Bryant Sanderson

Jun 30, 2020

By: Mark Hanson

Highlights

  • Today, the USDA will release the much-anticipated planting and quarterly stocks report.  The acreage will finally set the bar for upcoming S&D reports, leaving yields and demand as the unknown factors.  Below are the trade estimates:

     

    Plantings:

                      AVG              High              Low               March 31

    Corn          95.21            97.10            93.00            96.99

    Soy             84.72            85.60            83.50            83.51

    HRS            12.55               12.81               12.15               12.59

     

    Stocks:

                      AVG                 High                 Low                 

    Corn          4.951               5.150               4.795

    Soy             1.392               1.490               1.275

    Wheat       0.980               0.996               0.925 

  • Heavy rains moved across many areas including some regions that were seeing some stress.  While this eases the immediate concern, heat at less precipitation is in the forecast for much of the Corn Belt.
  • Dow futures are pointing to a slightly lower open and WTI is off about 50 cents after an impressive rally yesterday.  The easing of reopening due to increased cases of COVID is forcing some states to take a more cautious approach.

Corn

  • No deliveries were reported in corn with the oldest potential of June 17.  St Louis basis remains strong at +27.
  • While there were reports of drowned out areas, the overall drenching rain was welcomed.  Crop conditions were up 1% for last week at 73% G/E with silking a bit behind at 4%.  Would not expect next week’s report to deteriorate unless the heat exceeds expectations.
  • Today’s stocks report will finally give the market some hard data to study.  There has been much speculation with the demand deterioration during the shutdown with the average guesses implying a 401 million reduction of use compared to a year ago.  Factors the bulls are holding onto is the subpar quality from last year.  With farmers storing light test weight and higher moisture, this report may show less deterioration than expected. 
  • The CN-CU spread continues to stay in a tight 2 ½ cent carry.  Open interest fell by 51,000 contracts yesterday as some of the shorts covered their exposure going into the report.  July open interest still at 14,305

Outlook: Calls are mixed with the market anxiously waiting for today’s acreage and stock report. 

Oilseeds   

  • No deliveries were reported for beans overnight.  St Louis basis eased off 2 cents but still firm at +32.
  • Open interest fell 7,900 contracts and July open interest still at 8,506.
  • Chinese business quiet so far this week.  Board crush remains on the weaker side at 66 cents for August and 76 cents for November.
  • Unit train costs still showing a large premium for the gut slot.  BNSF at +$800 in the heart of harvest compared to the current -$100.
  • SN-SQ spread has eased off slight but still at a 2-cent inverse.  

Outlook:  Calls are 1-3 better ahead of today’s report.

Wheat

  • Rains across the eastern regions causing some concern but still appear to be a good shape.  Hot and drier forecast should help.
  • Deliveries for Chicago wheat were 151 contracts.  71 Hickman, KY #2SRW and 80 ESTL #2HRW.  There were no KC deliveries and 487 Mpls deliveries with ADMIS stopping 109 and CHS Hedging stopping a total of 373 contracts
  • Rains did come across areas of North Dakota easing some of the immediate concerns for HRS.
  • Planting report for HRS is a question mark.  With low corn prices during ND planting, it is possible that we could see a slight surprise to the acreage. 

Outlook: Chicago wheat is called 2-3 lower after yesterday’s rally, KC down 1-2 and Mpls up 2-3.  Light demand, continued harvest, and some expecting a slight disappointment in the USDA report today.