July 10 – Will the July WASDE Be Like the June Acreage Report?

Grain markets this morning ahead of tomorrow’s July WASDE report are mostly lower as the complex weighs better weather and some bearish possibilities.

“You can become blind by seeing each day as a similar one. Each day is a different one, each day brings a miracle of its own. It’s just a matter of paying attention to this miracle.” – Paulo Coelho (Brazilian writer)

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July 10 – Will the July WASDE Be Like the June Acreage Report?

Grain markets this morning ahead of tomorrow’s July WASDE report are all in the red as the complex weighs better weather and some bearish possibilities.

Outside the grain markets complex, the U.S. and China continue to talk and White House economic adviser Larry Kudlow says that China will make more agricultural purchases from the U.S. after the U.S. agreed to temporarily reduce restrictions on Huawei. [1] There’s some logical buzz going around that the Chinese are trying to figure out what will help U.S. President Trump get re-elected in 2020 and then use those factors to help them get a trade deal done. [2]

The USDA attaché in the Land Down Undaa suggests that 2019/20 wheat production will hit 21.5 MMT, while barley production will jump to 9.2 MMT on larger acres. [3] Compare the USDA’s numbers to ABARES estimate last month in Australia for a wheat harvest of 21.2 MMT and 9.2 MMT for barley. We all know that Australia is in its third consecutive year of drought conditions, and that’s why, in tomorrow’s July WASDE report, I’ll be specifically looking to updates in Australia, as well as from that of Canada, Russia, Argentina, and the EU.

Australia June 2019 Rainfall Deficiency

In South America, there are concerns about the impact of a recent frost in the state of Parana as the second/safrinha corn harvest is ongoing. [4] AgRural says that across the entire country, 44% of the second corn crop has been harvested and that the frost impact would be negligible, with them standing by their expectation for a record year of corn output. Expectations in tomorrow’s July WASDE report are for 100.9 MMT of corn production in Brazil.

Next door in Argentina, official estimates suggest that corn production in the country will jump 31% higher than last year to 57 MMT (for the record, the pre-report estimate for tomorrow’s July WASDE is 49.2 MMT). If the higher number is realized, it would be the first time in more than 2 decades that the Argentine corn harvest was bigger than the soybean harvest (currently forecasted at 55.6 MMT). As of this past Sunday, Argentina’s corn harvest was 61% complete. As for tomorrow’s July WASDE, I’ll be watching for Argentinian and Brazilian corn and soybean crop production numbers.

Will Tomorrow’s July WASDE Also Disappoint?

Ahead of the 2019 June stocks and acreage report, there was a lot of bullish buzz, especially for corn prices. However, when the dust settled after the U.S. government numbers came out, it was the extreme opposite. It also came with an asterisk from the USDA that they would be resurveying acres but the data wouldn’t be available until the August WASDE report. Further, the July WASDE uses the June acreage numbers for their production estimates (of which, ending stocks are also a function) Therein lies the key question: are grain markets setting itself up again for a bearish mistake?

2019 July WASDE U.S. pre-report estimates

The market is expecting to see lower yield numbers for both U.S. corn and soybeans, but other than that, there aren’t too many material changes expected. On a global level, the USDA’s attaché in China recently noted that Chinese 2019/20 corn production is set to fall almost 10% from last year to 230 MMT. [5] This would be the lowest corn production number for the People’s Republic since 2012/13 and is mainly attributed to lower harvested area and lower yields, as well as government policies pushing for more soybean output and less corn. While this reduction could easily be considered a bullish fact, the USDA’s attaché there in Beijing also says that corn feed use in China will drop by 11% year-over-year to 170 MMT. That being said, I and the rest of the market are not expecting the USDA to account for these changes in tomorrow’s July WASDE report.

2019 July WASDE world pre-report estimates

North American Crop Progress Remains Variable

Monday afternoon’s crop progress report showed that the U.S. corn and soybean crops continue to track well behind their normal development. [6] From a crop rating perspective, U.S. corn rated good-to-excellent (G/E) bumped up 1 point to 57%. And while basically all of the crop has emerged, just 8% is silking, down from the five-year average of 22% and last year’s pace of 34%.

For soybeans, just 10% of U.S. fields are blooming, well behind last year’s 44% through the first week of July and the five-year average of 32%. Also, the G/E rating of U.S. soybean fields dropped one point for the week, down to 53%. Also, for the U.S. spring wheat crop, 56% of fields are headed out, and while that’s up from 25% last week, it’s behind the five-year average of 73%.

Granted, if you didn’t look at the calendar, some might say that crops are doing just fine. [7] The problem is, however, that the weather is a function of the calendar, not the other way around. Thus, there continues to be much talk in today’s grain markets about the potential impact of the weather, especially towards the end of the growing season (and as discussed in Monday’s FarmLead Breakfast Brief).

For winter wheat, combines are rolling in North America as favourable weather conditions in the Southern Plains have helped things immensely: 17% of the crop was harvested in the past week, to put things at 47% total. Granted this is behind the usual 61% harvested by this time of year, there is more dry weather in the forecast through the middle of July. Also, the white wheat harvest should be starting up this week in the Pacific Northwest so the percentage harvested should accelerate by next Monday’s crop progress report. The downside of the roll-out of combines is that it puts pressure on wheat prices as more supply comes into the market.

To growth,

Brennan Turner
TF: 1-855-332-7653
@FarmLead on Twitter

At 7:00 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3135 
CAD, $1 CAD = $0.7614 USD)

Sept Corn: -3.8¢ (-0.85%) to $4.288 USD or $5.631 CAD
Aug Soybeans: +0.5¢ (+0.05%) to $8.865 USD or $11.644 CAD
Aug Soybean Meal (per short ton): -$0.30 (-0.1%) to $308.90 USD or $405.73 CAD
Aug Soybean Oil (cents per lbs): +0.18¢ (+0.65%) to 28.19¢ USD or 37.03¢ CAD  
Sept Oats: -0.8¢ (-0.25%) to $2.74 USD or $3.599 CAD
Sept Wheat (Chicago): -1.5¢ (-0.3%) to $5.013 USD or $6.584 CAD
Sept Wheat (Kansas City): -1.5¢ (-0.35%) to $4.378 USD or $5.75 CAD 

Sept Wheat (Minneapolis): +0.5¢ (+0.1%) to $5.27 USD or $6.922 CAD
Nov Canola: +1.8¢ (+0.2%) to $10.197/bu / $449.60/MT CAD or $7.763/bu / $342.30/MT USD

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECIPIENTS OF THIS POST. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

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