Written Commentary
SOYBEANS
Expect expanded limits on Sunday night/Monday with limit up trade in soybean oil. Soybean planted acres at 83.5 were down 4 mil. from March intentions and 4 mil. below the average trade guess. Since 1990 this was the 2nd largest decrease in acres from March to June, behind only the 4.6 mil. acre drop in 2019. The biggest decreases were in ND -900k, IL and IA -800k, MO -400k, KS -350k, and NE -250k. Even if the average US soybean yield can reach the current USDA est. of 52 bpa, production would only reach 4.3 bil. bu. with end stocks falling to pipeline minimum of 140 mil. bu. representing a decade low of 3.2% stocks/use. Clearly we have no wiggle room for reduced yields without being in a significant rationing situation. Volatility will remain evaluated until combines are rolling this fall. Soybean stocks at 796 mil. were 15 mil. below the average guess, however within the range of est. Limit up in soybean oil with monthly biofuel feedstock and capacity data out after today’s close and monthly crush after the close on Monday. Spot board crush margins improved $.44 for the week to $.80 bu. Soybean oil product value jumped to 43.7%, a 7 month high. Prior to the quarterly stocks/acreage data the USDA announced the sale of 132k tons of new crop soybeans to China.
CORN
Heaviest rains this weekend expected to impact the central part of the Midwest. Drought conditions likely to deepen in SW MO and the northern corn belt, however big reductions across NE, IA, IL, and rest of the eastern corn belt. Reports of damaging Derecho winds associated with yesterday’s rain event have been numerous. It’s way too early to assess the impact on production, likely not as damaging as those that impacted Eastern IA and parts of northern IL in Aug-2020. US corn planted acres at 94.1 mil. were up 2.1 mil. from March intentions and 1.5 mil. acres above the range of estimates. Since 1990 this was the 2nd largest increase in acres from March to June, behind only the 2.4 mil. acre increase in 2007. The largest increases were in Il + 500k, TX +450k, IA and SD +300k, MO +200k, while ND was +150k. Corn stocks at 4.106 bil. were 150 mil. below the average trade est. and at the very low end of the range of guesses. The stocks data helps explain the strong corn basis. For now I look for the USDA to increase feed/residual usage to account for the tighter supplies. Ultimately I suspect last year’s crop will be revised down a touch. Higher corn acres and improving weather clearly more than offset the support of tighter old crop supplies. If corn can reach an average yield of 174 bpa, looking more likely, production would still reach 15.0 bil. keeping supplies comfortable.
WHEAT
Winter wheat planted acres were trimmed more than expected to 37.0 mil., however harvested acres actually rose just over 400k to 25.7 mil. The USDA had been assuming record abandonment of 32.6%, which has now dropped to 30.5%, still the highest since at least 2000. The biggest increased in harvested acres were in OK +450k and CO +150k. Harvested acres in KS were cut 100k. For weeks I’ve been touting higher WW production vs. the USDA June est. based on steady rebound in crop conditions. Will update on Monday after the crop progress and condition. Will sure make for an interesting production report on July 12th. Spring wheat acres jumped 570k to 11.14 mil. 630k above the average est. and above the range of est. Durum acres fell 300k from March intentions, vs. expectations of unchanged. June 1st wheat stocks at 580 mil. bu. were 30 mil. below expectations suggesting strong feed usage. Stocks/use ration at just over 31% the lowest in 9 years.
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