JUNE SUPPLY & DEMAND
June 9, 2017
JUNE SUPPLY & DEMAND The USDA updated their supply and demand balance sheets on Friday this past week, which included both the 16/17 and 17/18 crop years. Below is a summary of the estimates: 16/17 WASDE
June Carryout (mbu)
Avg Est (mbu)
May Carryout (mln)
Arg Prod (mmt)
Arg Est (mmt)
Brazil Prod (mbu)
Brazil Est (mmt)
June World Carryout (mmt)
May World Carryout (mmt)
Last Year World Carryout (mmt)
Corn
2,295
2,282
2,295
40.0
39.9
97.0
96.1
224.6
223.9
211.8
Soy
450
433
435
57.8
57.3
114.0
112.3
93.2
90.1
77.1
Wheat
1,161
1,160
1,159
-
-
-
-
256.4
255.4
241.7
17/18 WASDE
June Carryout (mbu)
Avg Est (mbu)
June Production (mbu)
16/17 Production (mbu)
Production Change y/y
June World Carryout (mmt)
World Carryout Avg Estimate
World c/o change y/y
Corn
2,110
2,084
14,065
15,148
-7.2%
194.3
196.4
-13.5%
Soy
495
498
4,255
4,307
-1.2%
92.2
89.3
-1.1%
Wheat
924
909
1,824
2,310
-21.0%
261.2
258.5
+0.1%
CORN The USDA made no adjustments to the domestic balance sheet for either crop year in their June S&D. The trade had expected ethanol and export adjustments to favor a smaller carryout for old crop, but neither one of those categories was touched on Friday. The new crop balance sheet remained untouched as well, which is fairly routine for the June numbers. The July report will have a chance to incorporate the June 30th acreage and stocks information, which will allow for feed demand adjustments and provide greater confidence on supply calculations for new crop. Current crop conditions will allow for yield adjustments on the 17/18 balance sheet at that time as well. On the world front, Brazilian production was bumped higher by 1 mmt to 97.0 mmt while Argentine production remained at 40.0 mmt. The global carryout moved slightly higher for the month to 224.6 mmt in an uneventful edition of the global S&D’s. Editor’s Note: It’s about weather right now for the markets and how Brazil’s 2nd crop corn comes out of the field. With question marks in place for the US crop, South America is set to regain the export advantage from now through next spring. SOYBEANS Soybean revisions were pretty limited this month as well, with the only adjustment coming in the form of a -15 mbu reduction to US crush to 1,910 mbu. Since April, 30 mbu of demand has been stripped from domestic crush, supported by disappointing monthly crush data out of NOPA. The 15 mbu reduction was carried through to the bottomline, leaving the 16/17 carryout at 450 mbu. Brazilian and Argentine production estimates were raised by 2.4 and 0.8 mmt’s, respectively, which wasn’t a surprise to many. Carryouts grew accordingly with the bump to South American production. Editor’s Note: US exports are likely to see an adjustment higher at some point for 16/17 as current sales are already above the USDA’s annual estimate. Acres will be a key piece of data revealed in the June 30th numbers, with the likely scenario of more than 90 mln acres of soybeans playing out.
