Morning Commentary

July corn up 11 ½ at $4.3175

July beans up 25 ¾ at $8.8175

The DOW is down

USD is stronger

Crude oil down $1.78 at $57.32

Good morning,

Corn prices push to fresh three year highs! In fact, prices are up close to +25% since the beginning of the month. Traders continue to debate U.S. planted acres and what to use in the way of a “yield drag” in trying to calculate and forecast total U.S. new-crop production. As a bull, I can easily argue 85 million planted acres, perhaps even lower, especially when you start to take into account all of the re-plant acres that might not get in the ground, lack of available inputs, etc… At the same time it wouldn’t take much to convince me that our average yield is closer to 160 bushels per acre than it will be the USDA’s current estimate of 176 bushels per acre. This type of pullback in production would work to reset the balance sheet and in its wake make this market extremely interesting moving forward. As a spec, I’ve elected to bank some profits.  In above average volume, preliminary open interest surged over 56,000 lots!  Option open interest rose 71,000 lots!  The trade count had the fund buying 47,500 corn.  With Tuesday marking the cutoff date for Friday’s commitment of traders report, funds are now thought to be short 34,500 lots.  The short term trend for July corn is bullish.  Stable action over 425 leaves the market in position to trade 445 perhaps 481.25.  Closing under 406 signals corrective action.

The USDA showed just 58% of the U.S. corn crop as planted. Indiana just 22% planted vs. 94% planted last year; Ohio 22% planted vs. 78% last year; South Dakota just 25% planted vs. 87% last year; Illinois is just 35% planted vs. 99% planted last year; Wisconsin 46% planted vs. 77% planted last year; Iowa 76% planted vs. 95% last year; North Dakota 63% planted vs. 85% lat year; Missouri 65% planted vs. 99% last year.

Soybean bears have backpedaled heavily the past few days. In fact, many inside the trade suspect the funds have liquidated most all of their short holdings. There’s obviously starting to be more talk that soybean acres and yield are going to be in question moving forward. The current balance sheet is clearly burdensome and bearish, but moving forward bulls are thinking we could see a different story. With Tuesday marking the cutoff date for Friday’s commitment of traders report, funds are now thought to be short 136,500 lots.  The short term trend for July beans is bullish.  Stable action over 898 signals a run to 951.  Closing under 845.75 alerts for corrective action. 

Vietnam culled a further 500,000 pigs over the past two weeks in order to contain an outbreak of African swine fever, taking the total killed so far to 1.7 million or 5% of the country’s herd. Pork accounts for three-quarters of total meat consumption in Vietnam, a country of 95 million people where most of its 30 million farm-raised pigs are consumed domestically.

Since 1993, the productivity gains in U.S. agriculture have been, well, pretty astounding. Hog productivity has shot up 68% while gains in dairy and broilers have risen 44% and 43%, respectively. Beef production has jumped 17% and egg production, 13%, reports Carl Zulauf, an economist with Ohio State University. “At its simplest, productivity increases when more output is produced using the same foundation herd or when the same output is produced with a smaller foundation herd,” says Zulauf. “Dairy illustrates the former as more production is coming from a foundation herd that has changed little. Beef illustrates the latter as about the same production is coming from a smaller foundation herd.” He notes that between 1993-1997 and 2014-2018, the U.S. dairy herd has shrunk 4% but production has climbed 38%. According to USDA data, in 1993, there were 9.7 million dairy cows producing an average of 15,554 lb of milk. In 2018, there were 9.4 million cows producing an average of 23,173 lb of milk.


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