This is the Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Corn and soybeans managed to close higher on Monday despite wheat’s best effort to pull the markets lower. Wheat has come under pressure from a variety of sources. The weather in Russia has not improved much but those headlines are several weeks old so that is tired news to the market. What is new is that the crop is so big in Turkey that they are considering an import ban to support local prices. Turkey was a big buyer of Russian wheat over the last year so that is some demand that will have to shift somewhere else. Also pressuring wheat is US harvest progressing through the Plains. We are not seeing record yields by a long shot but they are a bit better than expectations so far.
We get USDA’s latest supply and demand estimates this wednesday, June 12th at noon. The market is not looking for any big changes to US carryouts on this report. We are not far enough into the growing season to make changes to yield despite the early challenges planting. Corn demand continues to grow and the market expects USDA is going to have to increase demand and decrease carryout on the old crop but may not be ready to make those changes on the June report. The market expects only minor reductions to corn carryout and small increases to soybean carryouts. The market will be closely watching what USDA does with their South American production estimates. USDA finally started making reductions to Brazilian corn and bean estimates but they only made minor changes and still remain well higher than CONAB (the Brazilian equivalent of USDA).
Harvest is progressing very quickly through the second crop corn in Brazil. Normally fast harvest can be a bearish force but the market is expecting the later yields to fall significantly so there remains some risk premium in the market for that as we await USDA and CONAB updates.
Planting progress is becoming less important on our Monday Crop Progress Reports and condition ratings will be the more important number going forward. Monday’s update showed corn 95% planted and 85% emerged. The crop was rated 74% good/excellent which was exactly what the trade was expecting. That was one point lower than last week and compares to 61% last year.
Soybeans were reported at 87% planted compared to 89% expected, 78% last week, 95% last year and 84% average. 70% were emerged. This was our first condition rating and it came out at 72% good/excellent. That was what the trade was expecting and compared to 59% last year this week.
The funds have been back to building a short position in the corn and beans as there is no immediate threat to the crop. We still have a lot of growing season ahead and the recent bounce in corn is encouraging as it gets us away from the support levels we need to hold. USDA report on Wednesday will set the tone in addition to the weather.