More of the Same: USDA Report Underwhelms

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🌽 USDA Report: Nothing to Get Excited About
The latest USDA report was largely as expected—minimal changes to U.S. stocks and only modest tweaks on demand. South American production was revised higher, keeping global corn supplies comfortable. Overall reaction: underwhelmed 😐

📉 Grain Markets Slip
Soybeans, corn, and wheat all moved lower. Favorable weather 🌦️, weak crude oil 🛢️, and ample supply expectations kept pressure on prices.

🌧️ Weather: Mixed Bag
Rain helped improve drought conditions across parts of the Corn Belt, but dryness worsened in northern Minnesota and remains widespread in the High Plains. Still a split story 🌦️➡️🌵

🛢️ Oil Drops on Peace Hopes
Crude fell over 2% as optimism builds around a potential end to the war, but uncertainty remains. Meanwhile, the prolonged conflict continues to fuel inflation pressures 📉➡️📈

🚢 Export Snapshot
Corn sales improved, soybeans disappointed, and wheat exceeded expectations. Notably, China is still absent from new-crop soybean buying, with a large share of sales sitting in “unknown” destinations 👀

Transcript

USDA Report

SPEAKER_00 0:08

Good morning, everybody. It is Friday, June 12th, about 5 30 a.m. Central Time as I speak here. Uh, the grain markets they are trading lower here this morning. Brian Split is joining me. Joe is off on vacation. We are going to start off with yesterday's USDA report, which featured uh no major surprises. Uh, there were no meaningful revisions to U.S. ending stocks for either new or old crop. On the demand side, old crop corn export projections were modestly increased. While soybean exports were lowered and crush was raised for wheat, the USDA lowered its all wheat yield by 0.5 bushels per acre, resulting in a modest reduction in new crop ending stocks. Down in South America, production estimates were raised for Argentina's soybeans and Brazil's corn, which in turn lifted global corn stocks while soybean and wheat changes were minimal. The marketplace was largely underwhelmed and will now turn its focus back to U.S. weather and the June 30th acreage and quarterly grain stocks report. Brian, what were your overall thoughts on yesterday's report?

SPEAKER_01 1:16

Um, I think the primary driver yesterday uh would have been the world numbers out of South America, the 2 million ton increase for uh Brazilian corn and Brazilian uh I should say uh Argentine corn and Argentine soybeans. And we had a two or three million ton increase in Brazilian corn production. So overall, and I think they increased like India's yield and their area. So there was a pretty decent increase in the world stocks for corn. And uh I think that'll bring into question the ability of the USDA to further raise corn for export uh in balance sheets down the road. Uh, we're probably gonna have a little bit more competition out of South America. Uh, as far as the uh the wheat market, uh, we had production decline there. After May was a very large hit to production on the yield side and on abandonment. And that might be something that we see a little bit further, maybe in July or August, is that abandonment number come up a little bit more. That was a feature three years ago when we had problems

Price Action

SPEAKER_01 2:22

in Kansas with the wheat crop. We did see that abandonment number uh continue to push higher late into harvest.

SPEAKER_00 2:29

And on to price action, how the market reacted. Uh, soybean futures extended losses yesterday, with the November 26th contract falling nearly five cents to settle at $11.34 per bushel. Uh, futures were pressured by weaker crude oil prices, favorable weather forecasts, and a lack of supportive news. Corn uh corn futures followed suit with the December 26th contract declining roughly seven cents to settle near 440 per bushel. Similar to soybeans, corn was pressured by favorable weather and USDA's crop report, which reinforced expectations of ample domestic and global supplies, and wheat futures were uh lower as well. What are your thoughts on yesterday's price action and then overall just what we've seen this whole week?

