CORN bears are thinking the USDA could bump ending stocks higher in tomorrow’s June report on another sizable reduction to ethanol demand. I’ve heard talk that the USDA will probably need to further reduce corn used for ethanol by -100 to -200 million bushels in the weeks ahead. Bulls are hoping that total U.S. production will eventually be adjusted lower on a sizable reduction to their earlier planted acreage estimate of 97 million. Bulls are also keeping a close eye on weather as the summer starts to turn warmer and rains fall less frequently. If U.S. weather doesn’t become an issue and China never steps up in a big way, I suspect most rallies will be short-lived. Producers should be adjusting and continuing to protect against any further downside.
SOYBEAN bulls are talking about continued buying from the Chinese with rumors of both Cofco and Sinograin booking bushels off the PNW. The weaker U.S, dollar vs. the Brazilian real has also been supporting the Chinese buying headlines. There’s also the deepening coronavirus problems spreading across Brazil. Brazil has the world’s second-highest number of cases – and has now more daily deaths than any other nation, There’s also now a ton of uncertainty surrounding Argentina and its government’s bid to take over Vicentin, the countries largest crusher who filed bankruptcy back in February. Remember, last year Vicentin handled just under 20% of all sales of soybean meal and over 20% of all soybean oil shipments. In other words, the market is very eager to know if or how much the Argentine government will be changing things? Here at home, most traders are eager to see tomorrow’s USDA report. The trade is looking for another slight uptick in old-crop ending stocks but a tightening in the new-crop balance sheet, perhaps down towards 400 million bushels. I am very uncertain about the number and seem to be caught guessing in regards to total planted acres. As a spec, I’m staying on the sideline and waiting to place my bets until after I get to see the USDA numbers. As a producer, I’m defending the $8.50 level with hedges but staying patient in regards to pricing cash bushels until I learn more about U.S. weather and Chinese buying.
WHEAT bulls are talking about the continued dry conditions in parts of Russia and the Balck sea region. Many inside the trade are thinking the USDA will eventually have to make deeper cuts to their current production estimates. On the flip side, bears are pointing to better than expected early-harvest yields down south here in the U.S. and much better production forecasts coming out of Australia, In fact, there’s talk in Australia of perhaps double the wheat exports compared to last year. The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) bumped its June estimate by almost 25% vs. its March estimate. As a spec and a producer, I’m thinking the extremely hot weather in Russia and lack of moisture is going to trump the increased production estimates out of Australia. I also like the tailwind created by the recent weakness in the U.S. dollar. I think prices could start moving a bit higher, especially if the bulls can find a fresh demand story. I don’t want to make any additional new-crop sales right here, I want to wait and see a few more cards.