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Looking to the Futures

Trade Looks Beyond Latest USDA Data

Yesterday’s USDA July 11 Crop Production and Supply/Demand data has come and gone with the market quickly returning its focus to the weather.

The much-maligned July report was released yesterday with the expected bump in Corn production and cut in Soybeans. The trade had been openly questioning the accuracy of the expected Corn numbers leading into the report based on the USDA usage of the June acreage survey data deemed obsolete.

As expected the overstated June acreage in Corn coupled with an unchanged 166 yield led to a 13.875 production figure, up from the June 13.680 projection. That increase was beyond the average trade guess of 13.664 billion bushels and an expected yield trim to 165. The USDA’s National Agricultural Statistics Service (NASS) did qualify the production estimate by stating, For 2019/20, corn production is projected 195 million bushels higher based on increased planted and harvested areas from the June 28 Acreage report. Excessive rainfall prevented planting at the time of the Acreage survey, leaving a portion of acres still to be planted for corn in a number of major producing states. In July, USDA’s National Agricultural Statistics Service (NASS) will collect updated information on 2019 acres planted, and if the newly collected data justify any changes, NASS will publish updated acreage estimates in the August Crop Production report.”

The Carryover for 2018-19 old crop was raised to 2.34 bbu from the June 2.195 number on lower usage projections. 2019/20 Ending Stocks were raised 335 mbu to 2.01 bbu, well above the average trade guess of 1.70 bbu.

 

2018/19 World Ending Stocks were bumped 2.8 MMT to 328.8 MMT, while new crop 2019/20 Carryover was pegged at 298.9 MMT.

Despite the larger than expected increases in stocks, the Corn market rallied into the close to finish up 8.5 on the day. Traders were already speculating on the expected upcoming acreage adjustments in the USDA’s August report.

Production numbers in Soybeans were adjusted lower as expected. Using the lowered June 80.0 acreage estimate and a yield trimmed to 48.5 bpa, production was pegged at 3.845 bbu. That was off 305 mbu from the June 4.15 bbu estimate and below the average trade guess of 3.87 bbu. Again, the numbers came with the same qualifier that acreage may be adjusted by the NASS in the August production report. 2018/19 Carryover was modestly trimmed to 1.05 bbu on a bump in residual usage. New crop 2019/20 Ending Stocks were cut to 795 mbu down from the 1.045 bbu June projection.

 

World Carryover for 2018/19 was left unchanged at 113 MMT. 2019/20 Stocks were cut substantially to 104.53 MMT from 112.66 reflecting the drop in domestic U.S. production.

Market reaction to the numbers was somewhat muted with new crop November (SX19) finishing up 4.4 on the day. Trade focus will now return to the weather with extreme heat and scattered precipitation in the latest models. With the abnormal planting schedule of both Corn and Beans this spring, there is a greater sense of uncertainty with this crop. Monitoring the weekly crop condition reports will take on greater meaning as we build to the much anticipated August 12 USDA numbers.

The latest 6-10 day weather projections continue to call for temperatures in the 90s with slight chances of rain. Any extended stress will raise concerns for the young crop and keep bulls in control.

 

Technicals

December new crop Corn futures (CZ19) have rebounded halfway back from the sharp drop to 420 off the June acreage surprise. The 450 mark will offer the next level of resistance followed by the 468 and 473 tops. Selloffs will find near-term support at 430 followed by strong support offered at the 420 gap.

 20-Day SMA     448-4

 50-Day SMA     426-4

 200-Day SMA   404-4

 14-Day RSI      55.16%

 Implied Vol       27.50%

  Contract Specs December CME Corn Futures (CZ19)

 

The new crop November Soybeans (SX19) have taken a pause from their recent three-week pullback and look poised to test the highs established in mid-June. First resistance will be found at the 934 mark followed by the 943 and 948 tops. Downside support will be found at the 900 mark and then the 890-2 weekly low. Longer-term support comes in at 875 and 844.

 20-Day SMA     918-4

 50-Day SMA     891-0

 200-Day SMA   925-0

 14-Day RSI      54.00%

 Implied Vol       18.50%

Contract Specs November CME Soybean Futures (SX19)

Trading Calendar

PPI     8:30 a.m.  ET

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