- For those who drool over government numbers, Wednesday is a day for you as the May Consumer Price Index, June USDA guesses, and US FOMC interest rate announcement are all on the docket.
- Regarding the FOMC, Fed fund futures continue to indicate no move on interest rates until at least the September meeting, if not November.
- As for USDA's nonsense, most folks will be paying attention to made up new-crop numbers while the imaginary old-crop numbers could be more interesting.
Morning Summary: It’s early Wednesday morning, and we are looking at another day of having to run a gauntlet of government numbers. Things get started early, 8:30 (ET), with the release of the May Consumer Price Index (CPI). I’m not sure what all the hubbub is about, for we know the US (as well as the rest of the world) is still seeing inflation. Such is the ripple effect of trade wars and tariffs. But anyway. Once those numbers are unveiled and argued about, the Grains sector will get the release of USDA’s latest supply and demand guesses. While most of the focus will be on new-crop projections, even though we know next to nothing about the actual crops at this point, the real interest could be in what USDA does with its old-crop corn and soybean demand estimates. These could change ending stocks guesses, and therefore new-crop beginning stocks. And when that set of kidney stones has been passed, this week’s 2-day US Federal Open Market Committee meeting will conclude with the expected announcement of no interest rate change. The focus should be on what Chairman Powell has to say to go along with the announcement. As usual, I’m looking forward to today’s close.
Corn: The corn market was quietly higher again early Wednesday with contracts finding a light round of buying interest pre-dawn. July (ZCN24) extended its overnight rally to as much as 3.25 cents and was sitting on that mark as of this writing, while registering trade volume of about 16,500 contracts. I’m expecting volume and volatility to spike once USDA releases its latest round of guesses at noon (ET). Fundamentally, national average basis continues to firm with Tuesday evening’s calculation coming in at 14.75 cents under July futures as compared to last Friday’s figure of 17.75 cents under July. This tells us merchandisers are still pushing to source supplies to meet demand. On the fund side of the ledger, July closed 7.0 cents higher from Tuesday-to-Tuesday indicating noncommercial traders were doing some short covering this past week. Technically, this leaves short-term uptrends in place, a factor that could come into play after USDA’s latest guesses are unsealed. New-crop December (ZCZ24) gained as much as 2.5 cents overnight and was one tick off its high at this writing, on trade volume of less than 10,000 contracts. As with the old-crop July issue, I’m expecting volume and volatility in Dec24 to jump after the release of USDA’s numbers, even if only momentarily.
Soybeans: The soybean market was quietly higher to start the day with July (ZSN24) rallying as much as 7.75 cents overnight on trade volume of less than 10,000 contracts. Some of this was likely short-covering following Tuesday’s selloff, a move that left July 1.0 cent lower from the previous Tuesday’s close, hinting at continued selling from noncommercial traders despite recent support from the commercial side. Speaking of which, national average basis firmed Tuesday evening with the latest calculation coming in at 58.0 cents under July futures as compared to last Friday’s 58.75 cents under July. We haven’t seen much in the way of increased export demand, though overnight activity hints at another possible sale being made to Eastern Hemisphere buyers. As for USDA’s monthly guesses, I’ll be keeping an eye on old-crop demand. The crush estimate has been sitting at 2.3 bb for quite some time, as compared to the previous year’s reported 2.212 bb. Looking at exports, USDA’s latest guess was 1.7 bb. At the end of May, total US shipments of 1.467 bb projected export demand of 1.686 bb, down 20% from the previous year’s reported 1.918 bb. New-crop November (ZSX24) added as much as 4.5 cents overnight and was sitting 2.25 cents higher at this writing.
Wheat: The wheat sub-sector was in the red pre-dawn as this week’s roller coaster ride continues. I doubt much attention will be paid to wheat numbers in USDA’s June round of guesses, though given all the ruckus over Russian headlines of late, some will take a look at that country’s production estimate. For now, I’ll continue to apply what I call the Wheat Reality: One bushel of wheat left over is too many. In other words, the world is not running out of wheat, while summer harvest continues to get cranked up in the US. With this in mind, the CME’s daily running average of the July-September Chicago (SRW) futures spread full carry coverage came in at 81% Tuesday evening. Recall the key number is 80% through the close of Friday, June 21, for if the daily running average is above that mark commercial storage increases to roughly 11 cents per bushel per month. For the record, July Chicago (ZWN24) dropped as much as 8.25 cents overnight and was near its low early Wednesday morning. July Kansas City (KEN24) fell as much as 10.25 cents and was sitting 9.0 cents lower at this writing. July Minneapolis (HRS) was down 6.25 cents while the September issue lost as much as 7.25 cents overnight and was down 5.75 cents to start the day.
On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
