Surprised again

Published on: 21:36PM Jun 25, 2019

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While it came a no shock to anyone who travels amongst corn and bean fields on a daily basis, but the trade was a little taken aback with the drop in corn ratings on the weekly updates, spurring additional buying in that market once again.  Just in case you missed the figure, corn in the good/excellent category slipped 3% to 56%, which compares with an average of 70% for this time in the year.  Acres planted did inch forward by 4% to 96%, and it would seem safe to assume, that pretty well wraps up the planting for this year.  We will not have an official tally for prevented plant claims until August, but a rough estimate would say there will be around 3.7 million acres that will not be planted to corn for one reason or another, giving us a figure of approximately 89 million planted.  I think this sound optimistic, particularly considering the number of wet holes that were planted around this year, but one could argue that adjustments could eventually come via a reduced harvested percentage figure this year.  We shall see what the USDA has in mind come Friday.

The soybean planting pace was slower than anticipated this past week, increasing 8% to 85% complete.  The trade was expecting it to be closer to 88%.  The normal for this time of year would be 97%, and as it stands, this suggests that we still have over 12 million barren acres. There is still a window of ten days to two weeks where progress could be made, but at this point, one has to suspect there will be 2 to 3 million acres that will remain idle this year.  At face value, 82 million acres of beans, which would be 7 million less than what was planted last year, would be enough to ignite a bull market, but that may be too strong of a word.  Yes, it has been a positive for the market, but the 1-billion bushels of carry-in stocks should continue to temper the enthusiasm.  Granted, we could easily wipe out 40 to even 50% of those ending stocks, but that would still leave us with the 2nd or 3rd highest level on record. I do not want to put the blinders on in the beans market and assume that bigger problems could not lay ahead, but this will continue to be an uphill battle. 

More estimates for the reports on Friday are filtering in with these from Reuters; Corn acreage is expected to come in at 86.66 million, beans at 84.35 million and all wheat of 45.654 million.  The March USDA estimate was projecting 92.79 million for corn, 84.62 million beans, and 45.75 million wheat.  The June 1st grain stock averages came through at 5.349 billion corn, 1.861 billion beans, and 1.10 billion wheat.  One has to suspect that the acreage numbers will largely overshadow the stocks figures. 

African Swine Fever was in the news directly and indirectly overnight. Vietnam now says that nearly 10% of its hog herd has been culled due to this disease, which to date amount to around 2.8 million head.  This is an increase of 300,000 from just a week ago.  Raising additional concerns are reports that the disease has now made its way from smaller operations to commercial farms suggesting we have not heard the last of the losses there.  While there may not have been any newly reported cases in China, the May soy imports from Brazil would seem to reflect the decrease in demand.  They imported 6.3 MMT from Brazil last month (total imports were 7.36 MMT), which was down from 9.124 MMT last year.  Yes, there are undoubtedly other reasons for the decline, but it would stand to reason AFS accounts for the lions share.

Last and possibly not least, we should not forget that President Trump and President Xi are scheduled for a tete-a-tete this weekend, and while that is a two-edged sword, hopefully, is a step in the right direction.