Morning Comments - Waiting on Uncle Sam
Jun 10, 2014
It was difficult to find many friends in the wheat market yesterday and particularly in Chicago where we surrendered much of Friday’s strength. World prices continue to be a drag on our values and with harvest advancing in the south, buyers have little reason to step in front of fund selling. Rain in the southern plains did support the KC market but I have not seen anyone predicting extended delays. Quality could be the bigger issue. Harvest to date stands at 9% compared with a normal pace of 12%.
No such problems exist in with the spring wheat though. On the first condition report of the year the crop was given a 71% good/excellent rating. We all recognize that will not assure a good crop but it is certainly in stark contrast to the conditions winter wheat has suffered through this year. The good/excellent rating for winter wheat was unchanged at 30%.
Export inspections for the week ending June 5th totaled 19.1 million bushels and is technically split between two crop years. This was within the range of estimates but slightly below the 10-week average of 21.5 million.
I would suspect to see quiet and flat trade now through the reports in the morning. The average estimate for old crop carryout is 588 million and for new 550. The World numbers could be more interesting and if there were to be a surprise I suspect it would be there. Baring a surprisingly negative number tomorrow, July futures should continue to find support at this 6.00 level.
Even though the corn market was pressed into slightly lower lows during the session yesterday, prices did bounce into the close and have been able to climb a bit now during the early morning hours. This is the type of action you would expect to see around a reaction low.
There would appear to be little in the news that would be classified as positive right now. The good/excellent rating on corn was down 1% but 75% of the crop remains in that category. The most notable decline came in Nebraska where violent storms passed through a week ago and North Carolina, each seeing their rating cut by 6%. There are no significant changes in the weather outlook and those who tried to promote the threat of a ridge building later this month could catch no traction for the story.
Export inspections bounced back nicely from the previous week as we loaded 45.2 million bushels. This moves us back above the 44.1 million we need to average through the balance of the year to reach the 1.9 billion target.
For tomorrow’s release the average estimate for the 13/14 crop is 1.157 billion bushels and for 14/15 1.746 billion. Last month these two numbers stood at 1.146 and 1.726.
As I commented initially, this little congestion action that we are seeing right now would normally be indicative of a low and as long as Uncle Sam does not provide us with a negative surprise tomorrow we should be in line for a corrective bounce, potentially into the first week of July. Keep in perspective, without a dramatic change in weather, the advance could be disappointing.
The bean market held its ground in face of the pressure in the grains yesterday with nearby futures continuing to hover just above very key support areas and I suspect leaving bulls feeling just a bit uncomfortable. They have been here several times before over the past three months but as I have commented before their story is becoming a bit stale.
Export inspections were as expected at 4.5 million bushels. The average is trending lower but that number is still just above the 4 million needed each week to reach the 1.6 billion bushels target. Planting progress remains ahead of normal reaching 87% complete last week and the first nationwide rating places 75% of the crop in the good/excellent range.
With the weather outlook near ideal, the action in November beans continues to baffle the bear but this market, just like corn and wheat, sat in a short-term oversold position after the recent setback. It would appear that we are in the process of correcting that but I doubt it will be able to carry much above the 12.40/12.50 level unless the government provides with something positive.
The average estimates for tomorrow have the 13/14 ending stocks at 127 million and 14/15 at 322. Last month these numbers were at 130 and 330.