This is the Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
We got USDA’s June Supply and Demand on Wednesday June 12th at noon. The June report can be pretty quiet because we have not gotten through enough growing season for USDA to make changes to the crop size. This week’s report was a little bit surprising for how few changes USDA actually made. While we can agree we have not been through enough growing season to make changes to the US supply side, there are some good cases to make for some adjustments to demand in corn which USDA did not do. USDA only made one small change to South American production despite a shocking difference between their estimates and CONAB (the Brazilian equivalent of USDA). The only change was a minor 1 mmt reduction in Brazilian soybean production. Brazilian corn production and Argentine corn and bean production estimates were left unchanged. USDA’s estimates for Argentine corn are around 250 million bushels higher than most private estimates. USDA’s estimate for Brazilian corn production is 400 million bushels higher than CONAB. USDA is also over 200 million bushels higher than CONAB on Brazilian soybean production.
The only thing USDA changed on the domestic balance sheet was a 10 million bushel reduction to old crop exports. That added 10 million bushels to the old crop carryout and carried it all the way to the new crop carryout. We have been ahead of pace to reach USDA’s estimate on corn for ethanol and exports and many analysts expected USDA to make some adjustments but USDA left them unchanged for now. Electing to wait and see the stocks report at the end of June before possibly making the adjustments.
This sets up some very high stakes reports at the end of June and in early July just when the weather will be most crucial. On June 28th we get the Quarterly Stocks report from USDA which should show if demand is indeed ahead of what they have been estimating. Also on June 28th we get the Planted acreage report which has huge implications for new crop. Then on July 12th, USDA will use the data from the stocks report, updated acreage from that report, and whatever other new demand information we have to make adjustments to both old crop and new crop balance sheets. They will also have to make adjustments to South American production since they have been kicking the can down the road on that too. This all comes at a crucial time for weather in the Midwest which the market will be trying to price in.
Since there were so few changes on the report, the market got it priced in quickly and moved back to trading weather. There is a ridge forecast to set up over the Southeast bringing extreme heat across much of the Midwest. Market will be watching the progression of the models and condition ratings that come out every Monday afternoon.