Grain markets finished mixed today. Corn still feeling some selling pressure from what was considered negative news in yesterday’s crop report while beans settled a little higher.
Weekly Price Summary
Grain Market News
U.S. Corn Monthly Ending Stocks Estimate
Each month USDA estimates stocks and current old crop stocks are estimated at 1.257 bb. That is a new low and keep in mind, less than a year ago USDA thought stocks would be 3.3 bb and now we’re below 1.3bb which is extremely tight. Cash corn is extremely hard to find. This is going to be a supportive item as we go into June and July.
U.S. Corn Ending Stocks
This year’s stocks at 1.257 bb is a very small number. Stocks to use approaching the tight level that we saw following the 2012 drought. But the bearish news that the market has sold off is due to next years stocks being projected at 1.507 bb and that’s possible but we have to have a big crop and demand has to be down as well in order to see our stocks increase to that level next year.
U.S. Soybean Monthly Ending Stocks Estimate
USDA has been at 120 mb for the last 4 months. Basically, USDA is saying that’s a minimum pipeline level and really somewhat reluctant to drop below that level. We believe the 120 mb is a pretty good guess right now. If we got some fresh sales of beans that number could slip lower. No matter how you slice the pie, soybean stocks are going to be virtually out before we get to the new crop and that’s going to continue to provide support on the old crop prices.
U.S. Soybean Ending Stocks
Soybean stocks at 120 mb this year is very close to record low for stocks and when we look at stocks to use, it is an all-time record low as we’re on the verge of running out of cash soybeans this summer. USDA did project ending stocks for next year at 140 mb, so a small increase but that is still very tight and there is no room for error with this year’s crop.
U.S. Wheat Monthly Ending Stocks Estimate
USDA inched stocks a little bit higher to 872 mb. That’s up 20 mb from last month due to USDA’s projection for lower exports. But with the exception of 2014-15, we are the tightest stocks we’ve seen for this time of year compared to the previous 5 years. Wheat stocks are not exceptionally tight but they are tight enough that if corn and beans do rally, wheat will be very quick to follow along.
U.S. Wheat Ending Stocks
Ending stocks for wheat projected at 872 mb. That is down for the 4th year in a row. Next year’s stocks projected to drop again to 774 mb. The projection from lower stocks over the long haul is a supportive feature for the market. But keep in mind, all of these markets even with tight stocks it’s going to be an extremely wild ride. We’re going to have big moves up and big moves down as well. The next 3 to 4 months are going to be extremely wild trading.
Grain Market News
14-Day Observed Precipitation
The eastern belt down into the Delta and the south U.S. is in pretty good shape. We’ve even seen some decent scattered showers in the western belt and central Plains. Generally, the northwestern belt has been drier than desired. There was a strip of rain a week ago in parts of MT and ND but generally that’s the area that has been missing out.
7-Day Precipitation Forecast
The 7 day precipitation forecast shows good rain from the central and southern belt down through the Delta and big rains in the Plains. Overall, we don’t see any major issues from I-80 south but north and west of that line is where conditions are much drier and rain is desperately rain but unfortunately that’s the area with the least amount of rain in the forecast.
6-10 and 8-14 Day Forecast
We see warmer temperatures in the 6-10 and 8-14 day which should help warm soils and get germination and early growing taking place. There’s also good news in the precipitation outlook. Average to above average precipitation for the western belt and northern Plains in the 6-10 day and average to above average precipitation in the 8-14 day. If this forecast would verify, it would get most U.S. crops off to a pretty good start.
U.S. Corn Production
The areas that are pretty good shape, I-80 south accounts for a large portion but northern IA, southern MN, and into the Dakota’s is an important area. That’s why we’re going to have to watch that area to make sure they’re going to get enough rain. If they do not, that’s when we could start to see these market have their next significant rally.
U.S. Soybean Production
Again, south of I-80 is where things are generally in pretty good shape. But we have a lot of beans that are produced in the northwestern belt and in the northern Plains and that’s the key area that needs to be monitored over the next few months.
U.S. Drought Monitor
This week’s drought monitor shows dry conditions across the northern belt into the southern Lakes and drought conditions in the northern Plains. Clearly this is going to be the area that is most sensitive to weather forecasts going forward.
July Corn Chart
Corn prices have turned sharply lower over the last few days and have taken out initial support at $6.84 and now broken through trendline support at $6.41. The chart clearly looks negative with technicals pointed downward as well but after nearly $1 pullback in corn prices this is no place to be making sales. In fact, end users should be using this sharp break of nearly $1 to acquire ownership at these new lower levels. From a chart perspective, once we broke through $6.84, chart watchers probably eyeing up $6.29. That’s about 10-14 cents below where we closed today.
July Soybean Chart
Soybean prices were down sharp yesterday but today they consolidated and finished just a little bit higher. At least in the short term, chart support is holding. If that breaks, we can’t rule out from a chart perspective a move down to towards the $14.90 level. At least for the moment, charts are still holding at the $15.74 top that posted back in April and that has provided support that last 2 days.
July KC Wheat Chart
Wheat prices down sharply the previous two days and then today consolidating near the recent lows. The near-term chart has turned down. Technical indicators are down, although they’re getting close to the oversold range. We’ve taken out the double top at $6.61 and $6.67 which did generate some additional selling. But now we believe prices are getting into an oversold level again, this is no place to be making sales on wheat after the market has fallen almost a dollar in a week’s time.