FarmLead Breakfast Brief
Wednesday, May 31, 2017
“The probability that we may fail in the struggle ought not to deter us from the support of a cause we believe to be just.”
– Abraham Lincoln (16th U.S. President)
Apologies but due to travel constraints, there is not list of grain market futures prices this morning but click this link to explore them yourself.
Supporting A Party
Grain markets are pretty much all in the green this morning as the market tries to rebound from yesterday’s significant sell-off, led by soybeans on both technical and fundamental factors. This was mainly because of higher expectations of great soybean acres and Chinese demand potentially starting to slow down. Wheat was pressured by the start of hard red winter wheat harvest starting in Kansas in the next week or so (obviously dependent on rain). However, with the end of the month clearly here, you might see more profits taken as there tends to be price weakness thanks to hedge funds shoring up their balance sheets and potentially pull money out of the markets. One might expect more buying though as some below-average temperatures are expected over the first 10-14 days of June across the Midwest. With the crop conditions out from the U.S.D.A. yesterday not doing the bears any favours, there are more than few fundamental factors that are supporting the green-coloured party happening in grain markets this morning.
The U.S.D.A.’s crop progress report showed us that 67% of the U.S. soybean crop is in the ground (71% a year ago, 68% 5-year average), with 37% of the crop now emerged (42% a year ago, 40% 5-year average). Moving on, 91% of the U.S. corn crop has been planted as of Sunday, May 28th, relatively in line with the 5-year average of 93%. Similarly, 73% of the American corn crop has emerged (it was 75% last year and 75% is 5-year average) but only 65% of the corn crop is rated in good-to-excellent (G/E) condition, below the 68-70% the market was expecting, 72% G/E last year, and the lowest start since 2013. Digging deeper, 11 states have G/E ratings that are significantly lower than where they started last season out, led by Indiana (-26 YoY to just 43% G/E), Missouri (-21 points to 53% G/E), and Illinois (-19 points to 52% G/E), all of which are major corn-producing states. This is obviously considered bullish, as could the recent wheat conditions, as U.S. winter wheat G/E ratings dropped down to 50%, (well below last year’s 63% at this time of year), and U.S. spring wheat G/E ratings came in at 62% versus 79% a year ago.
AgResource says that Brazil exported 2.16M tonnes of soybeans last week, which is down from the 2.35M tonnes shipped out the week before but still a significant spike from the 1.59M tonnnes shipped out the last full week of May in 2016. Total soybeans commitments marketing-year-to-date in Brazil is now sitting at 42M tonnes, which is a record and 7.4% higher than a year ago, albeit it is tracking by the average pace required to hit the U.S.D.A.’s full-year target of 61.9M tonnes. That being said, there’s rumours swirling around that China importers are asking for delays in actual shipments of new soybeans cargoes due to poor crush margins that they continue to experience. Following some holidays in the People’s Republic, soybean and soymeal futures on the Dalian commodity exchanged fell 2.2% and 2.6% respectively (and as reported by Agrimoney.com).
Coming back to North America, we can probably all agree that planting is behind its normal pace when you include the replanting factor. Accordingly, you have to ask the question if trendline yields are going to be hit this year, especially for the corn and wheat markets. Some would argue that wherever isn’t flooded out though (or has had to be replanted or will go into Prevent Plant acres), yield potential is still certainly there. We mentioned some cooler weather for the next few weeks but the N.O.A.A. is expecting more average conditions through the rest of June and July before things start to get a little warmer in August, albeit they do note that it’s cooler than the forecast they issued for the same time period last year. The hotter temperatures could have an impact on soybeans that are pod-setting but if it’s anything like last year, there could be a bearish surprise, and accordingly, those in the party that are betting on $8 USD / bushel beans is starting their party.
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.