CORN BREAKOUT Crop conditions last week showed enough issues to jar the corn market out of its 3 month slumber. The weather forecast was as much or more important, showing hot and dry conditions for a good portion of the belt through the weekend. Issues with the spring wheat crop in the Dakotas certainly helped as disastrous conditions are in play for many. Enough strength occurred to trigger additional short covering by the funds as July futures closed over $3.80’0 for the first time since early March. Additional shorts are still hanging out there, which has some optimistic that further July Corn Futures strength is ahead. Friday’s WASDE was a nonevent as the market is more concerned about crop conditions and the changing forecast. On the week, July futures added 15’0 cents to settle at $3.87’6. CROP PROGRESS / CONDITION RATINGS Condition ratings for the US corn crop improved 3 points in last week’s crop condition report with 68% of the crop rated good/excellent. Key production states saw improvement from the initial ratings with MN (+9) and IL (+7) seeing the biggest changes week over week. South Dakota’s g/e rating fell 5 points to 62% g/e while their poor/very poor rating was bumped higher by two points. North Dakota led all states with a 3 point bump in the poor/very poor category. Overall, the 68% rating for the US was a point higher than the trade expected and compares to 75% a year ago. Corn planting progress was listed at 96% complete vs 97% on average. Key states and their deviation from average in terms of g/e rating: NE (+8), KS (+7), IA (+4), MN (+4), MO (+4), WI (-7), IL (-9), ND (-15), SD (-16), IN (-23), and OH (-26). ETHANOL Ethanol production for the week ending 6/2/17 dropped 21k barrels/day to 999k. That grind rate equates to 103 mbu of corn and is still good enough to suggest that the corn demand estimate should be raised higher on the balance sheet. The USDA elected to leave the number alone on Friday, setting us up for a multi-adjustment report in July. Ethanol stocks fell 2.8 mln to 22.0. The bigger news this week was the crude stock build in the weekly EIA data. The market expected a cut to crude inventory and received a modest build instead. Crude oil was down hard following the data, settling with nearly $2.50 losses for the Wednesday session.
EXPORTS Corn sales of 13.7 mbu were reported this week, below expectations and below last week’s 16.2 mbu total. The performance was the 2nd lowest of the 16/17 marketing year, but still enough to hit the weekly “needed” pace for the USDA’s 2,225 mbu export target. Total sales stand at 2,127 mbu, leaving just 98 mbu to go. Corn shipments of 46.3 mbu were reported this past week, the top end of ideas coming in. Cumulative shipments stand at 1,745 mbu, up 50% from last year’s pace. In order to hit the 2,225 mbu export estimate, weekly shipments will need to average 30 mbu from now through the end of August. COMMITMENT OF TRADERS Friday’s COT report showed the managed money as a smaller net short than what some in the trade had expected. Through trading on Tuesday (the day of the break higher) managed money added 32k longs and covered nearly 39k shorts. The net impact was a 71k contract reduction to the size of their net short, which now stands at -127k contracts. Commercial selling of 60k contracts showed up in the data as producers took advantage of the opportunity last week. Editor’s Note: The commercial position explains why basis backs off when the corn market rallies, especially in a supply driven market like the one we are in. A tremendous amount of farmer selling across the entire country took place last week, leading to weaker basis values from the West to the East. NEW CROP December corn broke through resistance at $3.95’0, $4.00’0, and the old highs at $4.04’0 this week en route to a +15’0 cent gain for the week and a settlement of $4.06’0. Highs at $4.09’0 were the best trade since June of last year, fueled by lower crop condition ratings and weather forecasts for hot and dry conditions. Last summer’s high of $4.22’6 is a major target that many are watching, with intermediate resistance at each additional nickel from $4.10 to $4.20 expected. It’s all about the weather and the extended forecast at this point, which can quickly pull the wind out of the bullish sails. Enough question marks surround the balance Dec Corn Futures sheet that maybe this year’s price action is more gradual than what we’ve experienced each of the past two years. The trade will anticipate the June 30th numbers to see how corn acreage shakes out – the bulls expect a number below 90 mln. The Dakotas have been too dry and the ECB too wet, which is giving the bulls reason to discuss yield problems. The question marks may not get sorted out right away, which may have this market acting differently from 2015 and 2017. Still, producers should take advantage of the strength and reward the market with sales. One thing that the market doesn’t seem to be talking about is demand. Corn exports are going to flat out struggle going forward with the crop coming out of South America. If supply issues are real in the US, demand also has the potential to adjust. Keep that in mind as you market new crop production. Producers who don’t want to commit to hard sales but would like to take advantage of the strength should consider CVA’s line of Min/Max contracts. Secure $4.00 futures for little to no cost – reach out to your ProEdge rep for details on how!
