Ahead of the Open: Grains, Soy Seen Rising on Crop Development Delays and Falling Crop Conditions

Posted on 06/25/2019 7:51 AM


Corn: Up 4 to 6 cents
Soybeans: Up 4 to 7 cents
Wheat: Up 6 to 7 cents

General Comment: Corn, soybeans and wheat are seen trading higher today after USDA said crop conditions deteriorated more than expected and soybean planting and corn and soybean emergence continue to lag well behind normal, increasing production risks. The U.S. Midwest weather forecast will see things quiet down significantly over the next week to 10 days with smaller areas of rainfall working through the region from time to time. Temperatures will be running average to a bit below average over the next 4 days before warming to above average, but no severe heat is expected.

Corn planting progress is 96% completed which compares with 92% last week and the five-year average of 100%. The USDA report shows Ohio had planted 80% of its crop as of June 23, with Indiana and Michigan each at 91% planted, Illinois and Missouri both 92% planted, Wisconsin 93% planted. USDA said only 89% of the crop had emerged as of Sunday, which is 10 points behind average. Corn crop ratings unexpectedly fall to 56% rated in “good” and “excellent” conditions from trade expectations for conditions to remain unchanged at 59% rated “good” and “excellent”

Soybean planting progress is 85% completed. While up from 77% a week earlier, it fell short of the 89% expected this week by traders. The first soybean crop ratings report of the year showed conditions were 54% “good” and “excellent,” well below trade estimates for 59%. Even more concerning, emergence lags the five-year average by 20 percentage points at 71% as of June 23.  

Winter wheat harvest advanced just seven percentage points to 15% complete as of Sunday, which is well behind 34% complete for the five-year average. The winter wheat crop is rated 61% “good” and “excellent,” down from 64% last week. Spring wheat crop ratings are 75% “good” and “excellent” compared with 77% a week earlier. Both ratings fell below trade estimates.

U.S. officials are playing down expectations ahead of this weekend’s meeting between President Donald Trump and China’s Xi Jinping at the G-20 in Japan. Investors are showing little sign of optimism, with Chinese fund managers happy to sit on their hands as they look further down the line for a breakthrough. Meanwhile, the real economic costs from the trade war are stacking up. Chinese Vice Premier Liu He held a phone conversation with U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin, China's Ministry of Commerce said today. The Chinese and U.S. officials exchanged opinions on trade and agreed to maintain communications.

China's May soybean imports from top supplier Brazil fell 31% from the same month last year, customs data showed, with buyers curbing bookings of the animal feed ingredient as African swine fever has reduced the nation's pig herds. China bought 6.3 million metric tons (MMT) of soybeans from Brazil in May, down from 9.124 MMT the previous year. China's May soybean imports from the U.S. were at 977,024 metric ton (MT), up from 489,539 MT in the previous year.  Earlier this month, USDA lowered its projection of China’s soybean imports by 1 MMT to 85 MMT.  Last year, China imported a record 94.1 MMT. USDA sees imports rising to 87 MMT in the 2019-20 season.

USDA daily export reporting service reported no new large sales this morning.  

Corn: Futures gapped higher overnight and should open near session highs. The market gains may be capped ahead of the USDA Acreage and June 1 Quarterly Grain Stocks Reports set for release on Friday morning.
Soybeans:  Futures also gapped higher in response to USDA’s planting/emergence update and condition rating, all of which were lower than anticipated. Some drier weather this week may help to get some of the 10 to 13 million acres of soybeans that were yet to be sown as of Sunday.
Wheat: The wheat market’s focus remains on slow U.S. harvesting and declining winter and spring wheat crop conditions. Traders are also watching a shift to the hot, dry weather threats developing in parts of Europe and dry, warm conditions in the some areas of the Black Sea region and Canada.


Cattle:  mixed
Hogs: Lower

Cattle: Live cattle will be mixed with prices just above key support. Cash cattle traded at an average price of $110.48 last week, which was down roughly $3 from the week prior. July futures hold more than a $3.50 discount to that price level, signaling futures traders believe cash prices could continue to slide. Wholesale beef cutout values were mixed Monday with Choice down 8 cents and Select up 26 cents on moderate sales. Hedge funds and managed money continued to liquidate long positions selling 4,400 contract this past week, but they are net-long only 36,700 contracts, its smallest bullish bet in a year.

Hogs: Futures seen lower on followthrough fund selling of long positions after falling more than $3 yesterday with open interest rising. Funds sold about 3,800 contracts in the week ended June 18 but still remained net-long about 35,000 futures and options contracts. Cash hog bids slid 34 cents to start the week, but the pork cutout value did strengthen 60 cents on a $6.04-surge in bellies on Monday. Slaughter remains heavy with 448,000 head, up from 434,000 a year ago. While pork held in cold storage grew 7 million pounds in May from in April and up 1% from a year ago, pork trimmings, variety meats and unclassified pork all reduced inventories by more than 10% from the prior year. This is the lowest proportion these categories  since data began in 1993. Many of the products represented in these categories are destined for the export market and bodes well for 2nd half export figures of variety meats and hog by-products. African swine fever (ASF) has started hitting large-scale industrial farms in Vietnam, the country’s government said today, wiping out more than 2.8 million pigs, or nearly 10% of its total hog herd.

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