July 2

Commentary

Overnight Markets:

Corn -2.0 = $4.040

Soybeans +6.0 = $10.356

Wheat unchanged at $5.486

 

News Wire / Trade Talks:

-Export sales flash of 571K corn sold to Mexico

-June PMI comes in at 52.9 vs 52.0 expected

-May US soybean crush came in at 203.7 million bushels.  Crush continues to be 6-7% above a year ago.

-Senate passes the Trumps tax bill which includes tax incentives for only North American biofuels feed stocks.  This should stop dramatically slow the flow of Chinese veg oils.  Now we wait to see what the House bill will have in it.

-India’s June palm oil imports jump 61% to hit and 11-month high

-StoneX raises Brazil corn forecast to 136.1 MMT up from 134.

-Weather Updates:

 

 

 

 

 

Commentary:

A few clients spec sold Aug feeders at $308. The market opened down $6.00 but rallied back up to fill the gap.  I’m sure funds bought the sharply lower opening trying to protect longs.  They are so good at quietly getting out of a lot of positions.  I don’t know how they do it.  The market again dipped to new lows during midday but that dip was also bought.  I think the highs are in, and I believe funds will exit longs for the best profit they can.  To do that they will have to buy the big dips.  The last thing they want is a limit down move.  The market could bounce back up today.  If they give us another chance to sell at $308 I think we should do it.  Also, if the market crashes to the 50-day at $301, I think we should take profit in shorts.   

 

August is the front month in live cattle now.  That means the futures market can trade at a wide discount to cash for a full month.  June went off the board at higher values near the cash market.  Aug is trading at a large discount to cash.  This made for a large gap in the continuous live cattle daily chart.

 

 

As you can see, we can drop to $193 and still be in an upward trend. 

 

Funds will continue to sell corn. Maybe that is ok long term.  Gulf corn is the cheapest in the world.  Doesn’t that mean we have priced in Brazil’s huge crop?   

 

 

 

 

I actually like the way the grain markets performed yesterday.  The big report is out of the way.  It was NOT bearish by the way.  Funds continued to sell after the report. However, it felt like we might have ran out of sellers yesterday morning.  Like I mentioned yesterday.  Parts of the eastern corn belt are trending drier.  The forecast models are mixed.  EU trending drier than the GFS.  At this point the extended NOAA models are still showing above normal precipitation.  If we are going to have a weather scare for corn the extended forecast is going to have to turn hot and dry REALLY soon. 

 

The soybean market is showing better buying interest overnight, probably due to the tight S&D situation and the longer weather market season.  We can’t have the US yield dip below 50 bpa.  The US stocks to usage ratios for corn and soybeans suggest prices $1.25 higher in corn and $2.00 higher for beans.  This is the biggest reason why I haven’t wanted to sell old or new crop yet.  I’ll continue to hold for a few more weeks.  China has not been an aggressive buyer of soybeans or corn.  I believe that is because of their sluggish economy.  But they are always value buyers.  Now would be a great time for them to start buying US corn.  Maybe wishful thinking.  Overnight news has China buying barley over corn. 

 

More charts from USDA report….

 

 

Record corn planting in the Dakotas.

 

 

 

Corn stocks might end below 1.3 billion bushels come September 1st.

 

 

Posted on Jul 02 at 06:20