BASIS Corn basis was weaker this week with the breakout in July futures. It was common to see values back off during the day as grain moved pretty freely from farmer to market. Values are weak at the export terminal as well, which doesn’t spell good things for corn basis going forward. A firmer tone could develop if corn fails to sustain the strength and farmers again shut off old crop sales. RECOMMENDATIONS A good amount of corn was sold last week on the breakout higher, which was wonderful to see. Basis reacted accordingly by backing off, a move that we’ve talked about for much of the spring. Producers with basis contracts or Extended Price in place prior to the move are in good shape to price the futures portion of their risk on the rally higher without experiencing the weaker basis movement. Producers should be scale up sellers in this type of market and continue to reward the rally with sales. Old crop targets sit just under the last highs at $3.93’6. Weather markets can move pretty quick, so continue to evaluate what percent of your crop is sold and make plans to get to a comfortable level on both old and new crop before the June 30th report. As the forecast goes, so goes the corn market.
SOYBEANS RETRACEMENT EFFORT July soybeans had a really nice week, led by strength in the grains and concerns over the weather forecast. Friday’s S&D report held few surprises, though the bulls were slightly disappointed that exports didn’t get bumped higher. The strength in the corn and wheat markets was enough to buoy soybeans and get the charts flipped momentarily. Retracement objectives are fallin in line nicely and suggest that another 10-15 cents may be left in the soybean market yet. Soybean planting progress looks to be nearly behind us with the ECB finishing up a majority of the remaining acres in the latest week. On the week, July soybeans added 20’2 cents to settle at $9.41’4.
July Soybean Futures
US PLANTING PROGRESS Soybean planting progress came in at 83% complete vs 81% expected last Monday. This compares to 82% a year ago and 79% on average. The Western Corn Belt is all but wrapped up with soybeans, which is a pretty good contrast with what remained out east. IN (-10), MI (-10), and OH (-13) were key states that were lagging their respective averages by the widest margin. With a good week of weather, the remaining acres were expected to make it in last week. Soybean emergence came in at 58% for the US vs 62% a year ago and 59% on average. Next week the trade will get its first look at soybean condition ratings, which are expected to be below last year’s rating of 72% good/excellent. EXPORTS Soybean export sales were just 5.8 mbu this past week, below market expectations and down considerably from last week’s 22.5 mbu performance. The total was the 3rd lowest of the 16/17 marketing year and likely a reflection of the currency dynamics that shifted a few weeks ago. Despite the poor performance, cumulative sales have already eclipsed the USDA’s 2,050 mbu export estimate, so any sales from here forward will add to the export total for the year. New crop sales of 8.1 mbu showed up this week as well, bringing the 17/18 book to 176 mbu, the lowest total for this time of year in the last 9 years. Soybean shipments were slightly below expectations this past week with 10.2 mbu reported. That total is the lowest so far this marketing year as weekly shipments continue to tail off. Weekly shipments need to average just 8.3 mbu from now through the end of August to hit the USDA’s estimate. However, with soybean exports showing the likelihood of being bumped higher, shipments will need to be stronger than what is being implied today. COMMITMENT OF TRADERS Friday’s COT report surprised the trade some as managed money was still adding to their short position through Tuesday last week. The net position was listed at -101k contracts, a net change of 8k on the week. Short covering was a likely theme the 2nd half of the week as soybean futures added 17 cents from Wednesday through Friday. Overall, the grains have the fundamental justification to move higher, leaving soybeans as a follower. Still, chart and money action last week was encouraging for the soybean market and may set us up for further gains leading up to the June 30th report. NEW CROP November soybeans had a nice week riding the coattails of the grains, adding 18’2 cents to
November Soybean Futures
finish at $9.43’6. The weather premium coming into corn and wheat was the main feature, and created enough positive price action that the charts turned friendly in soybeans. Retracement objectives sit just under $9.60’0 from the recent leg lower, and serve as a good spot for producers looking to make new crop sales. The fundamentals haven’t changed for soybeans in the last week, with yield impacting weather needed in order to see additional premium come in. A friendly feature is certainly the position of the funds – net short in the early stages of the growing season is atypical for outside money. Expect volatility to be a feature in the soybeans for the next 45 days. BASIS Soybean basis was flat this last week with the majority of cash movement taking place in the grains. The move higher in the soybean market was enough to match processor demand and keep bids relatively unchanged week over week. South American export business is the main feature in the global marketplace right now, leaving processor demand as the key variable in soybean basis going forward. RECOMMENDATIONS Producers should look for further strength in the soybean market as an opportunity to make sales. The S&D situation hasn’t changed much in the past few weeks with the key unknown being US yield. South American production and US acres are bearish inputs; we’ll get more clarity around the latter at the end of June. We are far from knowing what US yields will be like on soybeans, but anything north of 46.0 mbu very likely keeps us in the $8 to low $10 CBOT range in the year ahead. If you haven’t gotten started on new crop sales, consider doing so on this retracement higher – another dime would complete the retracement objectives and leave the charts at risk of moving lower again. Visit with your ProEdge rep about placing targets at these levels.
