- The June 1st US corn stocks are expected to be record large at just over 4.5 billion bu. The US farmer is supposedly sitting on a huge stock of unsold old crop corn. The problem is that US corn export demand is suffering amid keen export competition from Brazil and Argentina. Ukraine is offering corn well below the US in a new crop position. The result will be if/when US farmers decide to sell that cash basis and futures could fall away from them. It is important right now to understand that if you are betting on higher corn prices, it’s a bet on adverse Midwest weather after mid-June.
- A surging US$ and the slowing of fund short covering sent US wheat futures to losses of 10-15 cents in yesterday’s trading. HRW conditions improved despite recent heavy rains in the S Plains, and world cash values are now far lower than US Gulf fob offers. Recent fund short covering is only further restricting potential 2015/16 US export demand. World cash fob offers into August are illustrated below. Weekly US export inspections totalled 11 million bu, down 2 million from the prior week. With cumulative shipments (799 million bu) down 38% from a year ago, the USDA still may be some 5-10 million bu too high with its 2014/15 export forecast. The EU and GFS weather models have also been consistent in forecasting a more lasting period of warm/dry weather across the S Plains beyond early next week, as the jet stream aligns itself more normally across the N Plains and Midwest. If realised, harvest will begin rather seamlessly in TX/OK in early June. CBOT open interest suggests the recent advance is indeed funds covering a portion of their massive short position. Russia’s crop size will determine seasonal lows in June/July. A close below $5.03 basis July ‘15 CBOT, foreshadows a test of recent lows. We’re willing sellers of any short covering advance to $5.30-5.40 with a dire Russian drought needed for a lasting trend change.
