Play Turner’s Take Podcast Episode 185

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Since our last podcast the USDA has announced some details on the farm aid package, new crop corn traded $4.54, new crop soybeans traded $9.18, corn planting was 59% completed, soybean planting 29% completed, and the funds are probably now flat corn.  Currently the we are seeing CBOT consolidation. A lot has changed and there is probably more to come.  Make sure you check out the latest Turner’s Take Podcast!

Corn

Corn plantings are way behind at 59%.  The average is usually 90% or higher this time of year.  As of the end of last week the US still had to plant 38mm acres.  That is over 6 billion bushels of potential corn production.  The weather forecast does look better for June and I do think we get a lot of farmers in the field the first week or two of the new month.  According to the University of IL, corn planted on June 10th could lose up to 20% of yield potential.

The markets trade in catalysts.  The latest catalyst was planting delays.  I think the market is pricing in a loss of 6mm to 8mm acres of corn.  The next catalyst for the market will be yield.  We are waiting on the NASS to start issuing corn condition reports with ratings.  This is when we get to see how much of the corn is rated poor to very poor and good to excellent.

A major headwind for corn is global stocks.  The world has plenty of corn.  So as US prices go higher we lose export business.  At $4.50 Dec the US loses a lot of export business to South America.  For August delivery Argentina is about 50 cents under the Gulf.  At these prices Argentina will sell out most of their corn before the US gets back market share.  ASF is another headwind as global demand for feed will be lower.  This is probably more of an issue for soybeans and meal but it still a bearish factor for corn.

The NASS will not release corn ratings until the crop is planted and starts to emerge.  In years when we plant corn early, we would already know the Good to Excellent ratings.  We are probably a couple of weeks away until we see those ratings for this crop.  Until then I think we consolidate and are range bound.  The next potential bullish catalyst will be the great yield debate!

Soybeans

Soybean plantings were also way behind at 29% nationally.  Beans have rallied on speculation about lower acres and yield drag.  Soybeans have a lot more headwinds than corn.  Issue #1 is US and global stocks.  There are just too many soybeans on this planet.  Issue #2 is the US-China trade war and that hurts our export numbers.  Issue #3 is ASF and that is going to have a big hit on global feed demand for meal this year.

US new crop soybean ending stocks are estimated to be 900 to 1 billion bushels.  For every 1mm acres we lose, that only translates into 50mm bushels of production.  We would have to lose 8 to 10mm acres to get ending stocks down to 500mm or lower.  Could acres go from 85mm to 75mm?  That seems like a HUGE number of acres to lose.  Also remember that for every bpa we lose off the national average, that is about 80mm bushels.  To shed 500mm bushels the US would have to see the soybean yield go down to 44 or lower.

A loss of 10mm acres and 6bpa is 900mm bushels.  That would in theory zero out our carryout.  If the US loses 8mm acres and 5 bpa we are back to 300mm ending stocks.  I’m not saying that is what is going to happen, but those are the kind of numbers we need to get soybeans above $10 across all contract months.  As you can see, it was a lot easier to get corn over $4 this year compared to getting soybeans over $10.