Market Analysis

After last week’s quarterly stocks and acreage reports provided some unexpected results for the grain and soybean markets, the trade’s focus has switched to the cur-rent western US heat dome. Forecasts show this heat moving into central US later this month during corn’s pollination and soybeans growth periods. With the US Drought Monitor showing dryness continuing in the central and northern Plains, numerous sections of Iowa, central Illinois, southern Michigan and northwest Ohio, the markets will likely remain quite volatile until the crops get past these important growth periods.

Last week’s smaller than expected spring wheat and soybean plantings helped firm the CBOT markets along with concerns about hot weather. However, the USDA’s upcoming July supply/ demand updates might not reflect smaller outputs since the USDA will only be updating its wheat and small grain crop sizes this month. A sharp drop in spring wheat’s output to 395 million bu. may tighten US total wheat crop by 100 million this month. Last month’s higher final stocks, however, suggests last year’s wheat feed level may be cut by 30 million, These higher beginning stocks, more imports and smaller feed demand in the 20117/18 because wheat’s new higher price spread to corn may only tight US stocks to 893 million bu. vs. 924 last month.

With the USDA not likely to change corn or beans previous yield levels with no field data until August, these new crop outputs will be based on the recent acreage report. In corn, last month’s stocks being 75-100 million above trade ideas suggests feed demand will be reduced while exports could rise by 50 million bu. given 2016/17 sales are only 36 million from outlook with 2 months left in the year. In beans, US sales are 130 million ahead of the USDA’s current outlook which could also mean a 25 million higher exports outlook vs.10 million lower crush.