Ahead of the Open: Corn, Soybeans Lead Lower on Small USDA Crop Rating Improvement and Less Threatening U.S. Weather

Posted on 07/16/2019 7:49 AM


Corn: Down 5 to 8 cents
Soybeans: Down 8 to 12 cents
Wheat: Steady to down 4 cents

General Comment: Corn, wheat and soybeans fell for a second session, touching four-day lows on better USDA weekly crop ratings and slightly less threatening U.S. weather forecasts as crops head into critical development. Much of the selling is tied to the failure of both corn and soybeans to rise above key resistance after a strong start Sunday night and then closing lower yesterday. This reversal action has funds cutting long positions and triggering some new selling. As of yesterday, funds were net-long 42,000 futures and options contracts of SRW wheat; net long 208,000 corn; net short 28,000 contracts of soybeans; net short 16,000 lots of soymeal, and; net short 24,000 soyoil contracts. 

Yesterday’s U.S. weekly export inspections had Wheat exports running 31% ahead of a year ago but down from 48% ahead of last year’s pace a week earlier. The USDA currently is forecasting a 1% increase on the year. Corn shipments are 11% behind a year ago with the USDA forecasting a drop of 14% for the season. Soybean shipments for the season are now 24% behind a year ago with the USDA having a 20% decline forecasted on the year


Late July and August weather will be far from ideal for poorly established and underdeveloped crops in the U.S. Plains and Midwest. However, the environment may not be quite as bad as many feared. The coming week will be hottest until early August and rainfall may have a below-average bias which will bring on crop stress for some crops. But until the heat returns stress may not be as severe has once expected. Late-planted soybeans and their shortened growing season have the most potential for declining yields and if conditions become dry enough that the plant slows or stops its development for even a few days that could have a much more significant impact on yield potentials than what would occur if planting had occurred on time. Some late-planted crops were planted in excessively wet conditions and have poor root systems and these root systems may not be able to tap into subsoil moisture effectively enough to prevent stress to the crop. The first half of July was drier than usual in many areas across the heart of the Midwest with southern and eastern Iowa, northern and eastern Missouri, portions of Illinois, Indiana and Michigan among the areas getting the least amount of rain relative to normal.  Temperatures over the past two weeks have trended much warmer in the Midwest, Delta and southeastern states with some areas in the heart of the Midwest experiencing temperatures 3 to more than 5 degrees Fahrenheit above average.  

Treasury Secretary Steven Mnuchin says there is a “good chance” he will travel to Beijing with U.S. Trade Representative Robert Lighthizer should talks by phone this week turn out to be productive. The conciliatory noises belie elevated rhetoric, as President Donald Trump claimed slowing growth in the Asian country is due to U.S. tariffs and is forcing Beijing back to the table. For its part, China rebuffed Trump suggestion hat Beijing needs a trade deal with the United States because its economy is slowing, saying this was "totally misleading" and that both countries wanted an agreement. China is also threatening sanctions of its own, although those ones have to do with military, rather than trade, disagreements. Trade-war casualties are looking more like global slowdown victims. Exports from India and Indonesia slumped more than economists forecast in June, cementing fears that nations beyond China and the U.S. are suffering from tariff battles. The fresh numbers followed China’s weak trade report on Friday. The bad news from Asia this week may not be over: Manufacturing hubs Singapore and Japan are also likely to report declines in exports. The data confirm what some economists have warned about for 18 months: The tariff-slapping pain will spread, leaving even countries with large populations like India and Indonesia at risk.

USDA daily export reporting service said private exporters did not report any large new farm commodity sales.

Corn:  As of Sunday, USDA reports just 17% of the U.S. corn crop was silking, well behind 42% for the five-year average. Eastern Belt states are the farthest behind. USDA raised the amount of corn rated in “good” to “excellent” condition by 1 percentage point the week ending July 14 to 58%, whereas traders had anticipated a one-point cut. Last year at this time, 72% of the crop garnered top marks.

Soybeans: Twenty-two percent of the U.S. soybean crop was blooming midway through July. That’s well behind 49% for the five-year average. USDA raised the amount of crop rated “good” to “excellent” by a percentage point to 54%, which is a point higher than the market anticipated. But that’s still well under the 69% that fell into the top two categories last year at this time. The U.S. soybean crush dropped by more than expected in June to the lowest level in 21 months, according to National Oilseed Processors Association (NOPA) data released on Monday. NOPA members processed 148.843 million bushels of soybeans in June, down from 154.796 million bushels in May and 159.228 million bushels crushed in June 2018. The crush had been expected to dip modestly to 154.405 million bushels, based on estimates gathered by Reuters.

Wheat: As expected, USDA maintained its 78% “good” to “excellent” rating for the U.S. spring wheat crop this week. This is just a point below a year-ago at this time. Winter wheat harvest advanced to 57% complete the week ending July 14, which was a 10-point gain from last week and five percentage points lighter than the market anticipated. But a high-pressure ridge should keep the Plains dry this week, helping harvest to make solid strides this week. Argentine farmers are expected to harvest 21.5 million metric tons (MMT) of wheat in the 2019/20 season, the Rosario Grains Exchange said Monday. That’s above last week’s USDA estimate for a crop of 20.0 MMT. Germany's 2019 wheat harvest will increase 17.7% on the year to 23.8 MMT as expectations of a recovery intensify after drought devastated last year’s crop, Germany’s association of farm cooperatives (DRV) said Monday.



Cattle: Mixed to firm      
Hogs: Mixed to firm

Cattle: Cash trade last week was higher with northern areas $115-116.50 and southern areas $112-113, $3 higher than the week before. To maintain this cash trend supplies must tighten, and demand remain strong. That means that exports expand. Wholesale beef prices were mixed Monday with Choice up 47 cents and Select sliding 39 cents. Sales were moderately active yesterday, suggesting improved weekend clearance at the retail outlets.

Hogs:  Cash hog prices inched higher and wholesale pork was higher on Monday, positive signs. Hog futures closed mixed Monday with bear spreading a feature. In China, average spot pig prices are up 37.6% for the year. This makes U.S. pork more affordable and increases the potential for exports of US pork to China. Weekly pork production should fall back to 2-3% higher than a year ago from the recent 6-8% increase.    Yesterday’s slaughter was 410,000 head, down from 429,000 a year ago and 69,000 head less than a week earlier.  

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