By Doug Tenney, Leist Mercantile
Corn ending stocks were less than expected. Soybean ending stocks 110 million bushels above trade expectations but soybeans not falling off. World corn ending stocks went down. Looks like the market looking at more than trade issues, weather, and a much higher soybean ending stocks than expected.
Shock, awe in recent years were words used to describe US overseas military efforts. Those same words can easily be inserted to reflect producer and trader’s mindset since late May. In that time frame corn has fallen 75 cents and soybeans have seen a huge decline of $2.10. Trade tensions and announced trade tariffs between the US/China have accounted for 80% of the price decline according to some analysts. Great weather that at the moment is non-threatening for much of the Midwest has also been a big factor in the price declines.
US corn 2018-19 ending stocks were estimated at 1.552 billion bushels. Last month it was 1.577 billion bushels. Corn production was less than expected, and a very friendly sign. Soybean ending stocks for that same crop year were 580 million bushels. Last month it was 385 million bushels. USDA with this report will calculate expected changes to US grain exports.
Corn prior to the report was down 1 cent, soybeans down 1 cent, with wheat up 5 cents. Shortly after the report corn was up 6 cents, soybeans up 3 cents, and wheat up 11 cents.
Producers with this report are looking are some morsel of friendly news to stop the bleeding of lower prices the last several weeks. The overall mood ahead of the report was to expect a bearish or negative report.
Last month USDA put the US corn yield at 174 bushels per acre while the soybean yield was estimated at 48.5 bushels per acre. They have been using that same yield since May. Typically the July yields would not change from those used in May. Then the August report will be the first monthly Supply and Demand report that actual field surveys are used to determine the US yield average.
It is no surprise that the ending stocks for corn, soybeans, and wheat were expected to increase. This is due to ideas that the US would be exporting less grain because of the trade tensions with China. As of this date the US and China are not talking. China continues to take the stance that forced technology transfers and concerns about intellectual property theft are unacceptable. For them these items are non-starters. Bottom line, somebody needs to man up and get the talks going again. The reality is that trade wars are bearish and can last longer than anyone ever expects. The last six weeks since late May have resulted in sharp declines for corn and soybeans. December CBOT corn was $4.28 ½ the last week of May. On June 29, it was $3.71. Prior to the report today, it was near $3.53. November CBOT soybeans have seen a much steeper decline in that same time. Late May they had reached $10.60. June 29 they had fallen to $8.80. Earlier today November soybeans were $8.50.
Traders had estimated 2018-19 ending stocks for corn to increase to 1.712 billion bushels. The June Supply and Demand report was 1.577 billion bushels. Little change is expected for the 2017-18 corn ending stocks which last month were 2.102 billion bushels. Soybean ending stocks for the 2018-19 year were estimated by the trade at 471 million bushels. The June report was 385 million bushels.
The USDA report was expected to set the tone for today. Weather in the Midwest does not look to be experiencing above normal temperatures in the next ten days. Overall, the weather is bearish. It has been said many times, trade wars are not friendly. We are certainly in a trade war at this time.