In today’s Breakfast Brief, we discuss the progress of the corn & soybeans crops as well as our pre-estimates for the July WASDE.
“The essence of greatness is neglect of the self.”
– James Anthony Froude (English author)
Grains this morning are mostly lower as the trade ignores some of the weather and focused on today’s July WASDE report today at 12PM ET.
Corn & Soybeans Ahead of Schedule
The USDA’s crop progress report out yesterday showed crops are developing ahead of schedule and in good shape as both corn and soybean good-to-excellent ratings increased by 1 point each to 76% and 61% respectively, both above last year’s G/E ratings at this point of 69% and 62%. This is putting a little more pressure on those who are sticking to their guns calling for a disaster of a crop thanks to a La Nina event but even rain accompanies hot weather, that makes rain. One without the other doesn’t make grain. That being said, while we likely won’t see any yield changes in today’s numbers from the USDA, considering the acreage changes made on June 30th, there are some great crops conditions out there and the numbers forecasted for today’s report aren’t small.
A fair amount of the Canadian Prairies are getting rains this week, exacerbating some of the risk that more disease will pop up. If the wet weather persists, crops can’t be sprayed b/c of field conditions being unworkable and that risk accelerates. Combined with some quality issues out of Europe, this one of the reasons we think it’s worthwhile to hold onto higher value cereals (as we called for in yesterday’s Breakfast Brief) as there may be some premiums available. Now, currently we’re seeing spreads not very wide and unless it rains in all of September, we won’t see the variances we did in 2014 (anyone calling for $20/bushel durum like they did that year should stay quiet), but knowing the quality of your cereals as it comes off will be super important so make sure to order your SGS tests ahead of time (you can do so easily on the FarmLead website).
Coming back to today’s WASDE, pre-report guesstimates are that corn production will be 14.52 billion bushels vs 14.43 billion forecasted last month and 13.6 billion produced last year. This would be mean a carryout in 2016/17 to come in somewhere around 2.2 billion bushels (2 billion estimated last month), a strong lift from an estimated 1.81 billion bushel carryout for 2015/16. For soybeans, with acres higher like corn, total US output is pegged at 3.88 billion bushels, slight above June’s estimate of 3.8 billion but below last year’s record yielding year of 3.93 billion bushels. This would translate into 2016/17 ending stocks somewhere around 295 million bushels of soybeans (260 million estimated in June), a fair-sized drop from the 357 million bushels it’s suggested we’ll end 2015/16 with, thanks to the increase in demand. Nonetheless, with fund positions still fairly long and crop conditions what they are for soybeans, some analysts are feeling that there’s more downside in soybeans (something we agree with and have been suggesting for some time, including last week).
As for wheat, 2016 total US production is projected to come in at 2.16B bushels, up from the 2.08 billion forecasted last month and the 2.05 billion bushels that came off last year. This would also mean a bigger 2016/17 carryout though, with average estimates pegging ending stocks for next year around 2.2 billion bushels carryout compared to the 2.01 billion estimated last month (vs this year’s 981 million bushel carryout). Other than these US numbers, we’re expecting the USDA to update some South American production numbers in all 3 major row crops as conditions look good for wheat down there but soybeans and corn production has seen local forecasts drop a bit. As such, the greatness of the US crop will be needed to cover up any more forecasted losses coming in from somewhere else in the world.
At 8:00 AM CDT in the North American futures markets:
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3014 CAD, $1 CAD = $0.7682 USD)
July Corn: -2.8¢ (-0.8%) to $3.455 USD or $4.496 CAD
July Soybeans: +0.5¢ (+0.05%) to $10.775 USD or $14.023 CAD
July Soybean Meal (per short ton): -$0.30 (-0.1%) to $372.30 USD or $484.51 CAD
July Soybean Oil (cents per lbs): -0.04¢ (-0.15%) to 30.29¢ USD or 39.42¢ CAD
July Oats: +0.8¢ (+0.35%) to $2.045 USD or $2.661 CAD
July Wheat (Chicago): -3¢ (-0.7%) to $4.275 USD or $5.563 CAD
July Wheat (Kansas City): -4.3¢ (-1%) to $4.125 USD or $5.368 CAD
July Wheat (Minneapolis): -2.3¢ (-0.45%) to $4.975 USD or $6.474 CAD
July Canola: -5.4¢/bu / -$2.40/MT (-0.5%) to $8.155/bu / $359.59/MT USD or $10.616/bu / $468.10/MT CAD
Yesterday’s Winnipeg ICE Close
July Barley: unchanged at $2.676 USD or $3.484 CAD
July Durum Wheat: unchanged at $5.749 USD or $7.484 CAD
July Milling Wheat: -2.7¢ (-0.45%) to $4.558 USD or $5.933 CAD
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.