Grain markets this morning are mostly lower ahead of tomorrow’s June WASDE and this afternoon’s crop progress reports from the USDA.
“Truth is confirmed by inspection and delay; falsehood by haste and uncertainty.” – Tacitus (Ancient Roman senator and historian)
June 10 – Will the June WASDE Confirm Bullish Sentiment?
Grain markets this morning are mostly lower ahead of tomorrow’s June WASDE and this afternoon’s crop progress reports from the USDA. On Friday, there was some buzz that traders were net sellers on the board, which led to the complex seeing weekly losses on both front and new crop contracts (except for Minneapolis hard red spring wheat).
Later this afternoon at 3PM CST, we’ll get the USDA’s crop progress report, giving traders further indicators of how far behind Plant 2019 continues to be. For soybeans, 39% of the crop was in the ground as of last Sunday, and traders are thinking that number will bump up to around 55-57% through yesterday (93% last year and 84% five-year average). The market is expecting to see 80-85% of U.S. corn planted, up from last week’s 67% but way behind last year and the 5-year average, both of which saw 100% of corn acres seeded. We’ll also get the first corn quality rating from the USDA today, and the market is expecting around 63% of the crop to be rated good-to-excellent (79% in the first rating last year, while the five-year average is 73%).
In politics, Mexico and the U.S. settled on terms for Central American asylum seekers trying to enter the U.S. through Mexico, avoiding a U.S. import tariff on all Mexican goods. [enter final] President Trump tweeted out that he was glad to see a dispute averted, but then said that Mexico would start buying more agricultural goods from U.S. farmers, something Mexico has since denied. 
June WASDE: Unprecedented 2019 Version
Tomorrow we’ll get the first summer supply and demand estimates from the USDA in the form of the June WASDE report. Historically, the June WASDE is a bit of a staller, as the USDA tends to wait to see what sort of damage or support May gave to the crop and share it in the July WASDE. But given where corn planting is at, you must guess the USDA will acknowledge this in some way. Already the market is expecting some bullish numbers compared to what they put out in May (as shown in the table below).
Succinctly, most traders are expecting to see lower yields for both corn and soybeans in tomorrow’s June WASDE. There will also be some focus on demand, as, with higher American corn prices, there’s likely to be some substitution effects in the domestic feed market (i.e. wheat) and on the export front (other countries like Ukraine, Brazil, or Argentina). With the increase in U.S. corn prices, we’ve seen corn shipments slowing, now tracking only 3.5% above last year’s pace through Week 39 of its crop year.
On that note, the South American soybean harvest is done, and the corn harvest there is starting up, so most grain market participants aren’t looking down south for much to change on the balance sheet. And while most of the focus in this June WASDE will be on the United States, for the wheat market, we might see some changes to 2019/20 production numbers. More specifically, I’m looking for a downgrade in wheat production in Canada, Australia, and Russia. As mentioned last Tuesday, these areas are all experiencing varying levels of drought.
Keep in mind that the USDA will NOT be acknowledging the rains that Western Canada received this past weekend, albeit it was mainly Alberta and parts of Manitoba that got the moisture (and although Saskatchewan has some in the forecast for this week, the province has yet to see many of such predictions materialize).
A Hiccup for Wheat Prices and Corn Prices?
Louise Gartner of Spectrum Commodities suggests that it’s likely that winter wheat prices have seen their highs and we’re back to Russia setting the market for wheat prices in terms of lower protein.  The U.S. winter wheat harvest is starting to cruise across the Southern Plains, but it’s also rolling in the Black Sea, bringing about harvest pressures. Don’t tell that to Western Canada CPS wheat farmers who have seen spot cash prices hit new highs recently (albeit they’ve regressed a bit with the winter wheat futures boards)!
Switching gears, while we’ve seen corn prices on the Chicago Board of Trade touch three-year highs in the past few weeks, the Wall Street Journal is reporting that corn prices in China are nearing a four-year high.  Since January, corn prices on the Dalian Commodity Exchange have rallied about 10% to $289 USD/MT (or $7.34 USD and $9.75 CAD per bushel if converting metric tonnes to bushels).
The reason behind the surge in corn prices is the result of no further price guarantees from the government, a subsequent shortfall in production the last few years as farmers switched out corn for, more profitable crops, and a bit of an armyworm epidemic.  It’s expected that Chinese corn prices could continue to rise unless there’s a trade deal with the U.S. made, or the Chinese government re-installs some price support mechanisms. While China will always support their farmers, the push up in corn prices thanks to a slow Plant 2019, coupled with their trade war with the U.S., policymakers in Beijing might be in a bit of a pickle.
Due to travel this morning, there is no futures data in today’s FarmLead Breakfast Brief but you can view them here.
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