Special Market Update

Our grain markets have been on an absolute rollercoaster recently. Of the last 15 trading sessions, 7 closed higher and 8 closed lower. In the 15 trading sessions prior to that, 12 of them closed higher and just 3 lower. We find the market trying to digest any new news thrown at it and find a stable level as we exit planting. Most of that news is weather driven, both domestically and internationally, as we wrap up planting and brazil approaches their second corn crop harvest. The weather in the US has been favorable for the most part, getting adequate rains and now seeing heat to get the crop out of the ground. We did however see a large frost effect the upper Midwest last weekend, and that sent futures on a rally to start the week. Rumors of soybean replants in the area have been flying, corn seems to have survived as most had not yet emerged. Brazil continues to face limited moisture and intense heat, although they have gotten some nice relief rains over the last couple weeks. The damage Is already done, and the question becomes: what is the true size of their crop? The USDA has it marked at 102MMT, some private estimates put it sub 90MMT. If true, the US is looked to as the main source of replacement to the global marketplace.

Continuing with corn, the USDA has corn 95% planted, vs an 87% 5 year average. For the first time this crop year, the USDA released their condition estimates for corn. The good + excellent rating came in at 74%, a very strong start. Just 4% of the crop rated poor + very poor. As mentioned above, timely rains mixed with rising temperature has started us off strong. However, there are mounting concerns in the western corn belt (West Nebraska, Iowa and Kansas) of a drought. We are seeing topsoil moisture levels falling below suitable levels, and the next 6-10 days look hot and dry. This area will remain a focus throughout the crop year. On the demand front we are still seeing very strong export movement. We are well on pace to meet the projected exports of 2.775B bu. Ethanol margins remain very strong as driving demand is picking back up. Weather will continue to dictate price action but keep a close eye on exports. China has been active in the export market on both old and new crop and making new crop purchases earlier than usual.

Looking now to soybeans, the USDA is reporting soybeans 84% planted vs a 67% 5-year average. Now remember, some of these soybeans were planted very early, and some of these will need replants from the recent frost. Ahead of pace planting progress does not necessarily mean an earlier harvest. The USDA will not publish soybean conditions until the national maturity level increases a bit further. The story in soybeans is mostly unchanged. The demand side remains strong domestically on the back of very expensive soybean oil. Most processors gross more than $1 per bushel of soybeans crushed. However, China’s margins are about $-1 per bushel as pork prices have fallen over 40% this year. This inhibits demand in the short term, making Brazilian premiums weaker. These weak premiums have allowed for US crushers to import soybean vessels to both the east coast, and the gulf. The cash markets have felt this, with soybean basis backing off 50+ cents from its highs. The question now is if the imports were enough. We know carryout will be tight, and like I said we are not guaranteed an early harvest. With crush margins where they are, plants will want to find any way to keep running, which could make for some big-time late summer premiums.

Key dates to watch coming up are the weekly crop progress and condition reports, published at 4pm eastern every Monday. We have the monthly WASDE report on June 10^th at noon eastern. Then we have the big one; June 30^th stocks and prospective planting report. This will provide an update to the estimated acres planted number for new crop, as well as the remaining stocks for old crop. Make sure to stay in touch with your local market rep for more info as these key reports develop and follow along on twitter @andersonsgrain.