Play Turner’s Take Podcast Episode 183

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We have have a good old-fashioned weather market on our hands.  Analysts are now reducing acres and yield for corn and their is a possibility we lose 1 billion bushels in production.  Soybean yields are starting to be adjusted lower too.  Turner’s Take still has a moderately bullish view of the stock market and hogs.  Cattle is due for a bounce higher but the longer term outlook still looks bearish.  Make sure you take a listen to this weeks Turner’s Take Podcast!

Corn Supply & Demand

Now that a majority of the bearish news has been priced in (US-China trade war, large S.Am crops, ASF), the market has focused on planting delays and the wet weather.  I have seen estimates of the US losing 2 to 4 million acres and yield coming down 3 to 10 bpa.  If this weather pattern persists we could lose 1 billion bushels of production and that puts our ending stocks at 1.5 billion, a 10% stock to usage, IF we assume demand stays the same.  That is not likely because as prices go up we become less competitive in the export market and domestic feed preferences could change to meal or feed wheat.  Regardless, the tables below real supply destruction and the potential for old crop at $4.00 and new crop at $4.30 if the weather continues to delay planting and the funds continue to short covering.  To go higher than the levels the funds would most likely have to change course and get net long.

We are hearing a lot of issue planting (and replants) in IL, IN, WI and MO.  Farmers are talking about getting in as much corn as possible in areas that can plant at the expense of soybeans/prevent plant.  I don’t think acres come down as much as people think, but the yield loss could be significant.

Soybeans Supply & Demand

Soybeans have been a follower to corn during the short covering.  At first the market thought lost corn acres would go to soybeans.  Then we started to hear more about prevent plant.  For now I think acres are steady but the yields could come down.  Soybeans will be planted late too and it will be very wet.  If soybeans lose 2.5 bpa, ending stocks are still at 750. That is a more manageable ending stocks than 1 billion.  If yields go to 45 then we have ending stocks in the 500s and soybeans are in the mid $9s again.  If stock go below 500 then we are close to a 10% stocks-to-usage ratio and that is when beans can trade in the high $9s and low $10s.

There is still time for soybeans but if the weather continues, and farmers choose to plant corn over soybeans due to this rally, we could see July trade up to $8.80 and Nov to $9.00.  That assumes 84.6mm acres planted and a 47 yield.  If we drop the yield to 45 we can get to the mid $9s…without a China deal.

 

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While the podcast does not have specific actionable trading recommendations, we do publish them in Turner’s Take Market Alert for spec traders and Turner’s Take Ag Marketing for hedgers. Want to know what to look for in the commodity futures markets?