The Hueber Report

It would appear that we are poised for a banner week for the bulls all around.  If we closed right at the time I am writing this, July wheat would be up 33-cents and at the highest level traded since late January this year. Beans by no means are setting any records, but November futures are currently 35-cents higher on the week and could close at the highest point since mid-April.  The big story though is understandably reserved for corn, and here we find December futures up 25-cents for the week but more critically, trading at the highest point witnessed since May of 2014. As I noted yesterday, this could be significant as it with a close above 4.54 we will have finished above a level that has stopped this market repeatedly over the past five years and will have potentially opened the door for an advance to the 5.15/5.20 zone.  Do keep in mind that this is truly a weather-driven market and by nature should be short-lived.  I recognize that for many who have a greater than normal uncertainty about their production this year, it becomes psychologically more challenging to pull the trigger on sales but there are a multitude of marketing tools available to you so do not be blinded by visions of 2012 and keep your eye on the prize, which is to sell your production at profitable levels.  In a similar vein, be looking out to the 2020 crop and while we are looking at a very understandable inversions in prices right now, and some may choose to try and play that spread with their hedges, those deferred months are moving into the price realms that have capped the upper end of corn during recent “normal” production years and one can already envision a significant boost in acreage next spring.  Never forget, one of the critical jobs of a market rally is to encourage an increase in production and discourage the use of the end product, and that is precisely what we are trying to accomplish right now.

Let’s also not lose sight of the fact that outside of weather concerns in Australia, world production is on the rebound this year.  We already know that South America has or is harvesting record quantities of corn and beans and Europe is on the rebound after last year. France’s Agrimer has the corn crop in that nation rated at 82% good/excellent and soft wheat at 80%. Strategie Grains forecasts that the total winter barley crop in the EU will be up 15% over last year.  There have been a few concerns in the Black Sea region this year, but nothing that would be market alarming as of yet and they continue export aggressively.  Ukraine reports that total grain exports are up 10 MMT over the previous year to date. 

Of course, we cannot go a day without mentioning something concerning China, and this morning they released Industrial Production for the month of May, which came in at 5%.  This was below expectations of 5.5% and is the lowest this has been in that country since 2002.  The Central Bank quickly announced that there would be 300 billion yuan issued to support small banks and that more stimulus should be expected soon.  It would seem that the ill effects of the trade war are really showing up in their economy, but keep in mind as well, this would suggest that the dollar will strengthen against the yuan, which is not a good thing for U.S. Ag export trade.