What would Rip think?

Published on: 21:36PM Jun 24, 2019

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While there has been a little two-sided action, we are primarily looking at positive action in the grain and soy markets as we kick off this final week of trade for the month of June.  If a modern-day Rip Van Winkle were to have awoken this morning and discovered that the primary news in grain markets was still centered on unplanted crops, one would have to imagine he would be surprised but that does still appear to be the central point of focus, and with more rains in the forecast for this week, odds of seeing much more planting are fading rapidly.  On this afternoon’s report, the trade is expecting to see corn somewhere between 95% and 98% complete and beans between 86% and 90%.  

That is a decent segue to the acreage and grain stocks reports that will be issued this coming Friday as trade surveys have begun to hit the wires. The initial release I have seen comes from Bloomberg News and give us an average estimate for corn acreage of 87.03 million, beans of 84.68 million and all wheat of 45.61.  At the end of March, the USDA had these estimated at 92.79m, 84.62m and 45.75m respectively.  While it will be nice to have a new starting point at least to work with, you can bet that whatever the numbers are, they will be contested.  As far as grains stocks are concerned, the average estimate for June 1st inventory is 5.335 billion corn, 1.865 billion beans, and 1.089 billion wheat.  As we are all aware, it is these ample stocks, both domestic and globally, that are providing a buffer to what could have been a panic situation this year.  

Addressing what could yet be a panic(y) situation in China, it has been reported that during the month of May, they imported a total of 187,459 MT of pork. This failed to eclipse the single month record of 192,348 MT set back in August of 2016 but was a whopping 63% above the same month a year ago.  For the first five months of the year, total pork imports are up 19.8% versus 2018. Between mass liquidation of herds and the increased imports, prices have leveled off in that country but as we have noted previously, it could be the second half of the year when the real effects of African Swine Fever hit home.

There does not appear to be a tremendous amount of feature in the marcos either, but most would be supportive for the ag sector. Energies are higher as are the metals and the dollar is lower.  We need to keep a close eye on that final market as the dovish tone set by the Federal Reserve last week helped push this market down to the lowest closing level since February.  While we have not exactly fallen off of a cliff just yet, we are moving closer and closer to confirming what could be a significant peak.  If correct, at a minimum, it should be psychologically supportive for the commodity sector.