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Veteran Advisor

Floor Talk, April 9, 2019 (Report Day)

NOTE: AT 11:00am CT, we will post the USDA/WASDE Reports right here. Tell us what you think.

 

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At 11am:

 

USDA SAYS:

 

In its April Supply/Demand and WASDE Reports, the USDA pegged the U.S. 2018/19 Marketing year corn ending stocks at 2.035 billion bushels, compared with the trade’s expectations of 1.99 billion bushels and the USDA’s previous estimate of 1.835 billion.

 

For soybeans, the USDA pegged the U.S. 2018/19 ending stocks at 895 million bushels vs. the government’s previous estimate of 898 million and the trade’s estimate of 903 million bushels.

 

In its report, the USDA estimates 2018/19 Marketing year wheat ending stocks at 1.087 billion bushels vs. the USDA’s previous estimate of 1.055 billion bushels and the trade’s estimate of 1.075 billion.

 

USDA 2018/19 World Grain Ending Stocks

 

For corn, the world’s ending stocks are pegged at 314 million metric tons (mmt.) vs. the trade’s estimate of 331.3 mmt. and the USDA’s previous estimate of 308.5 mt.

 

The USDA sees the 2018/19 world soybean ending stocks at 107.4 mmt. vs. the trade’s average estimate of 108.3 mmt. and the USDA’s previous estimate of 107.2 mmt.

 

In its report Tuesday, the USDA pegged the world’s wheat ending stocks at 275 mmt. vs. the previous estimate of 270.5 mmt. and the trade’s expectation of 270.9 mmt.

 

USDA 2018/19 World Crop Production

 

For Brazil, its 2018/19 soybean production is pegged at 117.0 mmt. vs. the USDA’s previous estimate of 116.5 mmt. and the trade’s expectations of 116.2 mmt.

 

The USDA pegged Argentina’s soybean production at 55.0 mmt. vs. its previous estimate of 55.0 mmt. and the trade’s expectation of 55.4 mmt.

 

In its report, the USDA pegged the Brazilian corn production at 96.0 mmt. vs. its previous estimate of 94.5 mt. and the trade’s expectation of 94.7 mmt.

 

For Argentina, USDA sees its corn production at 47.0 mmt. vs. a previous estimate of 46.4 mmt. and the trade’s expectation of 46.6 mmt.

 

TRADE REACTION:

 

--Corn market shaking off the negative numbers quickly. Watch the weather. As far as the reports, USDA took 75 million bushels away from corn-used-for feed, 50 million taken away for ethanol use and 75 million bushels off of exports.

 

---Jason Ward, Northstar Commodity’s managing director, says that the stocks totals on corn were the highlight (or lowlight) with 200 million bushels added to the ending stocks.

 

“And USDA accounted for it via all 3 usage categories, (75 mil reduction in feed), (75 mil/bu reduction in exports) and 50 million bushel reduction in corn used for ethanol,” Ward says.

 

Ward added, “No one can argue the ethanol or export numbers, as they have been well documented. We are lagging in both categories. But, the feed usage lowering again is in our view a reflection of a larger crop in 2018 than previously reported, not less feed fed to more livestock units than a year ago (or near record livestock units).”

So, at face value it is a bearish corn report with stocks swelling over 2.0 billion bushels at 2.035 bil/bu, Ward says.

 

“We are, however, below a year ago in corn supply by 105 mil/bu and we still have 5 months of usage left to account for, and the entire U.S. growing season.

 

Another point to make though, is our competition’s crop in South America is getting larger, with increases reported in both the Brazilian corn crop and the Argentine corn crop (+2.5 MMT in total),” Ward says.

The USDA’s wheat and soybean numbers are easily explained, Ward says.

 

“In soybeans, we chipped 5 mil/bu off carryout down to 895 million bushels (imports decreased by 3 million and seed increased by 2 mil/bu for the total of 5 mil/bu),” Ward says.

Wheat was a decrease in exports by 20 mil/bu which lead to higher stocks.

Ward added, “So, here is the food for thought from today’s report? Have we built in the biggest stocks number that we are going to see for corn? Bigger crop and lower usage? Does the financial/speculative community bank some profits on their near record short position, as we head into another major growing season here in the U.S. Can the corn market garner some risk premium in Dec 2019 futures contract from $3.89?”

