crops, most notably Brazil and possibly EU/Ukraine/Russia.  The average analyst guess going in is for very small declines in both US and world carryout from the prior report in May.

The soybean market extended its collapse with July beans falling more than $.15 to a 10-month low. The weakness can be tied to a combination of factors from China trade selling to weather selling to fund liquidation to tech selling to panic selling; you name it and it is here and lined up for the bear. Crop conditions this afternoon should show soybean conditions steady to better with the remaining unplanted acres limited to double crop.

Tomorrow we get the USDA crop report and while the trade is not anticipating any major adjustments to the balance sheet, crop reports have the potential to calm the panic by refocusing on the stats.  The avg. trade estimates show a slight 8 mb tightening of old crop beans stocks to 522 mb and a 2 mb increase for the new crop to 417 mb.  In the world numbers the old crop carryout tightens by less than 1 mmt to 91.35 mmt while new crop holds about steady at 86.74 mmt.   A reduction of Argentina’s soybean crop of 1.1 mmt is partly offset by a .4 mmt increase for Brazil.

Weekly beans inspected for shipment totaled 644 mt compared to 573 mt last week and 512 mt this week last year. Year to date shipments stand at 47.5 mmt vs. 51.6 mmt this time last year representing a 151 million bushel deficit to last year’s pace while the USDA most recently projected a 109 million bushel deficit for this year. The deficit has been tightening so despite limited Chinese trade our export activity is quietly stronger to other destinations as we try to narrow the gap to the USDA projection. Weekend rains were heavy in parts of IA/IL/IN including 4-5 inches in some spots (some localized 8 inch totals) while 75% of the corn belt received a good drink.  Plenty of moisture for most crops for the next two weeks along with above normal temps. The midday maps were somewhat drier for the Midwest but also showed less heat.

Considering how much the corn market and soy complex struggled, the wheat complex held up rather well today. There was plenty of positive news around for the wheat complex as it headed into morning trade, but with corn and soy trending lower, it was hard to imagine wheat extending gains much. Crop progress-condition reports this afternoon showed SRW wheat conditions improving, while HRW wheat conditions fell slightly. This should give the KC/Chicago spread a boost overnight, but the crop report Tuesday morning will eventually take precedence over everything.

Crop Report Tuesday morning. ** MINOR ADJUSTMENTS **  It is usually a minor one for wheat as the bigger report comes at the end of the month, but we will see some surprises in the state by state breakdown for both production and yield. Kansas, Oklahoma, Montana and South Dakota all have the potential to see lower production estimates as either harvested acres or yield or both were just simply too high last month. But there will be improvements in the White winter wheat states that could offset the reductions some. Last month we thought several SRW wheat states projected yields were just too high as well, but over the past month that crop has improved and the USDA looks to be accurate, if not too low in some of the SRW wheat states. Look for 2018/19 winter wheat production to be very similar to last month’s 1.191 bil bu estimate.

Look for HRW wheat to come in around 639 mil bu vs 647 mil bu last month, look for SRW wheat to come in around 320 MB vs 315 MB  last month and look for White winter wheat to come in around 232 MB vs 229 mil bu last month. Traders are expecting some minor upward revisions in 17/18 and 18/19 US ending stocks. Look for 17/18 US ending stocks to come in somewhere around 1.080 BB vs 1.070 BB last month. 18/19 US ending stocks should come in around 960 mil bu vs 955 mil bu last month. With recent weather problems around the globe, World wheat ending stocks should be lower than last month. Look for 17/18 Global wheat stocks to be sub 268 MMT vs 270.46 MMT in May and 18/19 world wheat ending stocks should see an even a bigger decline, maybe as much as 4 MMT below May’s 264.33 MMT estimate. In the S&D’s, do not be surprised if they take exports down 25.

Anna Kaverman

anna@mercerlandmark.com

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