Morning Commentary

September corn up 6 ¾ at $3.4825

Aug beans up 6 ¼ at $8.85

The DOW is down

USD is stronger

Crude oil up $.19 at $39.46

Good morning,

Stocks bulls cheer as the S&P 500 finishes the quarter up +20%, the biggest percentage gain since the fourth quarter of 1998. The Dow Jones Industrial Average rose +18%, its best quarter since 1987.

Corn bulls got what they wanted as the USDA dropped planted acres down to 92.0 million and well below the 95 million acres most in the trade were looking for. Unfortunately, June 1 stocks were reported at 5.224 billion vs. the average trade estimate of around 4.950 billion. In other words, the bulls get an extra -3 million acres trimmed off the supply side vs. what the trade was thinking which is equal to a reduction of an extra -500 to -550 million bushels depending on yield. Bears, however, get an additional +234 million bushels added to the balance sheet vs. what the trade was expecting via the higher than anticipated Quarterly Stocks estimate. Net-net, the bulls certainly come out ahead, but the balance sheet will still show us swimming in excess supply. In the best volume since August, open interest increased 11,000 lots yesterday.  The December contract reflected short covering but it was overshadowed by fresh flow elsewhere, including Dec 2021.  The trend for Dec corn is positive. Stable action over 360.5 would support a move towards 380.  Closing under 334.25 rekindles bear trending.  Marking the cutoff for Friday’s COT report and on the heels of the bullish USDA report, non-passive funds are estimated to have bought 40,000 corn on Tuesday. 

Soybean bulls were happy to see the USDA forecast planted acres at 83.8 million, up +10% from last year, but about -900,000 acres lower than the average trade guess of 84.7 million. Bulls were also happy to see the USDA show June 1 stocks reported at 1.386 billion vs. the average trade estimate of around 1.392 billion. In the best volume since February, open interest increased 11,000 lots on Tuesday.  Open interest featured an increase of 15,000 contracts in Nov and short covering in May.  The trend for Nov beans is positive.  Stable trade above 889 should fuel a drive to 924.75.  Closing under 868.25 alerts for a deeper pullback. 

The 54 leading countries of the world spend roughly $700 billion a year on farm subsidies, equal to 12 percent of gross farm revenues, said the OECD on Tuesday. The average rate of producer support in OECD countries – the industrialized world – is more than double the rate in emerging and developing nations, mostly in Asia, Africa and South America, despite some “convergence” in the past two decades. Government transfers to agriculture are equal to $2 billion a day. Three-fourths of the supports flowed to individual producers and more than half of the money, or nearly 40 percent overall, was provided through policies with the greatest chance of distorting production. OECD analyst Emily Gray sounded a note of caution about the large U.S. payments of recent years. “Where we say this might become a concern is if these kinds of assistance packages start to discourage producers from adjusting to new market conditions and new climate conditions, and if they discourage the necessary adjustments that are important to improve resiliency in the long term.” Gray said her comments covered the trade-war payments and disaster relief programs created after hurricanes, floods, volcanic eruptions, and wildfires.(Ag Insider)

U.S. Reps. Dusty Johnson (R., S.D.) and Henry Cuellar (D., Texas) introduced the Direct Interstate Retail Exemption for Certain Transactions (DIRECT) Act. This legislation will allow state-inspected meat to be sold across state lines through e-commerce, providing small producers and processors with more options to market directly to consumers. Currently, many states such as South Dakota and Texas have state Meat & Poultry Inspection (MPI) programs that have been approved by the U.S. Department of Agriculture’s Food Safety & Inspection Service (FSIS) as “at least equal to” standards set under the Federal Meat Inspection Act (FMIA) and Poultry Products Inspection Act (PPIA). Under the existing framework, however, state-inspected products can only be sold interstate if approved to do so under the Cooperative Interstate Shipping (CIS) Program.(Feedstuffs)


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