May corn is up 3 1/4 cents per bushel, May soybeans are up 5 1/4 cents, and May K.C. wheat is down 1/2 cent.CME Globex Recap:
Global equities are higher around the world Monday morning as Chinese equities hit their highest level in a year overnight as economic data on manufacturing improved. Investors also took some solace in the weekend trade talks between the U.S. and China, although more discussions will take place this week in Washington. Crude oil is back above $60 per barrel with its 200-day moving average just overhead at $61.68. Grains are mixed Monday morning with row crops higher and wheat mixed to lower. Friday's USDA reports were universally bearish and will have traders recalculating fair value after bushels of corn, soybeans and wheat all came in larger than expected. The bushels from the stocks report are already here and on the balance sheet while acreage is just a placeholder until producers actually hit the fields.OUTSIDE MARKETS:
Previous closes on Friday showed the Dow Jones Industrial Average up 211.22 at 25,928.68 and the S&P 500 up 18.96 at 2,815.44 while the 10-Year Treasury yield ended at 2.414%. Early Monday, the June DJIA futures are up 189 points. Asian markets are higher with Japan's Nikkei 225 up 303.22 (1.43%) and China's Shanghai Composite up 79.6 points (2.58%). European markets are higher with London's FTSE 100 up 55.1 points (0.76%), Germany's DAX up 143.54 points (1.25%) and France's CAC 40 up 44.4 points (0.64%). The June Euro is up 0.003 at 1.130 and the June U.S. dollar index is down 0.205 at 96.640. The June 30-Year T-Bond is down 13/32nds, while June gold is down $2.40 at $1,296.10 and May crude oil is up $0.50 at $60.64. Soybeans on China's Dalian Exchange were up 0.12% while soybean meal was down -0.32%.
|1)||The USDA pegged 2019/20 soybean acres at 84.617 million, 1.5 million below the average tradeestimate and 4.5 million below last year.||1)||March 1 stocks of corn, soybeans and wheat all came in above the average trade estimate with the corn miss being the second largest since 1989.|
|2)||Market hog prices in various regions of China are up an average of 17% since September 1.||2)||According to the USDA, farmers will plant 92.792 million acres of corn in 2019/20, 1.4 million above the average trade estimate.|
|3)||On Friday, the USDA reported another 150,000 metric tons (mt) of HRW sold to Iraq as well as 816,000 mt of soybeans sold to China.||3)||FOB offers of South American soybeans were $8-19/mt cheaper than U.S. offers from the Gulf going home Friday.|
CORN Corn futures are higher Monday morning, although considering it is April Fools' Day, traders are hoping Friday's data from the USDA was the real joke. Corn was hit with a double whammy of bearish news as both corn intentions and March 1 stocks came in well above average trade estimates, driving the market down double digits to new contract lows. While many focused on the acreage number, the real story was with the stocks as the data suggested Q2 feed/residual use was the lowest since the 2012/13 drought and the second lowest of the last 30-years. Commentators were quick to suggest either the 2018/19 corn crop was understated, or the government shutdown led to discrepancies with the December 1 stocks figures. We will err on the side of the latter, but regardless, the 270 million bushels (mb) of additional corn the market didn't think it had added a significant buffer against corn acres moving lower on planting delays, should they happen. What's worse, the March 1 stocks figure will likely lead USDA to cut 2018/19 feed/residual demand on the April WASDE which could follow cuts to ethanol and export demand as well. It looks quite conceivable ending stocks for the current marketing year will end up over 2.0 billion bushels (bb) which is a major fundamental shift to price expectations.
SOYBEANS Soybeans prices are also higher to start the new trading week and month with producers hoping April treats soybean prices better than March did. USDA did not deal soybeans the bearish blow that it did corn, but nothing about Friday left bulls particularly comforted. Soybean acreage at 84.617 million would be the smallest since 2016/17 but still staring at 900-1,000 mb worth of carryout in 2019/20 assuming trend line yields and 200 mb of additional demand. Soybeans stocks as of March 1 at 2.716 bb came in 33 mb above the average trade estimate and 607 mb larger than a year ago. Unlike corn, USDA probably doesn't need to adjust 2018/19 demand estimates on the April WASDE at this time. The acreage report should be taken with a grain of salt considering the flooding in a large swath of the Midwest, but economics and timing suggest soybean acres will be larger on the June acreage report. Soybean acreage has increased from the March to the June reports in each of the last seven years and nine of the last ten. USDA will issue February Crush data later Monday which should provide clarity into the current crush estimate. The trade is expecting 165 mb of soybeans crushed during the month vs. 153.2 mb a year ago. Nothing of substance out of the trade talks over the weekend with discussions continuing this week in Washington.
WHEAT Wheat markets are mixed to weaker Monday morning, following through on Friday's weakness and looking to close Kansas City lower for the third session in a row. Not wanting to be left out of the bear party, USDA estimated March 1 wheat stocks at 1.591 bb, 36 mb above the average trade estimate and nearly 100 mb larger than a year ago. The acreage report was mainly friendly with all-wheat acres pegged at 45.74 million vs. the average trade guess of 46.915 million and 47.8 million a year ago. The surprise came from 'other' spring wheat acres at 12.83 million vs. the average trade guess of 13.419 million and 13.2 million a year ago. The spring wheat balance sheet would welcome an acreage estimate like that, although based on our demand estimates, even 12.83 million acres would still provide the largest ending stocks in 2019/20 since the late 80's. Wheat stocks coming in larger than expected and implying weaker feed/residual demand during Q3 fits with the bearish surprise in corn. In addition, there is still a chance USDA has to cut its wheat export forecast on the April WASDE which could push carryout near or above 1.1 bb for the third year in a row.
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Tregg Cronin can be reached at email@example.com
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