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-USDA reports continue to weigh on corn
-Malaysian palm oil rallies to 4+ month high on lower than expected stocks data
-EU hits Indonesian biodiesel with countervailing duties
-US rain ideas rising
-Corn/soybean conditions unchanged vs ideas for small decline

 

Corn continued to solidly work lower overnight following yesterday’s limit down move as a result of the USDA’s game-changing U.S. corn crop estimate. The significantly higher-than-expected crop essentially puts the 2019/20 balance sheet right back into a very similar fundamental structure to that of the last several years, which saw corn chop incessantly in a lateral range. There certainly are still unknowns regarding this year’s crop, most notably the ability/likelihood of reaching full maturity and USDA yield ideas, but for all intents and purposes, yesterday’s acreage numbers will have to be used as the starting point for all production calculations moving forward until proven otherwise, which likely wouldn’t be until the January Annual report. The upward revision in the U.S. wheat crop also casts a negative shadow over the market as the 2019/20 balance sheet remains heavy amid lackluster demand expectations. While soybean acreage was revised solidly lower again and down massively from last year, the 2019/20 balance sheet still remains exceptionally burdensome from a historic perspective if the crop is able to reach full maturity and USDA yield ideas. There certainly is risk in that regard, as well, and could keep an elevated level of volatility in place in the weeks/months ahead. With US/China trade war rhetoric remaining heated and both sides appearing to really be digging in for the long haul, the USDA’s notable soybean export estimate cut yesterday significantly reduces the impact of the sharply reduced production this year.
 The Malaysian Palm Oil Board reported end July palm oil stocks in the country fell to a 12-month low of 2.392 MMT from 2.411 MMT in June and compared to last July’s 2.232 MMT. A wire service poll indicated market expectations were for an increase in stocks last month to 2.468 MMT. The unexpected decline in stocks prompted solid price gains in Malaysian palm oil futures overnight, moving to the highest level since mid-April. Malaysian palm oil production in July was 1.738 MMT vs 1.692 MMT expected and up solidly from 1.511 MMT in June and 1.503 MMT last year July. Malaysian palm oil exports in July were 1.485 MMT vs expectations of 1.435 MMT, 1.383 MMT in June/1.197 MMT last year July.
 China appears to be fully engaging the “dig in” mentality in the ongoing trade war with the U.S. as very little support of the yuan has been seen as it continues to slip to multi-year lows against the dollar. The yuan has not been below the 7 yuan/dollar level since 2008. Additionally, Chinese regulators have reportedly threatened to place some U.S. companies on an “unreliable entities” list which could negatively impact their operations in China.
 The EU issued provisional countervailing duties on Indonesian biodiesel imports of 8-18% as their anti-subsidy investigation continues, with definitive measures to be potentially put in place by mid-December.
 U.S. corn and soybean crop conditions were largely unchanged again last week, with the extremely steady nature of conditions over the last 4- 5 weeks, particularly in context of the overall below average precip regime, not providing the market with any rallying call regarding escalating yield concerns. Market ideas were for a 1% decline in good/excellent ratings for corn and soybeans last week, but both were unchanged. Yesterday’s USDA corn and soybean yield estimates were both above market expectations and, while they will very likely require the crops reaching full maturity, the lack of any sign of increasing stress on the crops helps to support the USDA’s ideas. Moreover, rain opportunities appear to be increasing over the coming 10-day period, as well. Spring wheat conditions fell solidly again last week, but with the crop nearing maturity in many locations and harvest underway, the USDA’s notable increase in the spring wheat crop yesterday leaves the condition decline as an afterthought.
 President Trump has reported asked Japanese Prime Minister Abe to be a “huge amount” of U.S. farm products amid the crumbling hopes for a near term US/China trade deal. The problem with that, though, is Japan’s grain import needs are extremely consistent on an annual basis, with nearly 80% of corn imports already coming from the U.S. and wheat accounting for roughly half of their imports. Additionally, Japan only imports around 3 MMT of soybeans annually from all sources. It’s hard to import additional “huge amounts” when the demand base isn’t there in the first place…
Weather
The forecast is a bit wetter than the model runs indicated yesterday, especially for the far south. Close to average rains (.75-1.5”+) look to fall across most of the corn belt in the next 10 days. The current batches of rains in the far north and far south will be finishing up today. Things then look to be dry in most of the region through Thursday. A system for Friday and Saturday then looks to impact most of MN, the southern 2/3rd of IA, most of MO, WI and IL, with totals of .40-1” range. Totals elsewhere look to be generally less than .30”. Things for next week sees things to be fairly quiet to the north of I-80, with periods of showers and thunderstorms bring combined totals of .50-1.25”+ to most areas south of I-80. Temps will run average to below average across the region in the next 3 days, then warm to above average for Friday and the weekend, cooling back to the 70s and 80s the first half of next week. 
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