The Hueber Report

While certainly not a shock, grain and soy markets have extended their technical correction again overnight. Does this mean that it is time to panic? I would suggest not, and as we have been noting, with the rapid runup witnessed over the past few weeks, we had pushed into a very overbought technical position, and with a lack of genuinely fresh news, it appeared we had lost the upside momentum.  By no means would I imply that 30 million acres of unplanted corn acres and 50 million of unplanted beans, (at least as of last weekend) is not important news, but it would appear that we had wrung just about all we could from that story, at least for now.  All that said, it is very difficult to imagine we will see this turn into a downside washout as the underlying fundamental picture has irreversibly changed and I suspect there are more than a few end users and traders who have been waiting for just such a swing to jump on board.  Considering it is only the 6th of June, one has to imagine there will be more than a few more weather scares waiting for us in the weeks ahead. 

Not helping the psychological state of the markets is the Presidential promise to hike tariffs on Mexican imports beginning next week, not to mention threats of additional tariffs on China.  Granted, Mexico has fewer means to retaliate than does China, but it would seem they may be trying to flex their muscles where they can.  It was reported overnight that they had purchased a 35,000 MT cargo of corn from Brazil.  Maybe prices were just competitive enough to complete such deal, but the timing would seem to hint that indeed, they do have some avenues to do business elsewhere. Yes, this is really just a boatload, and a smaller one at that (1.378 million bushels) but regardless, is still potentially 1.3 million bushels of sales that we missed out on.  

Adding insult to injury, weekly export sales for corn were just miserable. Yes, this was a shortened week due to the Memorial Day Holiday, but we recorded a negative 8,800 MT or -346,500 bushels.  There were increases for New Zealand of 33.2k MT, Japan of 24.2k and Mexico for 20.5k, but obviously, these were offset by total reductions of 100.9k MT.  Old crop wheat sales continue to dwindle along with the crop year, coming in at just 26,000 MT or 955,500 bushels.  New crop sales were a bit more encouraging though at 501,900 MT or 18.44 million bushels.  Taiwan was the top purchasers with 111.1k MT, followed by Panama at 89.5k and unknown destinations at 81k.  Beans sales rebounded and were 28% higher than the previous week at 510,000 MT or 18.74 million bushels.  Unknown destinations were at the top of the heap with 214k MT, followed by China at 72.3k and then Germany with 56.8k.  Pork export sales slipped 38% week over week, but we still sold 33.8k MT, of which China purchased 51.5% or 17.4k MT.

The June production and supply/demand estimate will be released on schedule next, and of course will be rendered primarily meaningless as soon as they are printed.  At least as far as the domestic production side of the ledger is concerned.  That said, here are some trade survey estimate that we have seen thus far; Total 2019 corn production is pegged at 14.251 billion bushels with an average yield estimate of 172.4 bpa.  Bean production of 4.123 billion using a yield of 49 bpa. Domestic ending stock for 2018/19 are estimated to be 2.123 billion for corn, 1.004 billion in beans and 1.121 billion for wheat.  2019/20 ending stocks are then expected to come through at 1.917 billion for corn, 983 million for beans and 1.118 billion for wheat. The 2019/20 wheat crop is expected to total 1.883, which 1.251 billion coming from winter wheat.  The average estimate for Argentine corn is 49.28 MMT and Brazil 99.86, making a combined total of 149.14 MMT or 5.87 billion bushels. Argentina beans are expected to total 56.09 MMT and Brazil 117.22 MMT for a combined 173.31 MMT or 6.368 billion bushels. 2018/19 Global ending stock are estimated to be 325.44 MMT for corn, 113.33 MMT beans and 274.7 MMT in wheat. Then for 2019/20 the estimates look for 304.96 MMT corn, 112.99 MMT beans and 290 MMT of wheat.