June 28 – Will the Stocks & Acreage Report Change the Story?

Grain markets this morning are mixed ahead of today’s hotly-anticipated U.S. stocks and acreage report, which will be published at 11AM CST.

“Change is the law of life. And those who look only to the past or present are certain to miss the future.” – John F. Kennedy (35th President of the United States)

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June 28 – Will the Stocks & Acreage Report Change the Story?

Grain markets this morning are mixed ahead of today’s hotly-anticipated U.S. stocks and acreage report, which will be published at 11AM CST. In Wednesday’s FarmLead Breakfast Brief, I walked through what Statistics Canada said in their June acreage report, and there was quite a lot of buzz on the social networks about what harvested canola acres will actually be, given the dry start to the growing season. Thanks to the export and trade challenges with China, Ag Canada is currently expecting a 2019/20 carryout of 4.3 MMT, which I, and pretty much the entire rest of the industry thinks isn’t likely. [1] While canola prices have fallen on better production expectations with rain finally falling, the other thing leaning on values is the strength of the Canadian Loonie, now sitting up above 76¢ USD.

Comparably, in Europe, the rapeseed crop there is taking on some significant heat, but doubling the growing challenge is the lack of available chemical tools to help fight bugs. More specifically, bans on neonicotinoids in France has pushed rapeseed acres in the country to a 14-year low, and those who did plant the oilseed last fall are now battling bugs that they effectively can’t eradicate. [2] The result is an expectation that rapeseed production in Europe will fall more than 6% year-over-year to 18.74 MMT, according to the European Commission. This includes the smallest rapeseed harvest in Germany since 1998!

The South China Morning Post is suggesting that the U.S. and China have agreed to a trade war truce ahead of their talks this weekend at the G20 Summit in Japan. [3] Once the trade negotiators do their thing, it’s expected that U.S. President Trump and Chinese President Xi will sit down face-to-face, but it’s widely expected that China won’t move unless the U.S. scraps its ban on Huawei. [4] Staying in trade talk, a USDA senior official told the media that a trade deal between the EU and the United States won’t happen unless agriculture is involved, and right now, the EU doesn’t want it included in the discussion. [5]

Stocks & Acreage Report Expectations Today

At the start of this week, I said that the USDA reports – especially today’s stocks and acreage report – could create some volatility in the grain markets. Since the collection of information for the June acreage report is from June 10th, intentions from that date and what’s happened since then might be two different things. In this case, there is some bearish buzz in the market that the numbers from the USDA won’t reflect the actuality of what’s happened in the past 2 weeks and thus, the report could be taken with a grain of salt by grain markets. [6]

Going in the acreage report, a Reuters poll of grain trade participants is expecting to see about 3 million less acres of corn than the USDA’s June WASDE report planted acres estimate of 89.8M. [7] For soybeans, the area is expected to fall by about 250,000 acres from the June WASDE’s number of 84.6M acres. To help stir the pot a bit, I think we’ll see  corn acres at 88.5M and soybean acres at 84.6M in today’s acreage report.

U.S. June 2019 acreage report expectations

From an inventory perspective, the Reuters poll is expecting U.S. wheat and corn stocks to be fairly similar to where we were a year ago. [8] While we can likely agree that there’s a healthy amount of corn still available, it seems that farmers have locked the bin doors as they wait to see what the growing season actually produces. There’s already speculation of what an early frost might do to this late-planted crop in the United States. [9] That in mind, $5 USD/bushel cash bids in parts of the Western Corn Belt aren’t getting farmers to pull the trigger! [10] As a reminder, 2012 was the last year you could sell cash corn at that level so basically we’re seeing a once-in-a-decade sort of opportunity right now. For soybeans, the markets are expecting U.S. inventories to jump more than 50% to a new record high.

Pre-report estimates for the June 2019 U.S. grain stocks report

Mixed Holiday Week Weather

While the acreage report will likely create the usual “I don’t think that’s accurate” conversations, the good news is that heat and humidity are starting to build in the Midwest, which hopefully will finally dry out some fields and get the crops growing. [11] With the humid weather though, we might see those evening thunderstorms which, unfortunately, could bring about some hail too. Already in Western Canada, hail claims are picking up after the last few weeks of spotty moisture events. [12] Here’s a look at the 7-day forecast for rain from DTN for both the United States and Canada. [13]

June 28, 2019 United States 7-day rain forecast

June 28, 2019 Western Canada 7-day rain forecast

Next week, you will not be receiving no FarmLead Breakfast Brief emails as I’m taking the week off from writing. Accordingly, I hope you have a great Canada Day if you’re in the Great White North and an awesome Independence Day if you’re spending the 4th in the United States.

Have a great weekend!

To growth,

Brennan Turner
CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead on Twitter

At 7:40 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3093 
CAD, $1 CAD = $0.7638 USD)

Sept Corn: -1.3¢ (-0.3%) to $4.445 USD or $5.82 CAD
Aug Soybeans: +3.5¢ (+0.4%) to $8.973 USD or $11.748 CAD
Aug Soybean Meal (per short ton): +$0.30 (+0.1%) to $313.50 USD or $410.48 CAD
Aug Soybean Oil (cents per lbs): +0.02¢ (+0.05%) to 27.95¢ USD or 36.60¢ CAD  
Sept Oats: +0.3¢ (+0.1%) to $2.788 USD or $3.65 CAD
Sept Wheat (Chicago): -1.8¢ (-0.3%) to $5.45 USD or $7.136 CAD
Sept Wheat (Kansas City): -1.3¢ (-0.25%) to $4.803 USD or $6.288 CAD 

Sept Wheat (Minneapolis): -2.3¢ (-0.4%) to $5.593 USD or $7.322 CAD
Nov Canola: unchanged at $10.251/bu / $452/MT CAD or $7.829/bu / $345.22/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.

About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.

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