Market Analysis

The USDA’s higher-than-expected old-crop demand forecasts provided some initial support to corn and soybean prices after the release of June’s US supply/demand revisions. Wheat, however, had the strongest post-report price recovery when the US winter wheat crop was only revised up by half of 1% (6 million bu.) & the USDA reduced its Russian wheat crop by 5% from last month &19.5% from 2017’s record output tightening world supplies. On the close, soy values waned on the potential that the US may still implement its $50 billion in Chinese tariffs scheduled for this Friday, June 15. The upcoming June 30 US acreage & quarterly stocks reports also remain important market factors in the near-term horizon for 2018/19 crop years.

This month’s 75 million bu. increase in old-crop US corn exports was justified after looking at our seasonal sales pace and as the USDA reduced Brazil’s corn crop by another 2 mmt to 85 mmt. This drop in corn’s old-crop stocks along with an increase in 2018/19’s ethanol demand now projects the coming year’s carryover under 1.6 billion bu. This would be lowest stocks since 2013/14 crop year. Interestingly, the current Russian dryness prompted the USDA to cut their 2018/19 corn forecast by 4 mmt to 15 mmt, but they didn’t increase the US new–crop exports this month. 

The USDA also advanced its old-crop soybean crush by 25 million bu. slicing stocks by a similar amount vs. 5-10 million trade average. This smaller 2018/19 beginning stocks and no downward change in new-crop exports also slipped the coming year’s carryover to 385 million bu. In wheat, June’s old-crop exports were shaved another 10 million prompting a rise in old-crop stocks 1.08 billion. However, the USDA’s 25 million bu. US export increase because of Russia’s 3.5 mmt smaller crop to 68.5 mmt and 2018’s sharp drop from last year’s 85 mmt output also compensated for this month’s minor 3 million increase in both US hard red and white wheat varieties.

What’s Ahead

After this month’s demand increases and slightly smaller stocks, Russia’s and the Central US growing conditions along the US/Chinese trade talks will be the market’s main focus near-term. With the investing public heavily short the CBOT markets, opportunities could occur to advance old-crop corn sales at 65-70% and finalize bean sales at $3.90-$3.95 and $9.77-$9.90 ranges, basis July.