Special Market Update
Grain Market Commentary
Monday, July 8, 2019
By Rhett Montgomery, Grain Associate, The Andersons
September corn (CU19) closed today at $4.395, up 0.75c to start the week. New crop December corn (CZ19) closed at $4.4375, up 1.5c.
It was a two sided trade to start the week here as the corn market had gapped higher overnight on dryer weather outlook but seems to be stuck trying to balance the June acreage report’s lofty estimate along with slightly improving crop conditions over the past few weeks, with ongoing concerns regarding what the actual prevent plant situation is in the U.S., and yield concerns with a late planted crop. The corn market has now regained around half of the losses posted following the USDA Acreage report at the end of June, in which the USDA surprised the market with a national corn acreage number of 91.7M acres, up about 2M acres from the June 11 WASDE report in which they used an 89.8M value, which was well above the average trade estimate of 86.6M. Prior to the June 28th report, the credibility of the acreage estimate was already being questioned given the extremely difficult planting conditions, especially in the Eastern Corn Belt. The USDA will be resurveying many states with the findings expected to be reflected in the August WASDE report, until then the market will have to rely on weather outlook and crop conditions, among other things, to lend direction to the market until the acreage estimate becomes more concrete.
To start this week, the markets eyes are on the longer-term weather outlook that shows dryness and above average temps across the Midwest through the first couple weeks of August. This is raising concerns about yield due to potential heat stress during the pollination stage, which supported prices early in the session. The market will also be watching the WASDE report out this Thursday which will use the June acreage number in the balance sheet. The biggest questions in regards to this report will be if the USDA takes further cuts to the yield after cutting it by 10 bpa in the June 11th report. The old crop demand side will also be important to watch as exports continue to lag behind pace and the clock is ticking with only 8 weeks left in the 2018/2019 marketing year. Crop Progress report is out this afternoon at 4pm EST, the market is expecting very slight improvements in corn conditions.
August soybeans (SQ19) started the week up 3c, closing at $8.79. New crop November soybeans (SX19) closed at 8.9775, up 3.25c.
Soybean markets are in a similar boat as corn, trying to find footing post the USDA June Acreage report which estimated soybean acres at 80M. Down from the USDA’s estimate of 84.6 in the WASDE report, and 4-5M below the average trade guess. Despite this cut in acres, the soybean market has continued its slide off of the highs set in the middle of June. Most likely the market is still trying to get a grasp on the accuracy of that acreage number, combined with ongoing demand concerns that leave the U.S. still facing a very large supply of beans on hand. Plugging in the USDA acreage number of 80M and leaving everything else equal still leaves us with an ending stocks number for 2019/20 north of 800K. It will be interesting to see if the USDA makes any changes to the yield with a lot of the beans being planted late, and with a hot and dry weather outlook developing across the Midwest.
In terms of demand, last week soybean export sales came in well above estimates, export sales and inspections will need to remain strong to meet the USDA’s forecast of 1.7B exported in 2018/19, but as of now with just under 1.4B bushels exported so far and outstanding sales of 368M bushels, the soybean market looks to be on pace for the USDA estimate barring any further logistical setbacks or cancellations. Tying into the export discussion, the U.S. and China will continue trade talks post the G-20 Summit meeting at the end of June. As has been the case for the year or so, the market will be watching negotiations closely as trade with China remains a huge factor in the soybean complex. Crop Progress this afternoon is looking for small improvements in G/E ratings for soybeans. Please keep your eye on the Andersons website for a more in depth look at the report this afternoon.