June 12 – Can the July 2018 WASDE Stop the Bleeding?

Good Morning!

Grain prices are slightly mixed ahead of today’s July 2018 WASDE report out from the USDA at 12 PM EDT.

“Any fact that needs to be disclosed should be put out now or as quickly as possible because otherwise, the bleeding will not end.” – Henry Kissinger (American Statesman)

graincents-trial

Can the July 2018 WASDE Stop the Bleeding?

Grain markets this morning are slightly mixed with corn prices and soybean prices in the green ahead of today’s July 2018 WASDE report. The release will come at 12 PM EDT, and most analysts are expecting production of both corn and soybeans in the US to go up since the July 2018 WASDE report will appear including acreage numbers that came out on June 29.

On top of that, the average trade estimate suggests that the USDA will increase the average corn yield by 0.9 bushels per acre to 174.9. They also think that soybean yields will go up by 0.1 to 48.6. For perspective, 2017/18’s US average corn yield was a record 176.6 bushels per acre while soybeans average number on the combine monitor was 49.1 bushels per acre. For further perspective, the USDA has not raised corn yields in the July WASDE report in 15 years and 24 years for soybeans. Should the July 2018 WASDE report be any different?

Also in today’s July 2018 WASDE report, we get the first estimate from the USDA on the US spring wheat crop. Going into the report, the market is expecting to see production climb 44% year-over-year to 599  million bushels (or 16.3 million tonnes if you’re converting bushels into metric tonnes). This would certainly offset the decline in winter wheat production, and thus, put total US wheat production up 7% year-over-year to 1.858 billion bushels.

Other pre-report estimates for the US wheat complex in the July 2018 WASDE report include:

• 650 million bushels /17.7 million metric tonnes of hard red winter wheat (if realized, this would be -13% year-over-year)
• 316 MBU/8.6 MMT of soft red winter wheat (+8% YoY)
• 229 MBU/6.87 MMT of white winter wheat (+1% YoY)
• 72 MBU/1.96 MMT of durum wheat (+31% YoY)

Other key numbers that we’ll be watching for today include wheat production in the Black Sea and Europe and South American corn and soybean production numbers for the 2018/19 crop year. There’s some speculation that we might see the USDA lower US soybean exports already in this report but it’s unlikely as the reports tend to account for hard facts and the July 6 deadline for Trump’s Trade War Tariffs was after this report was likely prepared.

Our Garrett Baldwin will be doing a live recap of the July 2018 WASDE report on our FarmLead Insights blog page.

Lower Lows in Store for Grain Markets?

Soybean prices are now the lowest they’ve been in more than a decade. [1]

Corn prices are on new yearly lows.

Canola prices are the worst they’ve been in 6 months.

There is a lot of negative sentiment in the grain markets right now, and as mentioned in yesterday’s Breakfast Brief, it’s tough to catch a falling knife.

There has now been some buzz that we could see $7 and potentially $6 handles for soybean prices in Chicago. There’s also been speculation of corn prices that have a $2 in its number. These are extreme in my opinion.

What’s also extreme though is that there is growing interest in Washington D.C. to ban “naked short selling” of ag commodities. This “is the practice of short-selling a tradable asset of any kind without first borrowing the security or ensuring that the security can be borrowed, as is conventionally done in a short sale.” [2]

This same practice of banning naked short selling was done during the financial crisis of 2008 and, some would argue, provided some support/stability for the markets.

However, this is what we would identify as market manipulation. There’s division on the subject as to why you should support versus letting the market truly decide what’s the price of a good (i.e., a bushel of soybeans) truly worth.

Ultimately, it’s certainly frustrating to see the sell-off, but the market is the market is the market. That is to say; the aggregate market movers believe that the likes of corn prices and soybean prices and wheat prices should be lower. Tough to swallow but it’s like hail finding one of your fields – you have to rebound from the crappy weather eventually.

To growth,

Brennan Turner

President | CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead or @GrainCents on Twitter

At 7:15 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3187 
CAD, $1 CAD = $0.7583 USD)

Sept Corn: 1.0¢ (0.29%) to $3.410 USD or $4.497 CAD
Aug Soybeans: 2.3¢ (0.27%) to $8.353 USD or $11.015 CAD
Aug Soybean Meal (per short ton): $1.00 (0.30%) to $331.50 USD or $437.16 CAD
Aug Soybean Oil (cents per lbs): -0.03¢ (-0.01%) at 28.40¢ USD or 37.45¢ CAD  
Sept Oats: -1.8¢ (-0.76%) to $2.343 USD or $3.090 CAD
Sept Wheat (Chicago): 2.8¢ (0.59%) to $4.745 USD or $6.257 CAD
Sept Wheat (Kansas City): 1.5¢ (0.32%) to $4.755 USD or $6.255 CAD

Sept Wheat (Minneapolis): -0.5¢ (-0.10%) to $5.250 USD or $6.923 CAD
Nov Canola: $2.00 (0.40%) to $11.249/bu / $496.00/MT CAD or $8.53/bu / $376.12/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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