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Grain Comments: 06-12-2024

Good morning.

Welcome to USDA report day. Markets are mixed ahead of this morning’s USDA update in a reversal of yesterday’s action; corn and soybeans are trading moderately higher, while wheat futures are giving back some of yesterday’s gains. The market is again focused on South American crop production estimates in today’s report, with not a lot of fireworks expected on either the old crop or new crop US balance sheets. The bulls are hopeful old crop stocks can be trimmed just enough to tighten the new crop figures, while the bears see record production forecasts for the coming season as more than plausible. Corn futures are trading 1-2 cents higher, soybean futures are trading up a penny/down a penny, and the Chicago wheat market is down 10-12 cents. Products are mixed, soybean meal is down around $1/ton, and soybean oil is up around 20 points. Outside markets are mixed as well; crude oil futures are up 80-90 cents/bbl, the Dow Jones index is up 50 points, and the US$ index is down 10 points.

Rumors began circulating late Tuesday that the newly proposed tax bill in Brazil has been rejected by congress. This likely contributed to the late-day slide in soybean and meal futures on Tuesday.

Traders see daily ethanol production for the week ending June 7th in a range of 1.054-1.088 mil bbls. Stocks for the week are seen between 22.90-23.30 mil bbls. Increasing production and decreasing stocks continues to be a good sign for corn demand.

Soybean exports out of Paraguay in the month of May were up nearly 34% from April at 1.13 mmt’s according to data. The country’s export program had been slow to start the season as low river levels and weak prices caused farmers to hold supplies.

The river system is key to the country’s exports as it is a landlocked nation and relies on these waterways to get barges to open waters. During last year’s historic Argentine drought, Paraguay was the world’s third largest exporter of soybeans.

Officials estimate the pace of the current crop year’s soybean sales in Argentina have reached 41% of expected production at 20.2 mmt’s. Some 930,300 mt’s were estimated to have been sold between May 30th and June 5th, which pushed sales to their fastest pace in nearly two years following last year’s drought.

Brazil ag consultancy ANEC sees June soybean exports at 13.78 mmt’s, up from their previous estimate of 12.08 mmt’s last week. Meal exports are seen at 2.38 mmt’s vs 1.985 estimated last week, and corn exports are seen at 1.24 mmt’s, vs 1.05 estimated last week.

The European trade association COCERAL lowered their estimate of the total EU wheat crop to 129.9 mmt’s, down from their previous estimate of 130.4 mmt’s in March. The same group sees barely output at 52.2 mmt’s (down 0.7 from March) and sees corn output at 64.8 mmt’s (up 0.4 from March).

Economists see May’s core inflation reading this morning increasing by 3.5%, down slightly from April’s 3.6% increase. The data comes just hours before the Fed’s June meeting ends – a phenomenon that has happened only seven times since 2014.

Also, on the docket for Wednesday as it pertains to the Fed meeting will be an updated look at the ‘dot plot’, or a chart showing projections for what officials think will happen with rates the rest of the year.

Most assume disappointing inflation data since the chart’s last update in March will cause a reduction in the number of cuts officials see for the remainder of 2024.

The International Energy Agency, in its annual mid-term update, said global oil markets will face a “major” surplus this decade as the shift away from fossil fuels causes demand to hit a plateau amid plentiful supply growth.

The group estimates world consumption to top off in 2029 at 105.6 mil bpd, a level 4% higher than last year. On the supply side, they see production being a “staggering” 8 mil bpd higher than demand by 2030.

Weather models continue to zig and zag on the one-week forecast but remain in general agreement. Both the GFS and the EU model are wetter overnight for the Northern Corn Belt in the week one period and are mostly unchanged from yesterday in the two-week period.

“Wetter” is a general term however, as conditions for most of the Corn Belt will continue to hold in a direr bias at least through next week. Amid plentiful Spring moisture, this forecast is still considered non-threatening into the second half of June.

Heat begins to stretch Eastward starting today, with high temps seen in the 90’s/100’s for a broad area from S California all the way to Western Ohio. A low-pressure trough then brings cool air back into the West Coast beginning Saturday, though temps for the Midwest remain above average through the middle of next week.

No updates overnight internationally; the EU continues to be wetter than the GFS for Russian wheat areas, though models are beginning to hint at scattered precipitation in the 10-day period. Heat remains with temps some 10-15 degrees F above average over the next week.

Forecasts continue to call for a return to the wet pattern for Southern Brazil that caused inundating flooding through much of the month of May over the next 10 days. Most of Argentina also sees shower chances, while the broader whole of Brazil remains dry.

Temps continue to run some 5-10 degrees C above average, with the hottest temps centered on Southern Brazil/Northern Argentina over the next week.

Have a great day.

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