WEATHER DRY IN THE WEST Dry portion of the Dakotas are expected to get some moisture in the next 3 days, which should provide some reprieve there. Unfortunately for the wheat crop, much of the damage has already been done. Temperatures will remain in the upper 80’s and low 90’s to kick things off this week with chances of thunderstorms mixed throughout. As we look into the extended forecast, the maps are showing a drying trend for the Western Corn Belt while the East benefits from some precipitation.
3 Day Precip Outlook
The row crops are in weather market mode, so the changing two week forecast will produce volatility in both directions over the coming weeks. The last half of June will be important as the market gets an early look at weather models for corn pollination.
Risk Disclosure -The risk of loss in trading commodities can be substantial and past performance is not necessarily indicative of future results. Therefore, you should carefully consider whether such trading is suitable for you or your organization in light of your financial condition. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. Neither the information, nor any opinion expressed shall be construed as an offer to buy or sell any futures or options on futures contracts.
JUNE SUPPLY & DEMAND The USDA updated their supply and demand balance sheets on Friday this past week, which included both the 16/17 and 17/18 crop years. Below is a summary of the estimates: 16/17 WASDE
June Carryout (mbu)
Avg Est (mbu)
May Carryout (mln)
Arg Prod (mmt)
Arg Est (mmt)
Brazil Prod (mbu)
Brazil Est (mmt)
June World Carryout (mmt)
May World Carryout (mmt)
Last Year World Carryout (mmt)
Corn
2,295
2,282
2,295
40.0
39.9
97.0
96.1
224.6
223.9
211.8
Soy
450
433
435
57.8
57.3
114.0
112.3
93.2
90.1
77.1
Wheat
1,161
1,160
1,159
-
-
-
-
256.4
255.4
241.7
17/18 WASDE
June Carryout (mbu)
Avg Est (mbu)
June Production (mbu)
16/17 Production (mbu)
Production Change y/y
June World Carryout (mmt)
World Carryout Avg Estimate
World c/o change y/y
Corn
2,110
2,084
14,065
15,148
-7.2%
194.3
196.4
-13.5%
Soy
495
498
4,255
4,307
-1.2%
92.2
89.3
-1.1%
Wheat
924
909
1,824
2,310
-21.0%
261.2
258.5
+0.1%
CORN The USDA made no adjustments to the domestic balance sheet for either crop year in their June S&D. The trade had expected ethanol and export adjustments to favor a smaller carryout for old crop, but neither one of those categories was touched on Friday. The new crop balance sheet remained untouched as well, which is fairly routine for the June numbers. The July report will have a chance to incorporate the June 30th acreage and stocks information, which will allow for feed demand adjustments and provide greater confidence on supply calculations for new crop. Current crop conditions will allow for yield adjustments on the 17/18 balance sheet at that time as well. On the world front, Brazilian production was bumped higher by 1 mmt to 97.0 mmt while Argentine production remained at 40.0 mmt. The global carryout moved slightly higher for the month to 224.6 mmt in an uneventful edition of the global S&D’s. Editor’s Note: It’s about weather right now for the markets and how Brazil’s 2nd crop corn comes out of the field. With question marks in place for the US crop, South America is set to regain the export advantage from now through next spring. SOYBEANS Soybean revisions were pretty limited this month as well, with the only adjustment coming in the form of a -15 mbu reduction to US crush to 1,910 mbu. Since April, 30 mbu of demand has been stripped from domestic crush, supported by disappointing monthly crush data out of NOPA. The 15 mbu reduction was carried through to the bottomline, leaving the 16/17 carryout at 450 mbu. Brazilian and Argentine production estimates were raised by 2.4 and 0.8 mmt’s, respectively, which wasn’t a surprise to many. Carryouts grew accordingly with the bump to South American production. Editor’s Note: US exports are likely to see an adjustment higher at some point for 16/17 as current sales are already above the USDA’s annual estimate. Acres will be a key piece of data revealed in the June 30th numbers, with the likely scenario of more than 90 mln acres of soybeans playing out.