 

Make no mistake about it though, if we achieve trend line yield of 176 bu/acre on corn and 90-92 million acres get planted, new crop values will be substantially lower than $3.89 in my view, but we have to achieve those 2 big scenarios, Ward says.

 

 

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Matt Tranel, Risk Management Advisor, Commodity Risk Management Group, says that as expected the corn ending stocks grew in today's USDA WASDE report. “They ended up at 2.035 billion bushels - two million bushels higher than the previous report. The average guess was 1,991 billion. The additions to ending stocks came as on the heels of reductions to Feed & Residual 75 million bushels, Ethanol demand lost 50 million, and exports lost 75 million bushels.

 

Tranel added, “World corn production grew by 5.48 million metric tons. Markets began the day testing the lows established post Planting Intentions Report from May 29th but are up 4 cents since then. Soybeans had little change on the domestic and world balance sheets. Still trading in a range bound manner awaiting a potential trade deal. Wheat had it's balance sheet raised once again by 32 million bushels. Likely keeps a little bit of a lid on that market again.”

 

 

What say you?

 

Mike

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At 9:15am:

 

In early trading, the May futures are 2 1/2¢ lower at $3.57. July futures are 2 1/2¢ lower at $3.66 1/2.

May soybean futures are 1¢ lower at $8.97 3/4. July soybean futures are 1¢ lower at $9.10 3/4.

 

May wheat futures are 8 3/4¢ lower at $4.56 1/4.

 



May soymeal futures are $0.40 short ton lower at $308.80.

 May soy oil futures are 0.04 lower at 28.84¢ per pound.



 

In the outside markets, the NYMEX crude oil market is $0.28 lower, the U.S. dollar is lower, and the Dow Jones Industrials are 211 points lower.

 

Al Kluis, Kluis Advisors, says that investors will be eyeing today’s USDA data update.

 

“The USDA supply/demand report today may be negative for corn prices, but by the close we will be watching the late-week weather forecast to see how much snow we will get in the northern Corn Belt,” Kluis told customers in a daily note.

 

He added, “Will the USDA increase the projected corn ending stocks to over the 2-billion-bushel benchmark? That is likely to be short-term bearish for corn futures.

 

“Also, will the forecasts stick for 10 to 20 inches of snow in southern Minnesota and northern Iowa on Wednesday night and into the afternoon on Thursday? If this is still in the noon weather model updates, then that will be bullish for corn futures by late this week."

 

Mike

 

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3 Replies
Honored Advisor

Re: Floor Talk, April 9, 2019 (Report Day)

JMO but it seems the trade has gotten less & less concerned about planting delays and so far the farmer has bailed out their complacency "Sun comes up in the east and the corn gets planted in May".   When you live in the midst of a wet spring (as I always do) seems you drive 50 miles north or south, it becomes apparent that planting delays so far are localized.   Like in 2013 we had 13" of snow on May 2nd, then on May 14th it hit 100 degrees (first time in a decade) so what you didn`t get planted by the 16th you were delayed by a month and half of solid rain.  But if you drove north even 30 miles they didn`t have any snow and had that week longer window to plant which was  a million dollar week one way or another depending which side of the snow line you were.

 

Then last year all kinds of local planting delays here, then fighting to spray, fight to harvest and way below trend yields...but Illinois, Indiana, southern Iowa, South Dakota..."Record yields!!!" and sucky prices.  If you`re going to have sucky prices, you`d better have "Record yields!!!" because I can graphically describe  what sucky yields AND sucky prices do to your bottomline.

 

Maybe "this year will be different" and wet weather planting delays prop up prices.  But, I think any appreciable price improvement will have to come from a mid-summer drought.  They say "I state" droughts originate in Georgia, well Mike Hoffman has a dry area in the southeast, perhaps that will slide over and bail us out?   Elwynn Taylor is calling for "70% chance of above trend yields"....again  Smiley Mad   176 bpa, I believe.

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Advisor

Re: doubt that Nebraska will

Raise much for successfull crops this year.

just to much infrastructure damages....estimates of $12 to $20billion.

 

the weather deal is changing things in biblical proportions there.

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Highlighted
Veteran Advisor

Re: Floor Talk, April 9, 2019 (Report Day)

Global supply and demand and a big carry-over.  Planting delays are an absolute non-event except for local basis.

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