Lower Ag Outlook After Yesterday’s Selloff

by Steve Freed,

Grains are lower. SN is down 2 cents and near 8.37. CN is unchanged and near 3.18. WN is down 3 cents and near 4.98. US stocks are mixed. Crude is higher.

Wednesday trade was negative to the technical grain picture. Managed funds turned sellers following a negative USDA report and talk Fed Chairman remarks that US economy will slow and there will be a need for more stimulus. USDA estimated a 2020/21 increase in World corn, soybean and wheat stocks of 45 mmt or 1.6 billion bushels. This mostly corn but would be a record stocks to use ratio.  It will take a north hemisphere weather problem to turn prices higher. Soybeans could supported by China buying US soybean with US prices are competitive after September. Wheat prices will watch closely Black Sea weather over next few weeks.

Higher US Dollar has pushed Brazil and Argentina currencies to new lows. This is expected to give farmers there incentive to increase acres. Some are now estimating Brazil second corn crop to be a higher. This suggest increase exports. Seasonally Brazil exports start in July and could be 3-4 mmt per month. This raise questions about USDA increase in US 2020/21 corn exports of 375 mil bu from this year. Most also feel USDA is still too high in their estimate of corn ethanol use.

Over the next 1-5 days, parts of east south plains, Delta and east Midwest will see good rains. The weather then changes to warmer and drier. This should be good for crops. The extended models suggest a return of scattered rains after May 24. Most look for higher than average corn and soybean crops ratings starting in early June.

On Wednesday, Managed funds sold 10,000 SRW Wheat, sold 13,000 corn, net sold 10,000 soybeans, sold 2,000 soymeal and net sold 3,000 soyoil. We estimate Managed funds are net short 12,000SRW Wheat; net short 183,000 Corn; net long 15,000 in Soybeans; net short 12,000 lots of Soymeal, and; net short 10,000 Soyoil.  

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Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.