CORN BREAKOUT Crop conditions last week showed enough issues to jar the corn market out of its 3 month slumber. The weather forecast was as much or more important, showing hot and dry conditions for a good portion of the belt through the weekend. Issues with the spring wheat crop in the Dakotas certainly helped as disastrous conditions are in play for many. Enough strength occurred to trigger additional short covering by the funds as July futures closed over $3.80’0 for the first time since early March. Additional shorts are still hanging out there, which has some optimistic that further July Corn Futures strength is ahead. Friday’s WASDE was a nonevent as the market is more concerned about crop conditions and the changing forecast. On the week, July futures added 15’0 cents to settle at $3.87’6. CROP PROGRESS / CONDITION RATINGS Condition ratings for the US corn crop improved 3 points in last week’s crop condition report with 68% of the crop rated good/excellent. Key production states saw improvement from the initial ratings with MN (+9) and IL (+7) seeing the biggest changes week over week. South Dakota’s g/e rating fell 5 points to 62% g/e while their poor/very poor rating was bumped higher by two points. North Dakota led all states with a 3 point bump in the poor/very poor category. Overall, the 68% rating for the US was a point higher than the trade expected and compares to 75% a year ago. Corn planting progress was listed at 96% complete vs 97% on average. Key states and their deviation from average in terms of g/e rating: NE (+8), KS (+7), IA (+4), MN (+4), MO (+4), WI (-7), IL (-9), ND (-15), SD (-16), IN (-23), and OH (-26). ETHANOL Ethanol production for the week ending 6/2/17 dropped 21k barrels/day to 999k. That grind rate equates to 103 mbu of corn and is still good enough to suggest that the corn demand estimate should be raised higher on the balance sheet. The USDA elected to leave the number alone on Friday, setting us up for a multi-adjustment report in July. Ethanol stocks fell 2.8 mln to 22.0. The bigger news this week was the crude stock build in the weekly EIA data. The market expected a cut to crude inventory and received a modest build instead. Crude oil was down hard following the data, settling with nearly $2.50 losses for the Wednesday session.
