Corn Crop Conditions Not Ideal, Soybean Futures Are Up

In a nutshell, the corn market was/is too short from a large spec perspective for this time of year, and crop conditions are not ideal as they were for last growing season. Corn futures are about 30 cents from Monday’s low and should see continued short covering as Tuesday’s report approaches. As we are trading supply more so than demand, and so we feel the acreage number for Tuesday is more important than stocks. Anything much above 90 mil acres would be bearish 89 or lower , friendly. As for spreads, we have seen carries tend to widen as prices advance as old crop corn hits the market, vice versa on breaks, no reason to change that view.

Soybeans futures are up almost 85 cents per bushel since contract lows were made a week ago Monday. Crop conditions and planting progress are problematic and the large spec was significantly short. Speculative and technical buying have led the way back to $10.00 in old crop, $9.80 in new crop as of this writing. We feel the large spec position is close to even, and it feels like they will build a small long position into next week. They are already modestly long the products. There are still some 8.0 mil acres that have yet to be planted and crop ratings probably down on Monday afternoon. Cash markets appear to be loosening up on the rally as old crop beans get marketed, and meal premiums soften.

There is still some strength in the eastern belt for cash meal, but the U.S. is badly overpriced on the export front. Evidence of that was Thailand buying South American meal for the Oct/Nov/Dec time frame which should be prime time for the U.S. export program. This may mean board crush works lower over time, but has been tough going for those trying to sell crush lately. Meal has gained on bean oil the past two weeks, but things could change in that regard with cash meal breaking hard in South America and threats to canola and rapeseed crop production.

Old crop/new crop spreads struggle as it appears domestic processors are well covered for the time being and spec buying is in the new crop. We can make the case for Aug/Nov to be weak going forward as the world supply of beans is big and the market would be on the cusp of new crop harvest without much of an export program in new crop to pull beans away from domestic users. Last year the market needed to replenish the pipeline and there was a huge export book on for both beans and meal. Every bushel was needed right off the combine, which may not be the case this year. But for right now the markets are trading weather, spec buying and outright prices are the feature.