World Perspectives
feed-grains soy-oilseeds wheat

PM Post - Wheatie Surprise

THE OPEN

November beans:  1/4 lower

December meal:  .70 lower

December soyoil:  19 higher

December corn:  1 lower

September wheat:  3 1/2 higher

The markets opened as expected with a firmer note in wheat on reported sales to China.  Traders were back to buying oilshare and buying beans/selling corn into the report.  Rains which moved through part of Iowa, Wisconsin, and northern Illinois with slightly cooler temperatures created morning long liquidation in beans while spurring more selling interest for corn.  Bearish ideas before the report surfaced in corn which led to bean/corn and wheat/corn spread trade.  

The surprise of the report was mostly found in wheat, which was more bullish than traders expected.  Post report wheat futures rallied further as shorts sought to exit the market, which triggered buy-stops.  Early trends of firmer oilshare and buy wheat/sell corn trade continued after the numbers were released.

At 11:00 the July WASDE was as follows:

USDA Reports Flash 07/10 11:09

U.S. PRODUCTION (Million Bushels) 2020-21

                        Jul         Avg        High         Low       Jun         2019-20

Corn              15,000    15,060     15,296    14,994    15,995    13,617

Soybeans         4,135      4,167       4,382      4,133     4,125      3,552

U.S. AVERAGE YIELD (Bushels Per Acre) 2020-21 (WASDE)

                         Jul       Avg        High      Low       Jun       2019-20

Corn              178.5     178.9      181.0     178.0     178.5     167.4

Soybeans         49.8      50.1         52.8      49.8       49.8      47.4

U.S. ENDING STOCKS (Million Bushels) 2019-20

                        Jul        Avg        High       Low        Jun

Corn              2,248     2,286      2,403     2,200     2,103

Soybeans          620       589        635       535       585

Wheat             1,044     1,042      1,053     1,010     983

U.S. ENDING STOCKS (Million Bushels) 2020-21

                         Jul       Average    High      Low       Jun

Corn                2,648     2,782      3,010     2,525     3,323

Soybeans            425       443         572        355        395 

Wheat                 942       959        1,006       875       925

WORLD ENDING STOCKS (Million metric tons) 2019-20

                        Jul         Avg        High        Low        Jun

Corn                312.0     315.7      320.5     311.8     312.9

Soybeans          99.7      99.5        101.0      98.0      99.2

Wheat              297.1     297.1      298.0     296.0     295.8

WORLD ENDING STOCKS (million metric tons) 2020-21

                         Jul       Avg.       High      Low       Jun

Corn              315.0     325.6      340.0     310.0     337.9

Soybeans          95.1      97.7       107.6     94.7      96.3

Wheat             314.8     315.5      317.6     311.8     316.1

 

WORLD PRODUCTION (million metric tons) 2019-20

                        Jul       Avg        High      Low       Jun       2018-19

CORN

Argentina         50.0      49.9       50.0      49.0      50.0      51.0

Brazil             101.0     100.8      103.0     99.0      101.0     101.0

SOYBEANS

Argentina         50.0      50.0       51.0      49.0      50.0      55.3

Brazil            126.0     123.4      125.0     122.0     124.0     119.0

U.S. PRODUCTION (million bushels) 2020-21

                          Jul       Avg.       High      Low       Jun       2019-20

All Wheat         1,824     1,855      1,885    1,826    1,877     1,920

Winter             1,304     1,249      1,285     1,227    1,266    1,304

HRW                  710       732        760       710       743       833

SRW                  280       291        301       269       297       239

White                275       225        230       219       225       232

Other Spring      550       548        564       529       N/A       562

Durum                56        59         65        52        N/A       54

Corn:  Neutral report with 19/20 production slightly below the average trade guess, and 20/21 close to the estimate.  19/20 corn to ethanol was lowered 50 mln bu to 4,850 mln bu.  

Beans:  Bearish with 19/20 carry-out much above expectations at 620 mln bu. USDA raised 19/20 crush by 15 mln bu, but lowered use from 3,891 to 3,857 mln bu.    

Wheat:  Neutral to friendly report, with EU production possibly the lowest since 2012/13.  Russian estimates were lowered as well, with all wheat production lower than expected. 

SOY

  • The soy complex opened as called with prices trending lower for meal, mixed for beans, and firmer for soyoil at the start of the trading session.  Sep. crush traded to 76.85c/bu while oilshare values traded to 32.42%.  
  • Meal was a mostly technical affair at the open with short-covering over in the first part of trade as charts built in some resistance.  
  • December soyoil prices popped over 29c again in retracement of a 2860c-2960c trading range.   
  • Spreads generally remained firm with August / Nov beans narrowing into 3 1/2c from 5 1/2c before the report.  New selling was noted after the report as funds maintain a long position and profit-taking became the key feature of trade.  
  • Oilshare continued to strengthen as meal sold off post data to trade down towards recent lows.  Towards the midday hour the soy complex took a defensive turn again as prices traded through recent lows for November at $8.95 which triggered sell-stops.  
  • Meal charts, which had been building resistance, took a turn lower as midday forecasts moderated and Trump was noted talking about a possible lack of follow-through on any trade deal for Phase two.  
  • December soyoil prices traded back to recent lows.   Price action today now creates tops in beans and meal as prices attempt to define trading range lows.

GRAINS

  • Despite a hefty sales announcement of corn this AM to China the path of least resistance after the open was lower as funds added back some of their short positions with Dec. back under $3.60.  China continues to auction off its corn reserves on a weekly basis, with stocks dropping substantially leading to speculation that more business could surface down the road.  
  • In the big picture, however, South American and Black Sea prices are at a discount to US.    
  • The sales announcement for wheat to China perhaps surprised the market the most, which created more unwinding of recent buy corn/sell wheat spreads.  Sep. wheat/corn traded from 174c to 1.85c before the report was released, rallying to 1.95c afterwards.  Spreads remained firm before the report as well with Sep./Dec narrowing into 7 1/2c from 8 1/2c.  
  • After the report was released, wheat prices triggered buy-stops with September trading over key resistance of $5.35 into new highs for the move up.  The break in corn was met by good scale down pricing orders from those who had missed out before the June 30 report.  Lower support in Dec corn towards the $3.40 level held as some funds also took the break as an opportunity to cover a short.  

AT 12:00 THE MARKETS ARE AS FOLLOWS:

                                                                            HI                      LO

November beans: 10 lower                               9.04 3/4            8.87 1/2

December meal:    4.50 lower                          306.70               300.20

December soyoil:  8 lower                                2916                 2866

December corn:    10 lower                              3.59 1/2            3.44 3/4

September wheat:  9 higher                             5.39                  5.20 1/2

November canola: .80 lower                            483.30               479.60

OUTSIDE MARKETS

The stock market turned higher from lower with crude oil prices back over the $40/barrel level.  The US dollar broke down to 96.43.  

CLOSING COMMENTS

The numbers in the USDA report were digested, but it was quickly back to weather and politics.  The report was more friendly than expected for wheat, and neutral to slightly bearish for beans.  Corn numbers were neutral.  Prices broke after the report as forecasts moderated a bit on the heat coming in.   Politics again came into the picture with Trump stating that he no longer was thinking about negotiating a phase-two deal with China, saying the relationship between the two countries was damaged by the coronavirus. 

The negative comments and forecasts created a sell-off that will determine overall trading ranges while the balance of July weather plays out.  Trading ranges now appear as such:

November beans:  $8.80-$9.15

December meal:  $295.00-$308.00

December soyoil: 2850c-2960c

December corn:  $3.40-$3.63

September wheat:  $5.15 - 5.39 or higher

 

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