EXPORTS Corn sales of 13.7 mbu were reported this week, below expectations and below last week’s 16.2 mbu total. The performance was the 2nd lowest of the 16/17 marketing year, but still enough to hit the weekly “needed” pace for the USDA’s 2,225 mbu export target. Total sales stand at 2,127 mbu, leaving just 98 mbu to go. Corn shipments of 46.3 mbu were reported this past week, the top end of ideas coming in. Cumulative shipments stand at 1,745 mbu, up 50% from last year’s pace. In order to hit the 2,225 mbu export estimate, weekly shipments will need to average 30 mbu from now through the end of August. COMMITMENT OF TRADERS Friday’s COT report showed the managed money as a smaller net short than what some in the trade had expected. Through trading on Tuesday (the day of the break higher) managed money added 32k longs and covered nearly 39k shorts. The net impact was a 71k contract reduction to the size of their net short, which now stands at -127k contracts. Commercial selling of 60k contracts showed up in the data as producers took advantage of the opportunity last week. Editor’s Note: The commercial position explains why basis backs off when the corn market rallies, especially in a supply driven market like the one we are in. A tremendous amount of farmer selling across the entire country took place last week, leading to weaker basis values from the West to the East. NEW CROP December corn broke through resistance at $3.95’0, $4.00’0, and the old highs at $4.04’0 this week en route to a +15’0 cent gain for the week and a settlement of $4.06’0. Highs at $4.09’0 were the best trade since June of last year, fueled by lower crop condition ratings and weather forecasts for hot and dry conditions. Last summer’s high of $4.22’6 is a major target that many are watching, with intermediate resistance at each additional nickel from $4.10 to $4.20 expected. It’s all about the weather and the extended forecast at this point, which can quickly pull the wind out of the bullish sails. Enough question marks surround the balance Dec Corn Futures sheet that maybe this year’s price action is more gradual than what we’ve experienced each of the past two years. The trade will anticipate the June 30th numbers to see how corn acreage shakes out – the bulls expect a number below 90 mln. The Dakotas have been too dry and the ECB too wet, which is giving the bulls reason to discuss yield problems. The question marks may not get sorted out right away, which may have this market acting differently from 2015 and 2017. Still, producers should take advantage of the strength and reward the market with sales. One thing that the market doesn’t seem to be talking about is demand. Corn exports are going to flat out struggle going forward with the crop coming out of South America. If supply issues are real in the US, demand also has the potential to adjust. Keep that in mind as you market new crop production. Producers who don’t want to commit to hard sales but would like to take advantage of the strength should consider CVA’s line of Min/Max contracts. Secure $4.00 futures for little to no cost – reach out to your ProEdge rep for details on how!
BASIS Corn basis was weaker this week with the breakout in July futures. It was common to see values back off during the day as grain moved pretty freely from farmer to market. Values are weak at the export terminal as well, which doesn’t spell good things for corn basis going forward. A firmer tone could develop if corn fails to sustain the strength and farmers again shut off old crop sales. RECOMMENDATIONS A good amount of corn was sold last week on the breakout higher, which was wonderful to see. Basis reacted accordingly by backing off, a move that we’ve talked about for much of the spring. Producers with basis contracts or Extended Price in place prior to the move are in good shape to price the futures portion of their risk on the rally higher without experiencing the weaker basis movement. Producers should be scale up sellers in this type of market and continue to reward the rally with sales. Old crop targets sit just under the last highs at $3.93’6. Weather markets can move pretty quick, so continue to evaluate what percent of your crop is sold and make plans to get to a comfortable level on both old and new crop before the June 30th report. As the forecast goes, so goes the corn market.
SOYBEANS RETRACEMENT EFFORT July soybeans had a really nice week, led by strength in the grains and concerns over the weather forecast. Friday’s S&D report held few surprises, though the bulls were slightly disappointed that exports didn’t get bumped higher. The strength in the corn and wheat markets was enough to buoy soybeans and get the charts flipped momentarily. Retracement objectives are fallin in line nicely and suggest that another 10-15 cents may be left in the soybean market yet. Soybean planting progress looks to be nearly behind us with the ECB finishing up a majority of the remaining acres in the latest week. On the week, July soybeans added 20’2 cents to settle at $9.41’4.
