Written Commentary
SOYBEANS
The soybean complex closed mixed in volatile trade. With the exception of spot July-23 down $.15, soybeans were steady to higher, soybean meal was $1 – $4 lower, while soybean oil was up another 120 – 140. Spot board crush margins surged $.30 today to $1.26 ½ bu. Soybean oil product value has now reached 45%, the highest since Nov-22. Monday afternoon’s crop condition report showed a 1% decline to 50% G/E, vs. expectations for a 1 – 2% increase. Lower ratings in MO, KS and NE more than offset increases in IL, IN, and IA. The CC index fell to 78.7, the lowest since 2012. Current ratings suggest an average US yield of 50.5 bpa, with production of 4.190 bil., well below the June-23 USDA forecast of 4.510 bil. Census crush for May-23 at 189 mil. bu. was at the low end of expectations, however still a record high for the month. To date in the Sept-Aug MY, cumulative crush has reached 1.683 bil. bu. up less than 1% from YA, in line with the current USDA forecast of 2.220 bil. bu. Soybean oil stocks fell to 2.386 bil. lbs. down 6% from April and slightly below expectations.
CORN
Prices chopped around all over the place finishing down $.03 – $.09 in old crop, while new crop was steady to $.02 higher. Much cooler temperatures are sweeping from the west to east over the nation’s midsection in the next 24-36 hours. Normal to slightly below normal temperatures are expected thru the upcoming weekend. Best prospects for heavy rain over the next 5 days are in the southern plains and SW corn belt, an area that missed out on recent rain events. Dec-23 slipped to its lowest level since Oct-21. Next support is $4.62 ½. Crop conditions showed a 1% increase in G/E to 51%, in line with expectations. The CC index increased to 79.0, however still remains the lowest since 2012. Current conditions suggest an average yield of 171.5 bpa, a full 10 bpa below the USDA. Under this scenario production would still reach 14.8 bil. bu. based on the revised USDA acreage data, exceeding the current USDA usage by just over 300 mil. bu. I’m of the belief corn condition and production prospects will continue to grow. Price potential above $5.00 is limited unless new crop soybeans soar above $14.25. Corn used in the production of ethanol in May-23 reached 437.5 mil. bu. bringing MY to date usage to 3.835 bil. down 4% from YA, vs. the USDA forecast of down 1.4%. In the last 3 months of the 2022/23 MY corn usage would need to reach 1.415 bil. bu. up 7% from YA in order to reach the current USDA forecast of 5.250 bil. bu., highly unlikely.
WHEAT
Prices surged in all 3 classes today as speculative traders were aggressive buyers. Fueling todays advance was lower US crop ratings, lower than expected yields in Russia, and the likelihood of the BSGI will expire in less than 2 weeks. KC and MGEX finished $.45 – $.50 higher, while Chicago was up $.28 – $.32. Next resistance for Dec-23 Chicago is its 100 day MA, currently $7.07 ½. Dec-23 KC wheat gapped higher trading above both its 50 and 100 day MA in the process. Next resistance is the June-23 high of $8.89. Dec-23 MGEX is also back above both its 50 and 100 MA resistance, next resistance is the June high of $8.98. Winter wheat ratings held steady at 40%, however there was a 1% shift from excellent to good, and a 1% shift from fair to VP. The WW CC ratings decreased to 75.5 from 75.8, still well above the 72.0 from YA. My model is forecasting an average yield of 47.7 bpa based on updated conditions and acres, well above the June USDA est. of 44.7 bpa and above YA yield of 47.0. Harvest advanced to 37% complete vs. 52% YA and the 5-year Ave. of 46%. Spring wheat ratings slipped 2% to 48% G/E, in line with expectations. The spring wheat CC index slipped to 78.5, below YA and the 5-year average. 51% of the crop is headed, vs. 18% YA and the 5-year Ave. of 46%. Increased talk that Russia’s wheat harvest may fall below 80 mmt, vs. the current USDA forecast of 85 mmt. Russia formally rejected the EU proposal to allow Russia’s Rosselkhozbank access to SWIFT in exchange for an extension for the BSGI. Algeria reportedly bought 200k – 250k of durum wheat, while Tunisia is believed to have bought 100k mt of durum and soft wheat.
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