• Funds continued to pile into new ag length with a gain of nearly 50,000 contracts in the past week. Since mid-May, funds have been poured into new ag length with the CFTC estimating their net long net ag position just under 200,000 contracts. This is the largest net long fund ag position since May of 2018, the same time that the Trump Administration started the trade dispute with China. We would be nervous of new net long positions in Chicago grains or soybeans with Central US weather improving. Seasonal tops appear to have formed in Chicago.

• The June Acreage report shocked Chicago traders with corn acreage coming in 5 million acres over expectations while the soybean figure was 4.4 million acres under expectations. Chicago markets responded accordingly, while the USDA announced their plan to resurvey the entire Cornbelt for corn and soybean acres. This looks to leave markets in a statistical limbo for another month. While the corn/soy mix of acres offered a big surprise for the market, perhaps the largest surprise from a statistical point was the record drop in total farmed acres. Total acreage across 13 principle crop and CRP (Conservation Reserve Program) fell by 11 million acres. Most of that (9 million acres), was due to a sharp drop in planted soybean acres.

• It is worth noting that final cropped acreage has often been below the June figure since 1996. But with the USDA set to resurvey the Corn Belt for corn/soybeans, confidence in today’s seeding figures is lower than normal. And yet it is the best that the market has to work with, and often, resurveys have not led to big changes from the initial June estimate .

• June 1 US corn stocks totalled 5,202 million bu. This was 100 million below last year and 100 million below trade expectations. Mar-May feed/residual use was a sizeable 1,111 million bu, up 168 million from last year and the highest since 2014.

• Work suggests WASDE in its July report will raise its annual feed/resid estimate slightly. However, WASDE is also likely to lower exports 100 million bu amid a very weak pace of sales and shipments in the last three weeks. The net result will be a modest boost in old crop US corn end stocks. But fortunately, feed use was “found” and so 2018/19 US corn end stocks will not balloon to 2,300-2,400 million bu. The third quarter US corns tocks data was neutral.

• However, today’s Chicago shock was NASS’s updated corn acreage numbers. NASS pegged new crop corn seedings at 91.7 million, vs. WASDE’s 89.8 million in early June.

• NASS in the weeks ahead will resurvey land where crops were unplanted as of mid-June. We will look for another downward adjustment to final US corn seedings. However, since 1990 the maximum decline in corn acres was 2.0 million in 2013. This is a unique year, but have heard that producers across the Western Corn Belt were shifting from beans to corn in June.

• And in the near/medium term, the market will now be left with adequate new crop corn stocks. The US Gulf market is $0.32-0.56/bu above all other corn origins and remains at a hefty premium to feed wheat and barley.

• Our new crop US corn export forecast will stay at 2,000 million bu until its position in the world feedgrain market improves. As of now there appears no need to ration demand. A new weather threat during pollination will be needed to trigger a test of the recent highs. Seasonal harvest lows are projected at $3.80-4.00.

• NASS reported June 1 soybean stocks at 1,790 million bu, a 571 million bu increase from last year, but 66 million bu less than expectations. March 1 stock was revised upwards by 11 million bu. Typically, the quarterly residual is negative, implying “found bushels.” In fact, the last positive quarterly residual was in 2001. And since 1965 there have been just nine other years that Mar-May residual was positive. Based on the missing bushels this year, the USDA is expected to raise their annual residual estimate in the July WASDE, and they could lower the estimate for the 2019 crop in September.

• Based on the June acreage survey, NASS reported US soybean planted acres at 80.04 million acres, down 4.6 million acres from the March intentions, 9.156 million acres less than a year ago, and 5 million acres less than expectations.

• If realised it would also be the lowest US soybean acreage planted since 2013. However, NASS indicated that will resurvey the states of; AR, IL, IN, IA, KS, Ml, MN, NE, NY, ND, OH, SD and WI. The results of the special survey will be made available in the mid-August USDA Crop Report.

• We expect that WASDE will incorporate the figure from the June Acreage report into the July WASDE. For now, WASDE has no reason to argue with NASS and the committees will not want to differ much with NASS until the resurvey is completed.

• Historically, WASDE has accepted the NASS acreage figure for the July report, though they are not obligated to. We look for a modest recovery in 2019 US soy seeding to 81-81.5 million acres in the resurvey.

• Final US wheat ending stocks totalled 1,072 million bu, vs. 1,099 million a year ago. Higher than expected Mar-May feed use was found, but otherwise the wheat data was uneventful. NASS pegged new crop total wheat area at 45.6 million acres, vs: 45.8 million in March. Winter wheat acres were 31.8 million, vs. 31.5 in March. Spring wheat acres were 12.4 million vs. 12.8 million in March. We have adjusted our estimate of total US wheat production to 1,885 million, vs. USDA’s 1,903 million forecast.

• The US Gulf wheat market is priced to limit exports to captive and traditional origins. Unlike a year ago, EU and Black Sea surpluses are more than adequate. Better rains lie ahead for Canada. Even Australia will see near normal rainfall in key areas into mid-July. The theme beyond the US harvest will be steep competition for world export demand which will require lower US prices. Amid larger US corn seeding, the need for wheat feeding is diminished.

• There appears no threat as of now that US wheat end stocks in 2019/20 fall below 1,000 million bu. Using updated acreage numbers, we project combined HRW and HRS production at 1,375 million bu. This is up 130 million from a year ago. This is a concern amid declining export interest and larger than anticipated corn acreage and production. Wheat prices need to work a bit harder to maintain feed demand. Gulf HRW only competes with EU origin below $4.60 basis Sept KC. Gulf SRW is one of the world’s most expensive milling origins of wheat.

• SRW quality remains a concern. But sustained rallies in Chicago wheat futures require a demand catalyst, which is lacking today.

To download our weekly update as a PDF file please click on the link below:

Weekend summary 28 June 2019

Our weekly fund position charts can be downloaded by clicking on the link below:

Fund positions disaggregated data