SPEAKER_01 3:10

Yeah, McKenzie, price action yesterday was not uh what I would call good. We did have new contract lows that were scored in both old crop and new crop corn. And the new crop contract has essentially been holding this general price level for the last 22 months. We had contract lows made at 439 a bushel, and this was at back in August of 2024. Uh, then we reinforced support at this level uh in August of 2025 with a low of 440 and three-quarters. So uh trading to 435 and a half for a low overnight, these are new lows. Um, there's not that's not a good thing to uh to occur, and hopefully we can recover into the close and and not close into new contract lows, which we were able to avoid yesterday. Um, on the soybean side of things, we're really still holding support uh rather nicely in the short term. November soybeans are revisiting highs that uh we had scored last November in that 1130 area. Uh there's definitely a shelf of support under July soybeans at the 1110 level from June of last year and then from highs that were scored in fall of last year. So we're uh kind of pausing soybeans on these on these uh old highs. Uh I think it is likely to be inevitable that we'll we'll continue to see soybeans weaken late in the month into July and likely see some further losses there. But with crude oil, and this is another key element, um crude oil was part of that late break in the day yesterday. We were we were poised to kind of hold contract lows on corn until we saw that late break in crude oil. And crude oil's taking out some support that uh has been holding since about late April. Um so if we close crude oil below $86 a barrel, that would be a close into some uh a new kind of a trading range that we haven't been in for quite some time.

SPEAKER_00 4:59

And we'll get to crude here in a second. Um, what's it gonna take to this is a broad question, but what's it gonna take to turn these grain markets around? Are we talking a major weather event? Are we talking China coming back into um back into the market? It just seems like we just cannot catch our footing.

SPEAKER_01 5:14

Yeah, so maybe we can start to slow down the selling a little bit if we do see uh a drop in condition ratings next week. Um, there are areas that have been getting too much rain, and I know it's when you have rain out there, it's hard to be bullish about rain in the Midwest uh as the crop is developing. But uh there are areas that have gotten too much, uh, there are areas that have some ponding uh yellow uh crops. So we'll see if that's something that might creep in to at least maybe help stem the selling. Uh as far as turning the market around, uh, yeah, I mean, if we could have China come in and make some corn purchases, uh, I think that would go an awfully long way. Uh if the forecast uh as we went you know, transitioning from June into July and start focusing on pollination, if that were to change the pattern, because right now it's uh it was 60 degrees this morning. We just had a bunch of rain yesterday. So that is not something that's get them going to get the market excited to try and price in a reduction in yield potential. So we've got to get a hot and dry type of a market to develop. Um and and outside of that, um, you know, maybe uh a resurgence in energy values, which at least for right now, that's not the case. Uh momentum is moving more to the downside in energy values.

Drought Monitor/Weather

SPEAKER_01 6:32

Uh so again, it's a kinetic event in the Middle East. Things can change rapidly, but uh the sentiment of the day is negative.

SPEAKER_00 6:39

Uh on to the most recent drought monitor, and as you touched on, weather. So a large portion of the corn belt received precipitation last week. As a result, drought conditions improved across northern Illinois, eastern Iowa, northeastern, and southern Missouri, and portions of Kentucky. In contrast, dry conditions worsened up in northern Minnesota. Meanwhile, rainfall was scattered across the high plains, easing drought conditions in some regions. But aside from North Dakota and eastern Kansas, most of the region uh remains plagued with widespread dryness. When we look at the percentage of U.S. areas experiencing drought, corn country currently stands at 24%, soybeans 25%, winter wheat 63%, spring wheat 22%, and cattle country 54%. As you just stated, um, some areas of the corn belt has have received too much moisture. Um can you elaborate a little bit more on that? And is there any uh seriousness when it comes to dryness, such as up in Minnesota?

SPEAKER_01 7:35

Um, yeah, so there's uh parts of the corn belt at uh Iowa's an example where there's uh some spots that have gotten too much rain. You can go in into the eastern part of the corn belt that uh there's been too much rain. And uh, you know, it's indicative when you look at the drought monitor. Um, you know, when there is no color on the map, that means that uh there is no drought there. Now, it's not like it starts to change colors in in you know a green direction uh or blue because there's too much there. This is only looking at deficits. So um you're not gonna see any areas with too much moisture on on any of these maps. But um I will say that when we think about uh you know the transition from June 2nd to June 9th, um, we are gonna see as of today, June 12th, if we were gonna look at an update of this map, which it doesn't exist, but uh if it did, a lot of the yellow that occurs in uh northern Illinois and as you get into Iowa, that's going to start turning into a smaller area, uh potentially white there as well. So that's I I think uh an improvement that the market is is looking at as we're gonna see further reduction in drought. Um, but uh yeah, the area in Minnesota that uh you know they that that is is also being uh cured in in some areas. So I think the important thing is to look at the big picture right now. Um and yeah, every year there's gonna be pockets that have a little too much or or uh not enough when we talk about rainfall. But uh in the aggregate, uh I think the market, and and we could tell by the price action, does not see the current

Iran War/Crude Oil

SPEAKER_01 9:10

moisture situation as as uh something to uh feel like they need to price in the the idea that we're losing yield potential in a major way.

