Do not go gentle
Dylan Thomas’s famous poem, Do not go gentle into that good night, has inspired many a composer, speechwriter, and even some advertising copy, and evidently is the rallying cry of bulls in the grain and soy markets at this time. “Rage, rage against the dying of the light.” After suffering one of the harshest down days for many contracts since this rally took hold, buyers have returned again this morning and, in a few instances, have even poked into higher highs for the swing. If this amounts to anything more than a turnaround, Tuesday is, of course, yet to be seen but indeed suggests they will not go without a fight.
While the overall dry conditions across much of the growing region of this nation have raised the level of uncertainty in markets, it has allowed for rapid planting progress. As of Sunday, the USDA estimates that 67% of the corn is in the ground and 42% of the beans. This compares with the average pace of 52% and 22%, respectively. Although, as we are all aware, that by no means assures it will turn out to be a good production year, I cannot help but be reminded of the old saying, “plant in the dust, and the bin will bust.” Coincidentally, it was 87 years ago today that the great dust bowl kicked in, and it is estimated that in two days, more than 350 million tons of dirt were blown from the Great Plains, all the way to the eastern seaboard.
While I am not exactly sure why some have attributed part of the selling on Monday to position squaring in front of Wednesday’s supply/demand report, I could buy into that theory a bit more if this were the acreage report at the end of June, but nevertheless, here are trade survey estimates for these number. 2021 corn production at 15.03 billion derived from a yield of 179.4. 2020/21 ending stocks are expected to slip to 1.275 billion, with 2021/22 stocks coming in around 1.327 billion. For beans, the average estimate for this year has production of 4.43 billion from a yield of 50.9. 2020/21 ending stocks are expected to come in at 118 million and then 133 million next year. Wheat ending stocks are expected to slip to 751 million for this year and then bounce back to 850 million next.
Possibly the most-watched number in the report Wednesday will be the estimate for Brazilian corn. This week, Dr. Cordonnier lowered his estimate for their total crop by 3 MMT to 97 MMT. Last month the USDA had production pegged at 109 MMT, and the average trade estimate now stands at 103. Brazilian bean harvest is into the waning hours, and Dr. Cordonnier bumped his estimate higher by 1 million to 134 MMT. In April, the USDA had this number at 136 MMT, and the trade is not looking for a change this month. Bean harvest in Argentina made good progress last week and is estimated to be just over 53% complete. The average for this date is 66%. Corn progress was limited, though and now stands at 23% compared with an average of 32%. The trade is looking for the USDA to place bean production in the country at 46.9 MMT and corn at 47.
While not a big surprise, it was confirmed that China was in for more corn. This morning, the USDA announced an additional sale to them of 680,000 MT for the 2021/22 crop year.
On the macro scene this morning, there is red ink flowing pretty much everywhere. Energies, metals, financial instruments, and the dollar are all lower, but the harshest selling was reserved for equities. Currently, the S&P 500 is down nearly 70 points and the Dow Industrials is down over 600. The reasoning provided is growing concerns about inflation.
