The Hueber Report

The relief many felt after the post-tariff bounce occurred last Friday has turned to anxious uncertainty, and the path of least resistance once again is to the downside.  It is quite understandable as with no eminent weather threats on the horizon and an ongoing case of Trade Tariff Terrors; there would appear to be little incentive for speculative bulls to hang around the grain/soy markets for now.  

The commitment of traders report was delayed until yesterday, but not surprisingly we find managed money leaning harder to the negative side.  In both the corn and bean markets, they increased shorts by around 10,000 contracts bringing the net short to 70,810 and 53,677 contracts respectively. As I commented last week, this happened earlier than would be expected in a normal year. In the products, meal longs were trimmed by around 7,000 contracts, and oil shorts covered 1,000, but over in wheat, the production issues around the globe appears to have prompted managed money to cover shorts as the bought over 10,000 contracts and are now just short 1,925. 

There was nothing surprising in the crop rating as corn in good/excellent moved backward 1% to a still solid 75% and beans for that same category remained unchanged at 71%.  The most notable aspect of the report though is the advanced stage of these crops.  Corn in the silk stage is at 37% which compares with 18% last year and 18% on average and beans blooming have risen to 47%, versus last year at 32% and an average for this date of 27%.  Note that in corn, Illinois is the standout as we have 76% of the corn silking compared with a normal 32%.  Cotton squaring has reached 59%, just ahead of the average of 55%, with the rest of the crops pretty much progressing in line with average paces.  Winter wheat harvest has reached 63% compared with a normal 61%. 

We have noted recently that hot and dry conditions have trimmed crop estimates in the Black Sea region, primarily Russia and Ukraine but that does not mean these countries are not chomping at the bit to try and capture a larger share of the Chinese grain trade as well as a few other countries while the tensions remain high. In the 2017/18 crop year, the Black Sea region captured 37% of all the international wheat trade which is more than the U.S. and Canada Combined.  Last crop year, U.S. exports of wheat to China were 902,400 MT, which was down 43% from the previous year and that nation appears to have turned to Kazakhstan.  Mexico has been purchasing Russian wheat over the U.S., as they have been price competitive and Brazil purchased Russian wheat for the first time in 8-years.  Russia actually sold 850,000 MT of beans to China this last year which was 2 ½ more than the previous crop year.  

It would appear that all the market has to look forward to at this point are the July production and supply/demand reports scheduled for this Thursday. Once again here is a breakdown of industry estimates that I have seen thus far; Total corn production of 14.29 billion bushels coming from a yield of 175 bpa.  This compares with the initial forecast of 14.04 billion and 174. The bean production estimate stands at 4.319 billion from a yield of 48.65.  The current government number stands at 4.28 billion bushels and a yield of 48.5 bpa. Total wheat production is expected to come in at 1.859 billion compared with the June estimate of 1.827.  2017/18 ending stocks are projected to fall in around 2.111 billion corn, 506 million beans, and for the 2018/19 crop year, corn is pegged at 1.718 billion, beans 484 million and wheat at 979 million.  On the world scene, 2017/18 ending stocks for corn are expected to come through at 191.42 MMT, 91.76 MMT for beans and 272.46 MMT wheat and then for 2018/19, corn at 156.27, beans at 88.15 and wheat at 265.05. Finally, Argentine corn production is expected to show up at 32.7 MMT and beans 36.7 and in Brazil, corn at 83.2 MMT and beans 118.9 MMT.