Weekly Data Dump: May 13, 2019

CORN MARKET UPDATE:

WEEKLY CORN MARKETING THOUGHTS:

• Another week, another leg down in the grain markets, while planting delays pile on.  If I did not already have the majority of my 2018 and 2019 crops priced, I would be lowering targets and looking to sell more on any bounce.  However, I do have plenty sold, and I feel the market has mis-priced the odds of considerably lower production (lower acres and yield), so I prefer to hold steady for now.
• The normal seasonal pricing window on corn closes in a bit more than month.  We can hope for some sort of counter-seasonal rally later in the summer, but the odds are low.
• At the halfway point the averaging contract is at 3.82 CZ’19.  At this point, in order to achieve an average over $4, the remaining 5 weeks would need to average 4.19.
• USDA released the MAY WASDE report last Friday, which included the first “official” projections for the 2019 crop year.
  • Acres: As expected, USDA used the 92.8M acres published in the March planting intentions report.  Based on the current state of planting progress, weather forecast, and relative appeal of taking the prevented planting option, I expect that number to EVENTUALLY be reduced below 90M.
  • Yield: Also as-expected, USDA used 176 bu/acre for the projected yield, which is the same number they used in the February “Outlook Forum”.  Anybody can make their own yield trend line, and mine says trend yield should be closer to 172, with the more likely scenario being a final yield of 169 based on planting progress.
  • Consumption: Feed consumption was raised 150 Mbu, ethanol production was raised 50 Mbu, and exports were reduced by 25 Mbu.  I think it’s reasonable to expect feed usage to increase (livestock numbers are increasing), and exports to decrease (strong crops in South America), but I am skeptical of the growth in ethanol without either a trade deal or fixes to the waivers/e15 issues.
  • Ending Stocks: The final carry-out is expected to be 2.485 Billion bushels, or a stocks/use ratio of 16.9%, which would be the highest since 2005 if realized.
• The following chart shows the historical correlation of stocks/use ratio vs average October futures price, updated for the projected 2019 stocks/use ratio of 16.9%.  While I don’t expect our final stocks/use ratio to be that large, the shape of the curve suggests we could see DEC futures get as low as $2.75-$3.25 during October.

SOYBEAN MARKET UPDATE:

WEEKLY SOYBEAN MARKETING THOUGHTS:

• It’s a race to the bottom in the soybean market!  In the past week I’ve had several folks ask me what should be done about beans.  From my standpoint I am unwilling to sell any more soybeans today because I already have enough sold that I am willing to wait for a better opportunity, even if it is at the risk of taking something lower.  I feel that waiting to price more new-crop is essentially treating soybeans like a call option for now.
• We still have about two months left in the soybean seasonal, but it hasn’t meant a damned thing so far, so who really cares, right?  I do, and you should to because, even if we don’t see a meaningful bounce in the next 60 days, the odds of seeing even lower prices into harvest are very high.
• At two weeks in, the seasonal averaging contract is at $8.50 SX’19.
• May WASDE for Soybeans:
  • Acres: 84.6M acres.  I haven’t put as much thought into handicapping this number as I have for corn.  However, whereas we would typically expect soybeans to gain acres on delays in corn planting, I don’t feel that is likely to be the case this year.
  • Yield: USDA is assuming a 49.5 bu/acre national yield, or about 2 bu/acre less than last year.
  • Consumption: Soybeans really only have two significant outlets for consumption: Crushing for soymeal/oil was increased by 15 Mbu, and Exports were increased by 175 Mbu, and an all-in/overall increase in consumption of 191 Mbu.  While I could easily envision the crush to hit that number, or perhaps somewhat higher (there are actually some major new crush plants being built), I am very skeptical that we can achieve their export figure.
  • Ending Stocks: The final carry-out is expected to be 970 Mbu, or about 25 Mbu less than this year.  That would be a 23% stocks/use ratio, or just slightly below the 25% projected for this year.  However, I feel there is a real risk that this year’s export expectations go unmet, and next year’s would also need to be reduced.  If we assume that consumption doesn’t increase in the next year, the carryout would rise to 29% of use, matching the current record set in 1985…let’s not go there.

Final thought for the week: This is what choosing to plant more soybeans looks like next year: