Free Commentary

By: Dan Hueber –

We appear to be witnessing a minor reversal of fortunes as we begin this final week of June with corn and beans tracking just a bit firmer and wheat moving in the other direction.  While this could be little more than a single day phenomena, from a technical standpoint at least, we do have corn and beans quite oversold and wheat overbought so a correction to balance this out would certainly not be unreasonable.

With the quarterly grain stock and acreage reports on the docket for Friday, we could be in store for a somewhat quiet week but there is still enough uncertainly in the weather outlook into July that could inspire more volatility.  Tropical storm Cindy brought rains in the gulf states and pushed as far north as the Ohio and Tennessee valleys over the weekend, which did bring needed moisture particularly for Texas, but understandably did nothing to relieve concerns in the western corn belt and Northern Plains.  Cooler than normal temperatures have reduced or at least delayed crop stress but that will only carry so far as we move into the critical months ahead.  The outlooks that I have read this morning do call for intermittent showers to the north and west but nothing that would be considered widespread enough to break the drought situation.  Crop ratings this afternoon will likely be steady to slightly improved for the averages though.

As I commented previously, we have reports coming up on Friday to grab our attention and estimates are rolling in. The survey conducted by Bloomberg produced these average guesses; June 1st Grain Stock of 5.125 billion bushels of corn, 983 million beans and 1.136 billion wheat.  Planted acreage at 89.78 million corn, 89.86 million beans and 46 million wheat.  Thompson Reuters survey yielded these estimates; Corn stocks of 5.123 billion, beans at 983 million and wheat at 1.137 billion.  For acreage their survey says, 89.903 million in corn, 89.75 million to beans and 46.07 million wheat. Just out of curiosity, I thought it would be interesting to see how acreage has shifted in the country.  A decade ago, we planted 93.5 million acreage of corn, 64.7 million beans, and 60.5 million wheat.  Two decades back and we find corn acreage at 79.5 million, beans 70 million and wheat at 70.4. If there was any doubt that we have evolved into a corn/bean production nation, that shift would appear to dispel it.

While consolidation appears to be the trend in the ag arena, (Syngenta and possibly Bunge) anyone who has been involved in acquisitions will tell they can often get off to rocky starts, particularly when different cultures are merged and it would appear that the Chinese giant, COFCO Group is working through some of these issues currently.  As we have covered in the past, over the past couple years, they have acquired the Dutch grain trader Nidera as well as the Noble Group ag division and it would appear they continue to grapple with bringing these all together.  There have been a number of departures from key positions, as well as a few financial (trading and accounting) mishaps. By no means does this suggest that they are at risk of failure but I have to imagine they will be working on making sure the ship is sailing on course before loading it with any more cargo, i.e. talks with Bunge.  Do recognize though, this company is making inroads on the world scene as they reportedly are now the second largest grain exporter in Argentina, following only Cargill and have moved up to the number four spot in Brazil.  It would seem only a matter of time before they acquire a presence in the United States as well.