Corn S/D: Our 1.414 bil bu 9/20 stocks forecast (USDA at 1.675 bil bu) assumes 4.0 mil lower corn acres than WASDE, 300 mil bu less use and the same 2019 US corn yield of 166 BPA. Resulting 10.14% 9/20 US corn stks/use ratio would be the lowest since 9/14’s 9.2% ratio.
Soybean S/D: Our 849 mil bu 9/20 stocks forecast (USDA at 1.045 bil bu) assumes 2.0 mil more soy acres than WASDE, 50 mil bu higher use and a 2.5 BPA lower soy yield than WASDE. Resulting 20% 9/20 US soy stks/use ratio (vs. the 9/19 ratio of 25%) would be the 2nd highest since 9/87.
Wheat S/D: Our 995 mb bu 6/20 stocks forecast (USDA at 1.072 bil bu) assumers 0.450 mil lower planted area, a 0.6 BPA higher yield and 69 mb larger 2019/20 use than WASDE. Resulting 46.5% US wheat stks/use ratio (vs. USDA’s 51.7% ratio 54.5% of 6/19) is still historically large vs. last 3 decades.
Corn closes only 11 cents below 5/29 $4.38 high as market braces for further cuts in corn area on upcoming 6/28 acreage report. Managed fund corn longs (estimated +65K contracts at close Monday) may opt to extend longs in ramp up to month-end report. Weather and perceived impact on corn yield (including mounting GDD deficit) will take on added importance this month.
The wheat market, lacking compelling fundamentals if FSU crops OK, simply tags along with corn rally today–fulfilling typical seasonal narrowing of wheat’s premium to corn into mid-June. Abares overnight cuts 2020 Aust wheat crop 2.7 mmt to 21.2 mmt (vs. USDA at 22.5 mmr). SovEcon trims Russian wheat crop 0.4 mmt to 82.2 mmt (USDA at 78 mmt). Additionally, USDA likely overstating 2019 Canadian wheat crop by 2-3 mmt. Nonetheless, still ample cushion in 19/20 world wheat production (USDA up 49 mm tover LY)! We’re watching developing FSU dryness/heat although CWG confident that plentiful spring rains will cushion Russian winter wheat from late season stress.
There is no story in soybeans even with our assumed 2.5 BPA (5%) cut in 2019 US soy yield. Soy farmers learn today that they have an additional 70 mb of O/C soy to either market or store prior to 2019 harvest. Our negative soy outlook could change if soy planting delays extend into July—likely undermining estimates for both planted area & yield. Soy market for balance of week may hold value given strength in corn and fear of below average US soy condition rating next Monday.
Low risk approach to trading unfolding threat to may be bull spreading Sept/Dec or Dec March corn given delayed harvest, rejuvenated farmer bullishness and prospects for 1.3 bil bu or larger cut in 2019 corn production vs. LY. Look for further gains in corn vs. both soybeans and wheat.
RJO IB trip report (just N of Indy to IN/IL border east of Champaign) The first word that comes to mind is ugly. Normally this time of year it’s a sea of dark green and lush growth, but crops are either stunted, water logged, or not there. There was quite a bit of planting done in the past week around Tipton, IN thus crops are not up while so many acres not touched yet. It is obvious we have never seen anything like this before, on this large a scale when you add in all the other states affected. Trying to quantify production is impossible.
Summer officially begins at week from Friday (6/21). Attached chart details history of CZ summer rallies. Stage is set for the largest summer rally in DEC corn since 2012 drought. Bull markets thrive on uncertainty with plenty to go around until later this summer amid widely varying estimates of both corn acreage and yield. Final point—USDA did up corn abandonment by an additional 225K acres vs. May—a precursor of more to come unless growing conditions improve measurably in coming weeks. Final Analysis of USDA’s June 11, 2019 Crop Report Feltes Ag Report 222 S Riverside Plaza, Suite 900, Chicago, IL 60606 (800)621-0757