Ahead of the Open: Severe Planting Delays Fuel Corn, Soybean Price Gains

Posted on 06/04/2019 8:20 AM

Grain Calls 

Corn: Up 5 to 7 cents
Soybeans: Up 5 to 7 cents
Wheat: Down 7 to 14 cents

General Comment: Grains and soybeans are likely to remain well supported today as the corn market is facing an unprecedent situation with more than 30 million corn acres unplanted and more light showers in the forecasts during the next two weeks. Soybean plantings are the second slowest on record and emergence remains troublesome for both crops. Progress was made the past few days the there will be additional opportunities this week as heaviest rains may stay to the south. Further complicating the acreage outlook is speculation that USDA may have the authority to offer Market Facilitation Program payments on prevent-plant acres.  "I don't know, frankly, whether we can legally do it or not," USDA Secretary Sonny Perdue told reporters Monday. "We are investigating that as we speak. You have something to sell or to trade for a tariff impact.  I hope to have a definite answer to those producers very soon, hopefully by the end of the week.”

As of June 2, 67% of the U.S. corn crop is in the ground. That compares to the five-year average of 96% and fell below most trade estimates that averaged 71%. USDA also said U.S. soybean planting was 39% complete this week, below market expectations of 42% and well below the average pace of 79%. But despite fears heavy rain could threaten U.S. wheat, the USDA gave a more positive picture of U.S. crops. The USDA said 64% of U.S. winter wheat was in good-to-excellent condition, up from 61% last week and expectations of 59%.

Mexico calls for comprehensive plan to address border surge and head off new U.S. tariffs on June 10. Mexican officials are noting economic development in Central America is needed to curb migration to the southern U.S. border. A solution that only relies on immigration enforcement “is not going to work. It’s not working,” Foreign Secretary Marcelo Ebrard said Monday at a press conference at the Mexican embassy in Washington. “We should work together. It is the reasonable thing to do. It is the efficient thing to do.”

Meanwhile on the China trade front, the U.S. Trade Representative's (USTR) office and the U.S. Treasury reiterated their view in a joint statement on Monday that China's negotiators had "backpedaled" on important elements of a deal that had been largely agreed, including on an enforcement provision. China on Sunday issued a government policy paper on the U.S.-China trade dispute in which it asserted that the United States bore responsibility for setbacks in the talks, citing three instances in which Washington had backtracked on commitments made during the negotiations. Earlier today, China’s Commerce Ministry urged dialogue and negotiation to solve trade differences with the United States. 
Meanwhile, U.S. Secretary of State Mike Pompeo urged China to make a full accounting of those killed or missing during the Chinese army's bloody suppression of student-led pro-democracy protests centered on Beijing's Tiananmen Square in 1989. Pompeo yesterday accused China of abusing human rights whenever it serves its interest. A Chinese embassy spokesman in Washington said his comments were “an affront to the Chinese people.” The dueling statements underscore the vast divide in perceptions of the events of three decades ago, which Beijing considers a taboo subject.

USDA daily export sales reporting service did not report any new large export sales this morning.

Corn: Futures gapped sharply higher last night but failed to rise above last week’s high, allowing prices to drift into the morning recess. The market remains well support by the planting delays but the ongoing tensions with China and Mexico are holding back gains. The key for market bulls is closing above last week’s highs to trigger the next rally phase. Corn use for fuel alcohol was 440.5 mil bu. in April, little changed from March and down from 445.3 mil a year ago. DDGS produced were 1.858 mt in April versus 1.856 mt a month ago and 1.832 mt last year.

Soybeans: Futures did push out above last week’s high but also gave back more than half the early gains last night. The market remains concerned more about the long-term relationship with China than whether a trade deal is ever completed. On Monday, USDA reported that U.S. soybean crushers processed 171.6 million bu. in April versus an average trade estimate of 170.0 million bu. In March the crush was a record 179.4 million bu. and 171.6 million bu. crushed a year ago. U.S. soyoil stocks at the end of April were 2.258 billion lbs. versus trade estimates of 2.261 billion. Soybean meal futures in China jumped 2.2% to the highest since November.

Wheat: futures on down on the unexpected gain in U.S. winter wheat conditions this past week when most were looking for another drop because of heavy rains. Black Sea weather will become more relevant in the next days as Russia's winter wheat belt and much of eastern Ukraine is forecast to see some light rain. Dryness in Canada also becoming a bigger concern about two prior years of drought depleted soil moisture.


Livestock Calls:

Cattle:  Weaker

Hogs: Weaker

Cattle: Futures seen weaker on concerns that U.S. tariffs on Mexican goods will prompt the country to retaliate against U.S. beef and other ag products. Boxed beef prices slipped Monday with Choice down a penny and Select falling 82 cents amid light sales. Cash cattle trade took place at an average price of $115.74 last week, which was basically in line with trade the week prior. Futures are signaling they expect softer prices this week.

Hogs: Futures seen weaker amid concerns about fallout from the U.S. plans to slap tariffs on Mexican goods starting June 10. The national cash hog prices slumped 39 cents on Monday, led by a 78-cent drop reported in Iowa/Minnesota. Counter-seasonal weakness remains a negative factor. However, fresh pork cutout values rose $2.23 cents led by gains in most primal cuts. The ongoing trade battle with China and U.S. tariffs threat for Mexican goods over immigration have bulls on the sidelines, with long liquidation and technical selling dominating.

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