CBOT Mixed At Midday Awaiting Crop Condition Report and July US Weather Pattern

Jun 19, 12:05 pm | Mid-day Commentary | Share this:

** CBOT values are mixed this AM with prices back to trading within their recent ranges. Wheat is resting on the topside of its range as funds continue to cover their shorts, but the structural corn short has liquidated allowing it to slide lower. Going forward, the funds will need some kind of adverse weather stimulation to get them to go long corn/soy (which is lacking as of this AM).

 ARC looks for a mixed CBOT close with the market trading crop conditions on Tuesday. The trade looks for an increase of 1-3% in GD/EX ratings in corn/ soybeans and 2-4% in spring wheat following last week’s rain. If the ratings fail to rise, it could portend another test of the recent highs in corn, with soybean and wheat price trends technically turning upwards.

 ** CBOT brokers suggest that funds have sold 12-15,000 contracts of corn (including overnight activity)  while buying 2-3,000 contracts of soybeans and  4,000 contracts of wheat. In soy products, funds are flat in soymeal/soyoil.

 ** US weekly export inspections for the week ending June 15th were; 48 Mil Bu of corn, 10.1 Mil Bu of soybeans, and 27.2 Mil Bu of wheat. The corn and wheat exports were larger than expected. For their respective crop years to date, the US has shipped 1,832 Mil Bu of corn (up 558 Mil Bu or 44% from last year) and a record 1,905 Mil Bu of soybeans (up 284 Mil Bu or 17.5%). 

** The US has shipped out 59.7 Mil Bu of wheat, up 15.9 Mil Bu for the first 2 weeks of the crop year or 36%. The US corn, wheat and soybean export pace remains better than expected. ARC maintains that WASDE should raise their 16/17 US soybean export pace by 20-30 Mil Bu and 25 Mil Bu in corn.

 ** Chinese crush margins recovered strongly on Monday as domestic soybean prices fell and soy product prices rallied. The recovery has some processors back making a modest crush margin. ARC notes that Chinese domestic soymeal buyers have very limited forward coverage (1-2 weeks at best) and should there be a US weather/crop problem, livestock feed compounders will leap at the marketplace for forward coverage. The setup for Chinese soymeal coverage is a little like it was in the spring of 2016 when Argentine soybeans endured flooding rains during harvest and cash short covering ensued.

 ** EU wheat harvest estimates are in retreat, but depending on whom you talk to, the size of the decline varies. Some peg losses at no more than 1-2 MMTs while others see the loss at 3-4 MMTs. WASDE pegged the EU wheat crop at 150.75 MMTs in June, so most see the crop as ranging from 149-147 MMTs compared to last year’s harvest of 145.5 MMTs. Remember, WASDE sees EU wheat carry-in at just 11 MMTs which would reduce 2017/18 exports to 28-29 MMTs.

  The EU corn crop size is also critical this year to determine the amount of wheat needed for feed? No loss of the EU corn crop cannot be tolerated without Black Sea corn imports. Feed supplies within the EU are tightening.

** Midday GFS Weather Update: The GFS at midday is similar to the overnight solution with drier/cooler than normal weather over the next 6-7 days. Most Nn Midwest areas will see rain potential of .25-1.00” with S Midwest crop areas seeing .1-.7”. High temps look to range from the 70’s to mid 80’s through the weekend with warming next week. 90’s stream northward as the mean position of the western US high pressure Ridge shifts slowly east to the Plains. Warm frontal showers are possible adjacent to crop ares along the US/Canadian border. The 11-15 day calls for improved Midwest rain chances, but our confidence that far out in the mean position of any Central US high pressure Ridge is low.

** AgResource Market Comment: The heat and dryness is budding across the Plains and producers are fearful that it will shift east with time. Not everyone in the Midwest received good rains last week and the forecast is not offering much relieve over the next 10 days. June will end up being drier and  warmer than normal, making July weather highly important to US corn yields. Its premature to turn overly bearish!

** 10 Day GFS Rainfall Estimate for the next 10 Days: