(Very) Brief respite from the selling
While hardly a surprise, a 4% dip in the good/excellent rating for corn and a 5% haircut in beans help shore up prices overnight in these markets, but the strength was fleeting, and the selling has since resumed. For now, at least, it would appear that the trade is more willing to focus on the 6 to 10-day forecast and 8 to 14-day which are calling for below-normal temperatures and normal to above-normal precipitation, than to concern themselves with the predominantly dry outlook for the next week. I suspect a couple of tropical storms that are in the development stage could be bolstering that sentiment. By the way, corn was rated 68% good/excellent and beans at 62%, compared with a year ago of 71% and 72%, respectively.
Harvest of the earliest planted safrinha corn is underway in Brazil, and as you would expect in a year with less than ideal growing conditions, yield thus far have been highly variable. Last week, the USDA finally lowered their estimate for the total Brazilian corn crop to 98.5 MMT, from 102, and Conab took their number down from 106.3 to 96.3 MMT. Of course, the trade has been expecting these cuts, so they provided little in the way of price support. It is worth noting that the Brazilian Real has been climbing against the dollar now for the past couple of months, which is not good news for Brazilian farmers. At this point, the Real has been in a broad sideways pattern for the past year, so it is not as if the impact is disastrous, but when taken against the backdrop of reduced yields, it still has a negative effect on their revenue. Further south into Argentina, the bean crop is now estimated to be 99% harvest, but progress in corn harvest remains sluggish, increasing less than 4% last week. It now stands at 37.8% complete compared with an average of 45%.
We do have a slew of economic data released this morning. The May Producer Price Index recorded an increase of .8% compared with the expected .5%. Surprise, surprise. Excluding food and energy, it came in at .7%. Personal Consumption in May shows an increase of .6%, but interestingly enough, Advanced Retail Sales came in at -1.3% versus the expected -.7%. More surprising was the April Retail Sales number adjustment, which was reduced from the preliminary figure of 10.7% to just .9%. Evidently, the American consumer is not quite ready to open their pocketbooks just yet.
Macros treated the numbers with a collective yawn this morning. Equities and the U.S. dollar are slightly higher, financial instruments are a touch weaker, metals are flat, and crude oil has climbed higher once again.
