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Closing Comments

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Closing Comments

The USDA was out today with their plantings estimate as well as the quarterly stocks report and true to form they didn’t disappoint. The most interesting note of the report was that from the March estimate, the number of additional planted acres in Corn, Soybeans and Wheat were an additional 3.165 mln. Of the 10 major crop reporting categories, only barley acres came in below the March estimate.

Corn tumbled on the bearish acreage and stocks info from the USDA this morning as corn acreage came in at an estimated 94.1 mln acres, up 7 percent from last year and above the March 31 forecast of 93.601 mln. This would be the third highest planted acreage in the US since 1944. June 1 stocks totaled 4.72 bln bu, up 6 percent from the year previous and above the trade expectation of 4.528 bln. .

Weekly sales this morning were on the lower side of trade expectations, but on the daily reporting system a fresh sale of 120,400 tonnes of US corn was posted to Mexico.

The added acres and carry-out provides more cushion for summer weather concerns as cooperative July and August weather could push the new crop stocks past 2.6 bln bushels – that being said, the longer term forecast continues to anticipate a rebuilding of heat into the Midwest starting in mid-July which could take the top end off yield. Look for this area to be a seasonal low for corn as the trade shifts its focus back to the daily forecast models. If July/August don’t provide any weather threats, look for the market to eventually resume its march toward September lows.

After an initial selloff, Soybeans took off and didn’t look back despite the fact planted acres are estimated at 83.7 mln acres, up from the March estimate of 82.236 mln. The number came in very close to the average guess but perhaps shy of the “hope” number that would be past 84 mln. This is a record high number for soybeans. Stocks for soybeans on June 1 totaled 870 mln bu, up 14 percent from a year ago and above the average trade guess of 829 mln bu. Disappearance for March-May came in at 661 mln bu, down 5 percent from the same period last year.

The new crop corn/soybean ratio closed past 3.10:1 today, challenging the recent high in the ratio from the summer of 2009. For front months, the spread in recent history maxes out around 3.6:1 while new crop contracts have historically struggled to get past 3.15:1.

Weekly export sales of 730,000 tonnes of old crop and 798,000 tonnes of new crop soybean sales came in line with expectations as did soy meal while soy oil bested the trade guess.

Today closes the month and the quarter for traders who can start a-fresh tomorrow. Technically the new crop soybeans look to be eying a run at the recent highs around 11.85 – if August weather turns threatening it has plenty of momentum to go well past for a July rally.

Wheat had a ho-hum report day, closing higher in spite an expansion of acres from the March expectation. All wheat was estimated at 50.8 mln acres, down 7 percent from last year but up from the earlier estimate of 49.599. Spring wheat acres came in at 12.13 mln acres, above the March outlook for 11.348. June 1 stocks totaled at 981 mln acres, close to the trade expectations but 30 percent the stocks around one year ago. The March-May disappearance of 14.7 mln bushels was up 22 percent from the previous year’s period. Of note in the Oklahoma panhandle, wheat is pricing into rations at a 30 to 40 cent discount to corn. Wheat is certainly in an over-sold condition and has been pummeled with bearish news – if lows are put in on bearish news, looking at the seasonal tendencies – wheat should be close to scoring its low.

Cattle futures continue to rally with the June contract expiring today. Lower feed costs has translated into new demand for replacement cattle. In Kansas and Texas, fed cattle are trading lightly at $122 per cwt, up from mostly $116 last week.

Hogs lower cash and wholesale pork prices weighed again on the lean hog futures. Cash hog prices around the Midwest this morning were steady to down 50 cents per cwt. Wholesale prices this morning fell $1.11 from Wednesday to $88.58 after ham prices dropped almost $13. For now, packers have enough supplies for the holiday weekend and supermarkets are curbing purchases until they can evaluate how much product was cleared out over the weekend.

Closing Market Snapshot

 

 

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading and may not be suitable for all investors.

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