Weekly Grain Update – June 28, 2018

6/21/18

The Grain Industry Prepares For A Major USDA Report On Friday.  Trade War Concerns And Great Crop Conditions Still Weigh On Grain Futures.

The USDA will be releasing its end of June crop report at 11 am CST on Friday, and this is one of the biggest reports of the year.  Generally, this report causes the market to make a major move in one way or the other.  The report contains the June 1st grain stocks and it also estimates the corn, bean, and wheat acres that were planted this spring.  The June 1st quarterly grain stocks gives the trade real evidence on grain usage during the 3rd quarter of the crop year, and it will indicate whether a particular grain is being used or shipped more or less than what the trade had anticipated.  Currently, the market is estimating that June 1st grain stocks are as follows:  corn – 5.268 B bu, beans – 1.225 B bu, and wheat – 1.091 B bu.  Any major difference given by the USDA tomorrow and the market will react according, possibly violently if a major difference exists.

The other set of numbers that will have a huge implication on future supply and demand estimates is the USDA’s estimated acres planted to each crop.  These acres will then be used by future crop reports as the basis for their supply estimates.  The acres estimate each June is usually a big focus and a big market mover.  Compared to the March 31st acres estimate, most believe both corn and bean acres will be increased by roughly 500 – 600,000 acres each.  The market now estimates these acres for tomorrow’s report:  corn – 88.562 M acres, beans – 89.691 M acres, and wheat – 47.102 M acres.  Again, any major differences by the USDA tomorrow and the market will react accordingly.  Over the years, the acres estimate has caused very big ripples in the market because the amounts released were not expected by the market.  Thus, it could be a very interesting session tomorrow.

The markets have been relentlessly pounded lower over the last month, and its hard for me to see where the market can really move lower in a big way.  The funds are now short all grains, and some of them could cash in their profitable trades before this report by covering (buying) their shorts back.  This might prop up the market through the end of the month.  Still, anything is possible.  An unexpected additional 500,000 acre increase in corn or bean acres would definitely press the market lower again despite what has happened this month.

Up to this point, the focus has been on the crops in the ground.  For the most part, the condition of the corn and bean crop is very good.  The crop now is not behind and nearly all areas of the Corn Belt have received enough rain to keep the conditions good to great.  There are some areas in western IA and eastern NE that received up to 12 inches of rain over the weekend and have too much water.  However, on July 1st, although it does happen, it is hard for the grain trade to move higher due to too much rain.  Crop conditions continue to be stellar each week with good to excellent corn acres now at 77% and beans at 73%.  This is the time of the year when the crop ratings start to decline due to not enough rain in certain acres.  These conditions remain some of the highest, if not the highest ever, for this time of the year.  So we are off to a very good start, and each week that we continue to stay at these levels, chances improve that the crop will make it to the finish line with incredible yields.  Still, there is a major heat dome building in Kansas today and it is moving slowly east with temps over 105.  The market is concerned about this heat as some of the corn nears pollination.

Concerning the trade war, the US – China relations seems to be stabilizing this week after a rough week last week.  The US looks to be backing off some of its requirements on investments and if the US will actually follow through on the additional $200 B in tariffs at the 10% level.  Time will tell on this.  The Trump negotiating style is to go in and ask for the moon, set the tone early, set up high demands, and then slowly back away as the teams meets in the middle with a resolved deal.  Time will tell if this work out, but this seems to be the way his team gets what they want.  In the meantime, the markets have stabilized last week, and the volatility has been reduced this week a bit, until tomorrow’s report.  We now have much lower trading ranges for all grains and the market seems to be content to move within these trading ranges until the USDA or the trade war gives us something else to focus on.

Quite a number of you still have old crop bushels and new crop bushels that need to be sold.  Again, I believe you need to focus on how the best way to protect your operation, and be realistic about what can be done yet to salvage your revenues this year.  Your first priority should be to get your arms around just how many bushels of old and new crop bushels you need to market yet.  The market did give us an opportunity during May to make excellent sales.  We will likely not make it back to those levels, but I can build a case where the market can make a decent run back to at least halfway.  Like I mentioned last week, generally a market will retrace 50 to 61.8% of a move before resuming the previous down trend.  I still believe this has a decent chance of happening.  However, once the market gets there, you need to have firm targets in place to automatically execute so it is not missed.  From last week, the cash target box for new crop prices into Readfield or Center Valley have not changed.  Again, these are cash prices on new crop bushels for harvest delivery into Readfield or Center Valley.  My recommended target range for new crop corn is $3.54 to $3.62, and for new beans is $8.87 to $9.10.  For those of you who have bushels left to sell, I would put firm targets out there for at least 75% of the bushels you need to sell.  That way in 3 weeks from now when the US and China finally get a deal worked out, and beans make a huge jump at 3 am during the night, your order will be active and be executed.  Its all about reducing risk and protecting your operation.

Targets Produce Success and Protection For Your Farm

Weather markets will push the market around like a yoyo and produce unprecedented volatility.  However, volatility can be your friend if you have a solid marketing plan and know how much and at what price you feel comfortable selling when the right opportunities present themselves.  If you are not working with one of our grain originators today, please give us a call.  We will gladly sit down with you to create a plan and help you protect your farm.  For a list of our grain originators and the one closest to you, please click here These types of volatile markets are a grain marketer’s dream.  The volatility present selling opportunities that are very short lived.  For the disciplined marketer, who knows exactly what commodity he needs to sell and at what level, this is a perfect scenario.  You simply place target orders in our system and at 3 am in the morning next Thursday while China makes an announcement when we are all sleeping, the markets ramps up, hits your target, locks in your contract price, all automatically while you are in bed.  How fantastic is that!  I encourage all of you to start using our online target system.  Its free, easy, and will protect your farm.  Please click here for more information.

New Arrive Delayed Price Rates have Been Reduced

We have reduced our Delayed Price rates for new arrive corn and beans into Readfield and Center Valley.  These rates are for new arrive bushels only, and the rate will be in effect until Oct 1st 2018 when new crop storage rates will go into effect.  The new Delayed Price rate is now 60 days FREE, and then 3 cents flat per month thereafter.

What Are The Charts Telling Us?

Here are the support and resistance levels for cash and new crop grains.  These are all futures levels as traded at Chicago:

Cash Corn – Sep 18 Corn Futures – Support at $3.48, Resistance at $3.76, Place Targets at $3.70

New Corn – Dec 18 Corn Futures – Support at $3.60, Resistance at $3.87, Place Targets at $3.82

Cash Beans – Aug 18 Bean Futures – Support at $8.47, Resistance at $9.57, Place Targets at $9.47

New Beans – Nov 18 Bean Futures – Support at $8.64, Resistance at $9.72, Place Targets at $9.62

New Wheat – Sep 18 Wheat Futures – Support at $4.80, Resistance at $5.10, Place Targets at $4.98

To see where grain futures are currently trading, please click here.

As always, if I can help you with anything, please call me at the grain office in Readfield at 920-667-4955, ext 2 or send me an email at marcus.cordonnier@chsinc.com.

Marcus Cordonnier

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