Morning Commentary

July corn down 3 ½ at $4.1225

July beans down ¼ at $8.5825

The DOW is up

USD is stronger

Crude oil up $.64 at $53.90

Good morning,

Corn  traders are eager to see today’s USDA report. Bulls are wanting to start seeing production cuts, while bears are wondering how much demand destruction is going to start creeping into the forecast. The USDA had been projecting a total U.S. corn crop of +15.0 billion bushels vs. the trade now talking a wide range of estimates between 11.5 and 14.5 billion bushels. Most suspect the USDA takes a more conservative and methodical approach to reducing their production estimate. According to the USDA numbers, we currently have +15 million corn acres still unplanted. Keep in mind many of these unplanted acres are in strong producing regions of the country. Illinois still has 27% of their crop unplanted; Indiana and Michigan each 33% unplanted; Missouri 19% unplanted; Ohio 50% unplanted; South Dakota 36% unplanted; Wisconsin 22% unplanted. At the same time, the USDA shows U.S, corn conditions rated 59% “Good-To-Excellent” vs.  77% of the crop rated “Good-to-Excellent” last year. The trade count had the fund buying 3,500 corn. Funds are now thought to be long 35,500 lots. The short term trend for July corn is neutral-positive. Stable trade over 426 alerts for a return to trending advances. Closing below 406 signals a deeper correction.

Soybean  traders seem somewhat confused.  In the May report, the USDA was talking a 49.5 bushel average yield with total production around 4.150 billion bushels. Now the trade is talking a 49.0 bushel yield and total production still right around 4.150 billion bushels. In below average volume, preliminary open interest was unchanged. The trade count had the fund buying 5,500 beans. Funds are now thought to be short 130,500 lots. The short term trend for July beans is neutral. The market is in a correction phase. Closing under 845.75 signals a drop toward 831.5-829.75.  Stable trade above 876.75 will signal renewed rallies.

Cattle, cash fed,  traded over 100,000 head again this past week on yet again lower prices. The show lists for cattle to be sold this week reflected the cash movement as Nebraska numbers we down over 20,000 hd. Some of the friendly points to be made in the current setup is packer profitability keeping feed yards current, carcass weights at a seasonal low and the hope for strengthening beef demand. Conversely, the arguments for additional downside would largely circle the seasonal aspects of summer cattle prices, increased supplies, weaker than expected export demand and a potentially slowing macro economy. Futures markets continue to chop and are no doubt attempting to carve out a bottom, but cash markets continue to slide. It is interesting to note that there are short term discounts and longer-term premiums built into the cattle futures curve, while the feeder curve is essentially flat. Recent advances in corn prices as well as strengthening basis is certainly driving some of these factors but should be monitored as we move forward. Expectations for cash trade this week are likely steady to softer with weaker basis. Futures markets bounced big on small volumes to start this week. It seems this is more of a basis narrowing rally, but it did seem to negate the bear flag setting up on the daily charts. Depending on how sharp your pencil is, the Aug19 LC may have closed just above the midterm downtrend line.

A drop in crude-oil prices means Americans could pay less at the pump this summer, which some experts are saying could fall to sub-$2 a gallon. As most already know, gasoline prices are typically expected to rise this time of year due to higher demand and the requirement that gas stations use a more expensive blend of fuel, which won’t ignite in hot weather. Last year at this time, the average price nationally for regular gas at the pump was $2.92 a gallon, according to AAA. Today, the national average is closer to $2.75 per gallon.  A key reason for the price decline is that the U.S. is over-supplied in both crude oil and processed fuels and now producing a record-high 12.4 million barrels a day of crude oil compared with 8.7 million three years ago, according to weekly Energy Information Administration estimates. Something else to keep in mind, the gap between Houston and San Francisco prices was more than $1.50 a gallon on Sunday, according to AAA data. California prices are normally higher than in Texas, but this year fires and other breakdowns at oil refineries in the Golden State sent prices rocketing higher. 


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