Lower-Than-Expected Conditions Fails to Spark Rally

MORNING AG OUTLOOK

Corn: 

Another lower start for corn this morning and over the last 2 weeks, July corn has consistently seen lower lows and lower highs as it has decoupled from crude. Weather and fund liquidation have been significant factors attributed to the current price slide. Yesterday’s 1st condition report of the season came in at 67% G/E, down 2% from a year ago and down 4% from the five-year average, and most analysts were looking for a higher reading. US plantings are nearing an end at 93% complete. Wet conditions expected over the next week across the Plains is ideal for the newly planted crop and the soil moisture boost is needed. The Tennessee Valley and eastern belt already have good subsoil conditions and can handle the temporary dry spell expected over the next 10 days. Another headwind for prices is the increasing chance of a strong El Nino June – August, now at 80%, and El Nino conditions tend to be associated with higher than average yields in the US. Corn use for ethanol in April was up 1% year-over-year and DDG production down 1.1%. The US has cut tariffs on imports of agriculture equipment. Without a compelling weather story here in the US, speculative longs are exiting positions and pushing prices deeper into support.

Soybean Complex:

A weak tone to start the day with beans remaining range-bound on new crop, while old crop is threatening the May lows. The lower start is disappointing for the bulls after the condition report came in a bit lower than expected. G/E conditions were 66%, compared to 67% a year ago and the 5-year average of 64%. The crop is now 87% planted, compared to the average pace of 80%. USDA April crush came in higher than expected at 218.5 million bushels, compared to the guess of 214.7. Stocks for bean oil were also above guesses at 2.443 billion pounds, up 23.6% year-over-year and meal stocks were down 10.9% from a year ago. Most of the winter and spring, drought conditions grew in the western and southern Plains, resulting in significant soil moisture deficits. However, the pattern has shifted and precipitation is expected over the next week in the Plains and will reduce drought conditions. Expectations for improved subsoil moisture in the Plains is a major reason for the current selloff as there is still no clarity on any additional China demand for US beans. The eastern bean belt and Tennessee Valley will be mostly dry but have good subsoil conditions and temperatures will be trending above normal across all of the central US over the next 2 weeks.

Wheat: 

The relentless selling lately in wheat continues with another new low for the move this morning and lower lows and lower highs for the 9th consecutive session. Widespread rain across the Plains over the next week will boost subsoil moisture in some of the driest areas. Harvest pressure has begun and winter wheat harvest is now 5% complete, compared to 3% average and Texas and Oklahoma are one quarter done. Winter wheat conditions were unchanged at 26%, a 37-year low, SRW conditions dropped 2%, HRW unchanged and spring conditions were 47%, compared to 45% last year. Harvest pressure and technical weakness have been the main bearish themes this week, along with SovEcon raising Russia’s 2026/27 export potential. China has issued an alert for winter wheat lodging in Henan province, their largest wheat growing area. The Australian government says their upcoming wheat crop is expected to be the smallest in 3 years, down 9 million tonnes from a year ago and 8 million below the 5-year average. However, for now, the market is dealing with harvest pressure and ample supplies around the globe.

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