- At the end of May, old-crop corn fundamental indicators had grown more bullish while new-crop futures spreads were less bullish.
- The soybean markets showed a similar situation based on futures spreads, though basis was already showing signs of slowing demand.
- The wheat sector finished off its marketing year at the end of May, and national cash indexes indicated available stocks-to-use had grown larger, for the most part.
It’s June 30, meaning we’ve made it to the end of another month. Here in the US this first month of meteorological summer has seen drought and floods, sometimes in the same place, all while an earlier than usual weather market appears to have played out. Besides being the end of the fiscal quarter in the financial and investment industry, the last trading day of June also brings with it USDA’s quarterly Grain Stocks and Acreage Update reports. This means ag media, both real and social, will be filled with “experts” on the FUTURES markets telling us how important data as of June 1 is. The large players on both sides (commercial and noncommercial) rely on up to the minute available stocks, planted acres, and expected demand data from private research firms or in-house analysis. That’s just how it is, but yet the game goes on.
What am I expecting to see in USDA’s Quarterly Stocks report for corn? At the end of May, the July-September futures spread showed an inverse of 77.75 cents as compared to the end of April’s close of a 56.25-cent inverse. At the end of February, the March-May spread showed a carry of 0.75 cent. Given this, we know US stocks tightened during 2022-2023 Q3, with additional support coming from the ongoing strength of national average basis. Recall my calculation at the end of May was still 34.7 cents over July futures as compared to the previous 5-year high weekly close of 15.0 cents over. Acreage is a tougher call but given the pace of early planting and the fact the December-March futures spread moved from a carry of 8.0 cents at the end of February to a carry of 10.5 cents at the end of April, it would make sense for US producers to have increased planted acres of corn.
As for my expectations regarding quarterly stocks and soybeans, the July-August spread closed May at an inverse of 82.0 cents as compared to 57.25 cents inverse at the end of April meaning US stocks had tightened. At the end of February, the nearby March-May spread was showing an inverse of 11.5 cents. National average basis was also strong at the end of May with my calculation coming in at 24.0 cents under July futures as compared to the previous 5-year high weekly close of 19.0 cents under July. I’m not expecting much change in US planted acres with the November-January future spread closing February at a carry of 6.50 cents and April at a carry of 8.25 cents. This same spread closed Thursday at a carry of 8.5 cents and covering 27% calculated full commercial carry, with 33% or less considered bullish.
As for quarterly stocks of wheat, the end of May was the end of the 2022-2023 marketing year for the wheat sector and my monthly available stocks-to-use (as/u) figures grew for both SRW (Chicago) and HRS (Minneapolis) while HRW was unchanged from the previous month (based on the price of cash indexes). In the grand scheme of things, though, the final SRW as/u figure (41.0%) was the largest since the end of the 2019-2020 marketing year (44.0%) while HRS and HRW were the largest since 2020-2021.
Are these my predictions of what USDA will say? Absolutely not. I don't play that game of pin-the-tail-on-the-donkey. This is my analysis of what the markets have been telling us. Once we get this report nonsense out of the way at noon (ET), attention should immediately return to weather forecasts. We’ll see what happens.
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.
