COMMENTARY 7/13/18

Temps cooling off a bit more now in forecasts to slightly below normal. Rain accums of 1.5 to 3” is likely especially for the N third of the grain belt. IA and E  NE expecting storms tonight into Sun.  In other areas NOT receiving as much rain, topsoil dryness has been increasing as 47% of corn acres and 51% of beans has been drier than normal the last 14 days.  at the same time, however, subsoil dryness still remains low with just 15% of corn and 19% of beans from previously heavy accums in the last 30 days.

 CORN

DOWN 4

No significant weather concerns and temps easing.  Overall GOOD conditions for the end of pollination.  Monday afternoon’s crop ratings should be unchanged to slightly weaker, though still WAY ahead of normal.  Today’s chatter on yesterday’s report has some noticing that the USDA did NOT increase yields any and that such high crop conditions ratings likely implies the likelihood of BIGGER yields.  Keep watching!  With smaller crops in Brazil, Ukraine, Russia, and the EU, some believe our new crop exports could get up to 2.4 bill bu!  That sounds GREAT since we look to have a HUGE crop growing!

Bloomberg Trader Bias:  Bullish 35% TW (67% LW), Bearish 45% TW (13% LW), Neutral 20% TW (20% LW)

BEANS              

DOWN 15

The 13% increase in world bean stocks took another toll today from yesterday’s report.  It was a hearty 11.3 MMT increase to 93.8.  NOPA Crush should be out Mon with US crush ests for June up 16.5 mill bu from last year’s 154.5 or higher.  Oil stocks will likely be lower by 180-190 mil lbs from last month at 1.670 bill and compares to 1.7 last year.  Also a take away from yesterday’s report was the USDA lowering the beans it expects China to import from 103 MMT down to 95 sends a political message of sorts to China saying that we acknowledge and EXPECT them to buy beans elsewhere and that the trade war isn’t going away soon.  This likely will equate to a $507 bill loss due to the loss of US beans.  The next round of tariffs should commence Aug 1st.

US beans ARE so critically important to China! As China, Brazil, and Argentina are not exporting as much meal, this increases meal demand from the US. This week the Chinese were only able to buy 3 or 4 vessels of beans from Brazil and at the same time cancelled only one vessel from the US, out of the PNW (did cancel three for new crop too).  Basis values in Arg and Paranagua continues to increase as demand for their beans goes up.  Crush margins there continue to work as meal facilities in Argentina continue to buy US beans to keep up with demand.  Meal processors in China are now less than 40 cents away from being able to buy beans directly from the US while paying the 25% tariff.  See how it is a huge circle?

Bloomberg Trader Bias:  Bullish 15% TW (33% LW), Bearish 55% TW (13% LW), Neutral 30% TW (50% LW)

 

  

WHEAT

UP 13

Weather fears abound as foreign crop estimates continue to shrink.  The GFA (German) lowered their est to 21.53 mill tons from 22.89 in June  That will be a 12% drop. Russia’s Ag Minister ests a 25% smaller crop at 64.4 MMT.  That’s 2.5 mill LESS than yesterday’s USDA report.  The Ukrainian Grain Assoc ests their crop at 25 million tons, down from 25.8.  Our USDA Attache updated their Ukraine est and expects more like a 25.740 mill, again below the USDA’s June official forecast of 26.5.  Last but not least, Strategie Grains lowered the EU’s soft wheat production est 7.5 MMT to 132.4 mill. That’s down 7% from 139.9.  On a positive note, In SA, the Rosario Exchange increased Argentina’s wheat acres by 180,000 hectares to 6.18 mill due to good planting weather and good germination.  This next year’s production COULD be a record 20 mill tons! The previous record last year was 18.2 mill.

Bloomberg Trader Bias:  Bullish 30% TW (71% LW), Bearish 25% TW (0% LW), Neutral 45% TW (29% LW)