July Soybean Futures
US PLANTING PROGRESS Soybean planting progress came in at 83% complete vs 81% expected last Monday. This compares to 82% a year ago and 79% on average. The Western Corn Belt is all but wrapped up with soybeans, which is a pretty good contrast with what remained out east. IN (-10), MI (-10), and OH (-13) were key states that were lagging their respective averages by the widest margin. With a good week of weather, the remaining acres were expected to make it in last week. Soybean emergence came in at 58% for the US vs 62% a year ago and 59% on average. Next week the trade will get its first look at soybean condition ratings, which are expected to be below last year’s rating of 72% good/excellent. EXPORTS Soybean export sales were just 5.8 mbu this past week, below market expectations and down considerably from last week’s 22.5 mbu performance. The total was the 3rd lowest of the 16/17 marketing year and likely a reflection of the currency dynamics that shifted a few weeks ago. Despite the poor performance, cumulative sales have already eclipsed the USDA’s 2,050 mbu export estimate, so any sales from here forward will add to the export total for the year. New crop sales of 8.1 mbu showed up this week as well, bringing the 17/18 book to 176 mbu, the lowest total for this time of year in the last 9 years. Soybean shipments were slightly below expectations this past week with 10.2 mbu reported. That total is the lowest so far this marketing year as weekly shipments continue to tail off. Weekly shipments need to average just 8.3 mbu from now through the end of August to hit the USDA’s estimate. However, with soybean exports showing the likelihood of being bumped higher, shipments will need to be stronger than what is being implied today. COMMITMENT OF TRADERS Friday’s COT report surprised the trade some as managed money was still adding to their short position through Tuesday last week. The net position was listed at -101k contracts, a net change of 8k on the week. Short covering was a likely theme the 2nd half of the week as soybean futures added 17 cents from Wednesday through Friday. Overall, the grains have the fundamental justification to move higher, leaving soybeans as a follower. Still, chart and money action last week was encouraging for the soybean market and may set us up for further gains leading up to the June 30th report. NEW CROP November soybeans had a nice week riding the coattails of the grains, adding 18’2 cents to
November Soybean Futures
finish at $9.43’6. The weather premium coming into corn and wheat was the main feature, and created enough positive price action that the charts turned friendly in soybeans. Retracement objectives sit just under $9.60’0 from the recent leg lower, and serve as a good spot for producers looking to make new crop sales. The fundamentals haven’t changed for soybeans in the last week, with yield impacting weather needed in order to see additional premium come in. A friendly feature is certainly the position of the funds – net short in the early stages of the growing season is atypical for outside money. Expect volatility to be a feature in the soybeans for the next 45 days. BASIS Soybean basis was flat this last week with the majority of cash movement taking place in the grains. The move higher in the soybean market was enough to match processor demand and keep bids relatively unchanged week over week. South American export business is the main feature in the global marketplace right now, leaving processor demand as the key variable in soybean basis going forward. RECOMMENDATIONS Producers should look for further strength in the soybean market as an opportunity to make sales. The S&D situation hasn’t changed much in the past few weeks with the key unknown being US yield. South American production and US acres are bearish inputs; we’ll get more clarity around the latter at the end of June. We are far from knowing what US yields will be like on soybeans, but anything north of 46.0 mbu very likely keeps us in the $8 to low $10 CBOT range in the year ahead. If you haven’t gotten started on new crop sales, consider doing so on this retracement higher – another dime would complete the retracement objectives and leave the charts at risk of moving lower again. Visit with your ProEdge rep about placing targets at these levels.
WEATHER DRY IN THE WEST Dry portion of the Dakotas are expected to get some moisture in the next 3 days, which should provide some reprieve there. Unfortunately for the wheat crop, much of the damage has already been done. Temperatures will remain in the upper 80’s and low 90’s to kick things off this week with chances of thunderstorms mixed throughout. As we look into the extended forecast, the maps are showing a drying trend for the Western Corn Belt while the East benefits from some precipitation.
3 Day Precip Outlook
The row crops are in weather market mode, so the changing two week forecast will produce volatility in both directions over the coming weeks. The last half of June will be important as the market gets an early look at weather models for corn pollination.
Risk Disclosure -The risk of loss in trading commodities can be substantial and past performance is not necessarily indicative of future results. Therefore, you should carefully consider whether such trading is suitable for you or your organization in light of your financial condition. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. Neither the information, nor any opinion expressed shall be construed as an offer to buy or sell any futures or options on futures contracts.
