Podcast | John Payne and I put out a new Inside Commodity Futures podcast today. Take a listen to our thoughts on Monday’s crop progress/planting report, grain futures spreads, the upcoming WASDE on Friday, and much more.
TWITTER | I’ve been a lot more active on twitter lately and providing some very good information that I don’t see anywhere else. Follow me on twitter @Turners_Take | https://twitter.com/turners_take
WASDE | I am still adjusting my supply and demand estimates for the WASDE but the main changes I have are
- Old Crop Corn export increase 100mm bushels and makes carryout out 1.7 billion
- New Crop carryout comes down 100mm bushels to 2.05 billion (lower new crop carry in)
- Old Crop Soybeans export and crush increases to bring carryout 350mm bushel or lower
- New Crop Soybeans carryout to 250mm or lower due to lower new crop carry in
I think the June WASDE will be supportive of the grain markets and will set up the potential for a volatile summer weather market.
SOYBEANS | Monday’s planting and crop progress report showed lower than expected topsoil moisture. With summer now expected to be hotter and drier than previously forecasted, much of the Midwest could use some rain. If moisture levels continue to get worse we could hear about yield loss. We are early in the growing season so the crops will not be using that much moisture out of the ground, but there is little ground cover out their now and that increases the risk of evaporation. This could turn out to be a big story if the weather stays hot and dry. Some of the weather services are already beating the drum. They say if we have hot/dry weather early in the season, that increases the odds of a hotter than normal July. Stay tuned!!!
As for the markets, cash in Paranagua trading +135N yesterday. In other words, Brazil has serious cash shortages of soybeans right now. We could see R$ 100/sack which is about $13.00/bu for old crop. No wonder we are seeing increased export activity in the US.
Important to note it looks like the funds and managed money are leaving old crop and moving to new crop. SN/WN spread continues to liquidate. SN/SX has been pressured on the roll to new crop. Meal spreads are in a bearish reversal for anything with July as the front month. I am keeping an eye on SX6/SK7 (more on that this week in my daily Turner’s Take emails). Nov16 is going to be the month for specs trading US new crop. May17 includes US new crop but also represents the eventually soybeans from the next South American crop. If beans are in a bull market I expect SX6/SK7 to work higher.
CORN | I’m looking for Friday’s WASDE to show 1.7mm bu for old crop stocks and 2.05mm bu for new crop. If this topsoil moisture issue turns into a full blown soil moisture crisis corn could really take off. For now the market will slowly build in weather premium but it is important we see some rain in the next week or two in much of the Midwest.
WHEAT | We are almost halfway through the VSR period for WN/WU and we are about 85% of full carry on the rolling average. Every day it looks like we are more likely to have VSR expansion. If that happens elevators will be able to charge a max of 3 cents per month more for SRW Wheat storage. I think the Wheat crop looks great and we are going to have a lot of high quality wheat to blend with the poor quality wheat from previous crops. That should lead to a wider carry. I can see WN/WU trigger the VSR and then WU/WZ eventual trade to a 25 to 28 cent carry.
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