In its monthly crop report, the USDA failed to provide a bullish spark for the market and prices should now grind lower into the quarterly stocks and acreage report at the end of the month.
USDA forecasters lowered corn yield outlook by 1.5 bushels per acre to 156.5 bpa, while leaving estimated acres planted unchanged.
The lower yield forecast lowered corn supplies as of Aug. 31, 2014, to 1.949 billion bushels, a still burdensome level and only 55 million bushels less than its previous forecast of 2.004 bb.
Traders had expected stocks to fall to 1.758 bb as many expected the USDA to lower yields further and cut harvested acres.
It’s too early to reduce acres as that adjustment will be made in two weeks.
This fall’s corn harvest, according to USDA, will total 14 bb, down from the 14.1 billion it projected last month, but the projected harvest still would break the current record of 13.1 billion set in 2009, and would mark a 30 percent increase over last year’s production, when the worst U.S. drought in decades were a disaster for Midwest producers.
The outlook for the rest of the month is pretty simple. Prices should ease lower into support as improving weather is helping the crop. However, the acreage and quarterly stocks report on June 28 should be a major market mover and promises major volatility for the trade.
Weak shorts will want to buy back positions ahead of the report’s release and producers should look to supplement their marketing efforts with cheap option strategies that will enable them to profit on a large move the report promises.
Total corn usage is bearish as it was lowered by 70 mb last month as feed usage was dropped by 125 mb although ethanol and crush was slightly higher.
For soybeans, the USDA left the forecast of domestic soybean stockpiles at the end of next summer unchanged from last month at 265 mb. The forecast was below the average analyst prediction of 273 mb.
No production or usage changes were made from May as the USDA decided it was too early to adjust the soybean production figures as the remaining soybeans are still trying to be planted.
The USDA forecast domestic wheat supplies as of May 31, 2014, the end of the current marketing year, to total 659 mb, down from its previous projection of 670 mb and above the average expectation of 634 mb among analysts.
U.S. winter wheat production is forecast at 1.51 bb, up 2 percent from the May 1 forecast, but down 8 percent from 2012.
Based on June 1 conditions, the United States yield is forecast at 46.1 bushels per acre, up 0.7 bushel from last month, but down 1.1 bushels from last year.
Hard red winter production, at 781 mb, is up 2 percent from last month. Soft red winter, at 509 mb, is up 2 percent from May. White winter, at 219 mb, is up 1 percent from last month.
Of the white winter production, 11.5 mb are hard white and 207 mb are soft white.
The USDA increased U.S. exports by 50 m.b. which is surprising given that world export competition should increase and foreign countries will no doubt undercut U.S. wheat prices, leaving U.S. wheat as non-price competitive and lower in quality, making it less desirable to foreign buyers.
The USDA did forecast global new-crop supplies to decrease by 5.2 metric tons to 695.9 mt amid persistent dryness in Ukraine and Russia.
The USDA’s new view for domestic supplies still would be a five-year low.
Corn closed the week $.11 1/4 lower. Last week, private exporters did not announce any private sales.
In the weekly export sales report, old corn sales were only 3.2 mb, above the 1.3 mb needed each week to reach the USDA export forecast of 700 mb.
New crop sales were only 2.7 mb. Last week, the weekly crop progress report showed corn plantings at 95 percent versus 91 percent last week.
In the weekly crop conditions report, conditions were unchanged at 63 percent good-to-excellent versus 66 percent last year.
Emergence is 85 percent versus 99 percent last year.
Corn rallied close to resistance of the March and April highs, but failed to close above these highs, which was needed to be technically bullish for the market and attractive to fund buyers.
Improved weather has weighed on prices through June with new crop corn nearly 40 cents lower since June 1. December corn should not trade any lower than $5.19 until the Fourth of July.
Seasonal highs are normally in by June 23, but look to be later due to the late-planted nature of the crop.
Strategy and outlook: Producers are now 100 percent sold of 2012/13 crop and are also 50 percent sold of the 2013/14 crop.
They reowned 50 percent of the 2012/13 corn crop with July calls. Producers own December corn puts on 50 percent of 2013 production.
Soybeans closed the week $.11 3/4 lower from last week. Last week, private exporters did not report any private sales.
In the weekly export sales report, old crop soybean sales were 1.1 mb, enough to reach the USDA forecast of 1.330 bb. New sales were strong at 16.6 mb.
The weekly crop progress report shows U.S. soybean plantings at 71 percent done versus 57 percent last week. Emergence was reported at 48 percent versus 31 percent last week and 67 percent on average.
Iowa is 40 percent planted with Nebraska at 63 percent, Minnesota 42 percent, Illinois 40 percent and Indiana 60 percent planted.
The soybean crop will need sunshine and warmer temperatures during June to establish its root system. There is talk of soybean acres being switched from corn, which would add to the bearish new crop profile if a large U.S. soybean crop is raised.
We will find out on the June 28 acreage report. The soybean meal market has turned decidedly bearish and is the leader of the soy complex. Normal weather will push prices lower if a huge crop will be realized.
Seasonal highs are normally in by June 23, but seasonal highs look to occur later due to the late-planted nature of the crop.
Strategy and outlook: Producers are 100 percent sold of the 2012/13 production and are 40 percent sold of 2013/14. Sell 10 percent at $13.45 against the January contract.
Producers re-owned 50 percent of 2012/13 production with July soybean calls. Producers own November puts on 50 percent of 2013 production.
Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. Midwest Market Solutions is a full-service commodity brokerage and marketing advisory service, clearing through R.J. O’Brien. He can be contacted at 605-660-1155.