Soybean bears fed big time

End-of-day grains wrap-up

Corn Fundamental Support: Corn (CBOT:CNN14) stocks came in today slightly bearish with acreage almost unchanged. Remember that late last week there was suddenly talk of corn acreage going down which didn’t happen today. For some time now buyers have kept the corn supported above contract lows until seeing today’s reports. With the reports behind us, weather goes back to #1 factor which still looks generally bearish. Excessive rainfall can look bullish but trade has not bought hardly any of that talk. About the best weather hope for a bounce right now is for hot weather during pollination. Right now no such weather is in the forecast but let’s keep a close eye on that.


Old crop traders:

•           Trade was looking for corn stocks to come in at 3.722 billion bushels and saw 3.854 billion

•           Ethanol could offer some support later this week but following new crop is most likely

New crop traders:

•           Analysts’ were looking for 91.725 acres of corn planted and saw 91.641

•           Trade was holding support until seeing this report and has now broken contract lows likely resuming the trend

•           Corn conditions came in at 75% good to excellent, an increase of 1%.

Bulls:

•           Given that today’s drop was drastic there can be some bargain buying seen tomorrow

•           The next weather issue that can offer support would be heat during pollination

Bears:

•           Most bears should look for the previous trend to continue, sell bounces when offered looking for a continued grind lower

•           Forecasts today offered no heat threat in the entire 15 day outlook
 

Soybean Fundamental Support: The soybean (CBOT:SN14) bears were fed big time today as both the acreage and stocks reports came in above expectations. The USDA reported that the June 1 Grain Stocks came in at 405 million bushels. This is the amount left over from the fall harvest as of June 1. This number was a little larger than the 378 average guess. The ranges of the estimates were 334 to 440 million bushels. This implies the remaining June–August period will not be as tight as feared and the United States will scrape by and not run out of beans before the new crop is harvested.

We would look for the old crop to get bigger on the September reported due to the size of stocks on hand. As for the acreage number, it was also viewed bearish as some of the missing acres from the March survey showed up in the bean plantings today. Plain and simple, the market was shocked when the USDA reported that the U.S. farmer will have planted 84.839 million acres of beans this year. This represents a 3.3 million acre increase over the March number and was an increase of 8.3 million acres over last year!

This should tell the trade, in very clear language, we are set for a dramatic change in supply from the current tight situation. In the big picture we really shouldn’t be surprised by this number. You may remember Allendale’s assertion back on the March report that USDA’s total acreage numbers were off. Back then, USDA implied only a 1 million acre increase for combined corn, soybeans, and wheat acres over last year.

That did not make sense as preventive plant and the inflow from lower CRP acres gave us potentially over 8 million more acres for this year. With today’s Acreage report in hand, the total acreage increase of 4.9 million this year is much more reasonable. Bottom line here is that new crop soybeans care bearish and without a weather problem look to eventually take out the $10.00 level.

Crop ratings released after the close showed that 72% of the crop is rated good to excellent. This is unchanged from last week and is a record for this time of year.


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