July 10

Commentary

Overnight Markets:

Corn -.75 = $3.984

Soybeans -2.75 = $10.062

Wheat +5.25 = $5.522

 

News Wire / Trade Talks:

-The Mexican border has been shut down again due to the detection of another screw worm in Veracruz Mexico which is only 370 miles away from the TX border

 

 

-Trump announces a 50% tariff on all copper imports

-Trump announces a 50% tariff on Brazil imports

-China’s corn futures are at a 4-month low

-Malaysia’s palm oil stocks hit a 18-month high after disappointing exports during the month of June

-Canada wheat crop still seen at 35 MMT despite drought conditions

-Weather Updates:

 

 

 

 

 

Commentary:

The updated weather forecast has BELOW normal temps now.  There are areas of the Eastern Corn Belt that have missed out on rains and will continue to miss out this week.  However, the below normal temps will allow crops to hold on longer waiting for rainfall. 

 

The next map shows root zone moisture levels.  The next map shows forecasted rains the rest of this week. 

 

 

Despite some less-than-ideal crop conditions, the trade has been talking about record corn yields.  I’m not ready to increase my corn yield forecast above 180 yet but as the extended weather forecast stretches to July 22nd with no threat in sight, the lower end of yield possibilities does come up substantially.  For example, even if the forecast flips, I don’t see the nation corn yield below 173.  With this year’s sharp increase in acres even a lower yield of 175 will produce a 15.2 billion bushel crop.  A 186 yield that has been talked about a lot this week. That size yield would produce a 16.1 billion bushel crop.  In summary, the funds can feel comfortable being short.  Dec corn is trading at $4.15 this morning but likely will test the sub $4.00 area before long. 

 

The wheat market is likely forming a major low.  Drought in EU, Canada, and Montana are reducing crop sizes.  A drought in EU could dramatically affect global wheat supplies.  Winter wheat harvest is over 50% complete.  That means we should be nearing the end of harvest pressure on the market.  Acres in the US are at a 50+ year low.  That keeps production down despite high yields in the southern plains and the eastern corn belt.  EU wheat prices also appear to be finding support at recent lows.  For wheat to be a buy, I would like to see an increase in export sales.  If wheat does rally, it could lend support to our corn market. 

 

Nov soybeans are oversold but could continue to drop on good US weather and fears of a new trade war with China.  I normally don’t like selling right before a USDA report, but I don’t know if the funds care if USDA prints bullish numbers.  Funds were recently long soybeans but might pile onto the short side now and push Nov soybeans back down to contract lows.  Sell Nov soybeans at $10.10, risk the trade to $10.21.  Hedgers can “panic” sell half of your expected production by selling on the board.  I don’t like selling cash here because we could still have a weather scare for soybeans during the month of August.  My idea is to be short the board now at $10.10 and hopefully exit at $9.75.  I’m worried we could get stopped out during the report tomorrow, but would likely sell again on a pop to $10.30. 

 

Nov Soybeans

 

Cattle rallied again on Wednesday pushing Aug feeders to a new high of $321.  After the markets closed box beef prices dropped hard.  HOWEVER, the Mexican board was closed again to imports due to a new case of screwworm in Mexico. This time only 370 miles away from the US border.  I assume futures will open moderately higher.  The feeder cattle cash index rallied $5.36 yesterday to $316.76.  Producers hate the price for old crop corn, so they are aggressively buying feeders to feed cheap corn too.  Watch the Aug feeder market today for a top.  The market is overbought and might overdue the border closing news.  Keep your fingers crossed we don’t find screwworm in the United States. 

Posted on Jul 10 at 06:30