Market Recap:
Markets ended the week on a firm tone despite today's USDA reports being a little bit bearish on the soybean side. New crop balance sheets were for the most part as expected, with the trade's focus now turning squarely to planting progress and weather over the next few weeks.
Products were mixed, July bean meal closed at 371.90, down $1/ton, and July bean oil closed at 44.44, up 1.80. Livestock markets were mixed/quiet to end the week; June live cattle closed at 176.15, up 20 cents, August feeders closed at 250.90, down 15 cents, and June hogs closed at 98.37, up 65 cents. Outside markets are trading mixed, crude oil futures are down 80-90 cents/bbl, the Dow Jones index is up 95 points, and the US$ index is up 5 points.
Spreads were mostly stronger, corn spreads were up a quarter cent to 4 and 3/4 cents, and soybean spreads were generally up a quarter cent to 5 cents. CK/CN and SK/SN both closed at -14.
For the week: July corn futures were up 9 1/2 cents; Dec corn futures were up 9 1/4; July soybean futures were up 4 cents; Nov soybean futures were up 4 3/4; and July Chicago wheat futures were up 41 cents.
As was predicted, a lot of the bearish new crop news had been priced in ahead of time, especially on the soybean side. The biggest unknown at this point, besides obviously summer weather, is what the final acreage number will be, and whether that number is bigger than initially estimated due to switches from corn to soybeans. For corn and wheat, the report was significantly less bearish than what the market had likely been trading over the past few months. World wheat stocks are at multi-year lows, while corn stocks are seen just marginally higher than last year on smaller production.
For corn, new crop ending stocks came in at 2.102 bil bu, which was towards the lower end of the range of trade guess and up just 80 mil bu from last year. Production numbers came from the Feb. outlook forum and were as expected. Both feed & residual and exports were up 50 mil bu from last year, while ethanol use was left unchanged from the previous season at 5.450 bil bu. Ending stocks in 2023/24 were down 100 mil bu from last month on a 50 mil bu increase in both exports and ethanol use. World ending stocks were down 5.2 mmt's from last month in the old crop at 313.08 mmt's. New crop world ending stocks were seen at 312.27 mmt's, which was below the lower end of trade guesses. For South American production, USDA trimmed estimates for both Brazil and Argentina by 2 mmt's a piece. Interestingly, USDA sees China's corn imports in the 2024/25 season at 23 mmt's, while China's Ag Ministry sees corn imports at 13 mmt's.
On the soybean side, new crop ending stocks were seen at 445 mil bu, which was near what the trade was looking for. Exports and crush were both estimated 125 mil bu higher than the previous season, which mostly offset a nearly 300 mil bu production increase. Like corn, production numbers came from the outlook forum and offered little surprise. Minimal changes were made to the old crop balance sheet with ending stocks for that crop year remaining unchanged at 340 mil bu. World ending stocks were seen at 111.78 mmt's in the old crop, and 128.50 mmt's in the new crop. The new crop number was at the upper end of trade expectations. For South America, USDA estimated Argentina's soybean crop at 50.0 mmt's, unchanged from last month, and estimated Brazil's soybean crop at 154.0 mmt's, down 1 mmt from last month. The Brazil cut was less than the trade had anticipated, and likely furthers the gap between the USDA and Conab.
For wheat, the new crop ending stocks for the coming year were estimated at 766 mil bu, which is up nearly 80 mil bu from last year. Increased carry-in stocks was the main culprit for this build, with demand forecast to increase by 65 mil bu vs last year. Production is also seen increasing roughly 46 mil bu. old crop stocks were seen at 688 mil bu, which was slightly below both last month and the average trade guess. On the world balance sheet, new crop stocks were seen like last year at 253.61 mmt's, but the stocks/use ratio was seen near all-time lows at 13.5%.
Soybean oil rallied sharply at mid-morning on rumors that US President Biden would be placing tariffs on used cooking oil coming from China. Confirmation of this rumor is not confirmed at mid-day, though news outlets are/have been reporting that the administration is preparing to announce a new tariff package as early as next week.
This afternoon's COT report showed heavy fund buying in corn and soybean futures in the week ended May 7th. Managed money was buyers of 115,527 combined contracts of corn futures/options, which was the biggest one week of buying since May of 2019. In soybeans, managed money bought 107,783 combined contracts, which was the single largest week of fund buying on record. Fund traders also covered 5,507 contracts in wheat futures/options. In soy products, managed money extended their meal long by 44,395 combined contracts and were buyers of 1,177 combined contracts of soybean oil. Managed money is now seen short 42,360 contracts of wheat, short 102,513 contracts of corn, and short 41,453 contracts of soybeans.
Financial markets were again mostly quiet to wrap up the week on Friday. Next week's inflation data will be the next point of interest, with jobs numbers this week giving traders and economists fresh hope for multiple rates cuts this year. Major stock index futures closed near one-month highs at the end of the first full week of May.
Mid-day weather continues to remain the same as recent runs. The Northwest Corn Belt sees the best planting window over the next week, with the South and Southeast getting wet. Overall net drying will be seen in between, with scattered/light showers seen over the next week 10/days. Planting progress will be hit or miss East of the Mississippi. Temps will be variable over the next 10 days, with cool air generally moving East into next week. Temps are then seen mostly average after that. Extended range forecast confidence has diminished further, as the model agreement has fallen apart. Confidence is null beyond a week. Whether a high-pressure ridge can build into the Northwest will be key to June weather in the Midwest.
Another USDA report has come and gone, with next week's attention to return to Mother Nature. Conab will give us Brazilian production updates on Tuesday, with the trade curious as to whether further divergence is seen between them and the USDA. Have a good/safe weekend!
Have a great evening!
Chelsey White
Emery Manager & Originator:: Topflight Grain Cooperative, Inc.
593 Emery Rd :: Maroa, IL 61756
Phone:: 217-794-2240
E-Mail:: cwhite@tfgrain.com
Web:: www.topflightgrain.com
This material should be construed as market commentary, merely observing economic, political and/or market conditions, and not intended to refer to any trading strategy, promotional element or quality of service provided by Topflight Grain Cooperative, Inc. Topflight Grain is not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material. Information contained herein was obtained from sources believed to be reliable but is not guaranteed as to its accuracy. Contact Topflight Grains designated personnel for specific trading advice to meet your trading preferences. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by Topflight Grain Cooperative, Inc.
