First we wan to say that our hearts go out to all that suffered losses this week due to violence.
Weather is mixed with rain west and north, scattered elsewhere. Calls are mixed. Firm support under the market.
This forecast will be bullish if IL-IN-OH do not get rain. The US CANNOT afford any more losses. Secondly, traders are assuming a yield that can normally only be obtained with good yields in nearly every producing area. And we admit the potential of the crop is there….if it were June 28 we would totally agree with that assessment. But there is a LOT of corn this size and will be lucky to make it to maturity. It is hard to imaging 210 bu here… maybe 170-180 tops if everything goes right.
In the Woodstock IL area, 56% of the fields were planted early and tasseled, and 44% was not.
This corn is shoulder high. A lot even smaller that will NOT make corn…..maybe silage….for sure an insurance claim. I counted 38% of the late planted fields below chest high and some were not even waist high in Lake county IL. I know most of this is not corn ground but that is where I drove.
Corn market filled the gap last week at 420
Corn retraced 62% of the entire rally
Technical pull back may have accomplished its task
Expect crop conditions to decline due to dry weather in IL-OH
Weather this week will determine if the market has bottomed.
Keep it simple – Is crop getting bigger or smaller?
Bzl corn taking business from US
Ethanol industry is cutting grind
Planted acres on this report will be key on Aug 12. All PP details in so far suggest are much bigger PP than we are trading.
This should show up on report. Key is harvested acres and AgMarket Aerial study suggested 79.6.
Harvested acres will continue to be revised all the way into January
Crop hurt by too much water first, now not enough in many areas. AgMarket pictures show more compaction issues ever witnessed. These compaction areas probably show up in late August if they are a problem. We are contemplating doing another Aerial study – we would like your thoughts on this?
Weather forecast looks like heavy rains in Dakotas MN, WI and N IA Tonight through Monday. Rest of C Belt is spotty right now.
6-14 day NOAA is cooler and above precip odds
C IL- OH needs rain this week or losses will be unrecoverable
Bottom line – traders were trading at near normal yield last week and a technically bearish chart, while comments from the field were actually thinking crop size may be getting trimmed from a hopeful crop to less hopeful. Technical recovery Friday would confirm a short term low if Monday – Tuesday market hold Fridays low or takes out the highs.
Current trade is assuming yield 164-169 area – only ~9 bpa less than 176.4 last year (2nd record high) and 178 trend. Only wet year to compare is 1993 and yields fell 22% by final USDA revisions. USDA did not recognize the real production loss until the November report
Crop size:
Cordinier 12.08
FC Stone 14.3
AgMarket.Net is 12.4 after all harvested acres and yield accounted for
Anything below 13.0 is bullish as REAL rationing would be required.
JSA meeting in Chicago this weekend. All traders felt that if markets hold Fridays low, we have probably seen the low and will eventually trade a crop that is significantly smaller. If last weeks low is taken out, then one more round of margin call selling is expected but in either case, end users are likely to be significant buyers on this break and will expect delivery on contracts.
Buy – on a chart signal and risk last weeks low. Buy calls.
For risk management, buy 3 week options to protect downside
Crop hedge – we are 50% hedges in options at 420 and missed buying 460’s. We are comfortable for now and expect higher priced later this year.
Beans – Nov got into gap 858-864 from May 24
Crush has improved with drop in bean price
Inverse in cash July – October
Trade talks pushed more business to Brazil/Arg
Brazil Sept +10 last week at +80. US is competitive at +40 FOB
China ASF more talk of 50% herd culled
Trade war is the story and limits attitude – will see downward export revision
4.3 mmt left to ship to China to do in 5 weeks. Should see some rolled to new crop.
New crop sales 3.3 YTD vs 10.4 LY, 6.4 – 16 range last 10 years.
3.743 w 47.2 yield estimate – this would be bullish if there was resolution to trade war
If yields are really closer to 41.5 AgMarket would require price appreciation
Wheat – expect crop conditions and crop size to increase w exception SD
Canada crop improves.
EU revised crop down and exports will likely 24 v 26 LY 27 USDA
Russia Monday estimate expected to decline on Monday
If crop is <76, this would be a direct cut to exports. Expect 2.5-3.0 mmt less than last year
Australia – S and edge of W area has been hurt with 50% of rain. September rains will be important.
Crop size will likely decline 22 v 26 mmt
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