Morning Highlights


Highlights

  • Global and domestic concerns are weakening the economy with the Dow down 390 points yesterday and the bond market about to show a recession signal with the 2-year and 10-year yield spread at the flattest level since 2007 and about to invert.
  • Protests in Hong Kong continue to worsen and raise worries China would bring in their army to get a grip on things, a move that would raise global tensions.
  • Argentina’s peso weakened 25% against the US dollar as President Macri lost by a larger than expected margin in a primary election ballot that is a good barometer for the first round of their presidential elections in October.
  • EPA has grated 31 small oil refineries exemptions retroactively for 2018. These exemptions do not actually reduce the demand for ethanol as the refineries still need to blend ethanol.
  • As of 7:10 AM CT, September crude oil was down 48 cents at $54.45, the dollar index was up .007 at 97.205, and Dow futures were down 69 points.

 Corn

  • Corn continues to weaken this morning as it gapped 4 ¾ cents lower on the overnight open. The shockingly high planted acre estimate by the USDA estimate is still weighing heavily on the market.
  • Looking into the acre numbers more, planted acres at 90 million and PP acres at 11.2 would get 101.2 million acres of corn intended to be planted. Soybean planted acres were at 76.7 million, down 12.5 million acres from last year, so much of the loss in soybean acres went to corn. The jump in corn acres makes sense because of the cheap soybean prices and a jump in corn prices this spring but the 12.1 million increase in corn acres from last year, when adding in the PP acres, is not very probable. Corn PP acres might be overstated as it had a better payout than soybeans in many locations.
  • Going forward, the harvested acres will be closely monitored as well as the yield estimate given the wet spring and the delayed planting for a large part of the Corn Belt.
  • Crop conditions last night stayed flat in the good/excellent category vs. expectations of a slight drop due to the dry conditions last week.
  • December corn went as low as $3.79 ¼ overnight, finding support at the gap that was established on May 14th. The gap is from $3.77 ½ to $3.80.
  • Spreads: U/Z 9 ¼ cent carry; Z/H 12 ¼ cent carry; Z/N 23 ¾ cent carry.

 Outlook:  Lower with the bearish USDA numbers.

 Oilseeds

  • Soybeans were higher overnight as the reduction in acres to 76.7 million in yesterday’s report was 4.3 million acres less than the average trade guess.
  • The yield estimate was left unchanged at 48.5 bushels per acre vs. the trade guess of 47.5. It is still early to have a strong indication of how yields are going to look as it is still early on a late planted crop. There are concerns the dryness could hinder pod fill.
  • Crop conditions were flat on the good/excellent category vs. expectations of a dip because of the dry conditions last week.
  • Chinese soybeans were up 5 ½ at 3,479 yuan per tonne. Soymeal was up $4.95 per ton settling at 2,925 and soyoil was down 3 and settled at 6,166.
  • There were 182 deliveries of August beans, 66 deliveries of August meal and 25 of soybean oil.
  • Spreads: U/X 12 ¾ cent carry; X/F 13 ½ cent carry;

 Outlook: Higher with much lower acres than expected.

 Wheat

  • Wheat markets were down hard yesterday with the limit down corn market and higher than expected wheat production estimates, but the overnight action is down a few cents on the winter wheat markets and a penny on Minneapolis wheat.
  • HRW production was increased to 840 million bushels vs. 806 million expected. Total winter wheat production increased to 1.326 billion bushels vs. last month’s 1.290 billion.
  • The spring wheat production was at 597 million bushels vs. the average trade guess of 569 million. North Dakota’s yield was raised 3 bushels per acre to 50 bushels per acre while Montana’s was raised 2 bushels per acre to 34 bushels per acre.
  • Spring wheat conditions were down 4% on the good/excellent category. ND conditions were down 4%, Montana was down 8%, and SD was down 5%.
  • Spreads: Chicago U/Z 3 ¾ cent carry; Kansas City U/Z 16 ½ cent carry; Minneapolis U/Z 12 ¼ cent carry.

 Outlook: Lower on corn weakness and larger than expected production estimates.