SPEAKER_00 9:18

On to crude oil. Uh oil prices moved lower yesterday amid hopes the war will soon end. WTI crude fell more than 2% to settle at 8771 per barrel after President Trump signaled that the U.S. and Iran are nearing a deal, which he expects could be finalized in the coming days over in Europe. However, Iranian media pushed back on that narrative, reporting that no final decision has been made. Earlier in the day on Thursday, Trump called off planned airstrikes on Iran, citing a breakthrough in talks to end the war. Trump has repeatedly suggested the conflict was nearing an end, initially projecting it would last only four to six weeks. However, as we all know, the war has now entered its fourth month, driving a sharp rise in fuel costs and adding to uh broader inflationary pressures. So is this the time, Brian, that we really end the war, that we get a deal put together?

SPEAKER_01 10:10

You know, I don't know. I mean, it's uh one of the things that we talked about, I think back in in March was that you know, once these wars start, they last a lot longer than uh I think what is advertised, and and um, you know, they become very sticky situations. And uh I think that this war has been suggested was close to over or over numerous times. Um, and so yet here we are. So I I don't know. Um, you know, at to your point, uh the Iranian uh sentiment seems to differ from what we're seeing on on uh sentiment about ending the war on our side. Um so I'm just going with history. I'm gonna say no. Um, you know, the the market is pricing in based on the headlines. Uh, we're obviously seeing energy values down, but uh I don't know. Coming out of the weekend, I mean, we just had a uh helicopter where it was down. Uh how close are we, really? I I don't know.

SPEAKER_00 11:05

Um the crude market, though, continues to ride the wave of headlines. You know, Trump comes out and says it's gonna end and then it goes down and then you know escalate uh things escalate again. When does the crude market just straight up trade the facts, the fundamentals, as in the Strait of Hormuz is still closed? Because you know, Trump can go on and on forever just saying it's gonna end and then have it not end. When like is the oil market ever gonna do that? Just trade the straight up fundamentals?

SPEAKER_01 11:31

Well, um, I think there's kind of this belief that uh, you know, at some point when you have a lot of the major countries dipping into the reserves, uh if the traffic doesn't start back up, that there's gonna be kind of that breaking point where all of a sudden no one has the reserves anymore. Um, you know, there's been statements that uh oil is leaving the region, that the U.S. is getting it out of there. I so I, you know, it's tough to unfortunately, it's tough to believe everything the administration says. Yeah. And so um, I don't know how much oil has left the Middle East, uh, how much the US has been able to get out, and and and uh we do have the situation of draining our reserves, and and they were already uh reduced to begin with from the the Biden presidency. So um there's definitely outside markets watching that. Uh, and and if that is the case, then you could argue that maybe the energy market's being complacent right now. But um for some reason, you know, we have traded crude oil uh to the highest price right at the beginning of the conflict, up to almost $120 a barrel. Uh we spent some time uh you know jockeying back and forth over a hundred, uh, but now we're starting to break down below levels that have been holding for the last uh 30 plus for almost 45 days. So there you have to uh read into that a little bit that the market is sensing some things. And I I guess something else is that you know the higher energy prices do change behaviors as well. So um there is going to be reductions in consumption because of what's happening, you know, families going into summer, for example. It's awfully expensive to fly a family of four. Um so I think you're gonna have a lot more people drive and do uh you know destinations

Export Sales

SPEAKER_01 13:20

that are closer to home. Um so I do believe that there's uh a change in behavior that also comes along with higher energy values that reduces demand.

SPEAKER_00 13:28

On to export sales, U.S. corn export sales increased last week for the week ending June 4th. Net corn sales were reported at 39 million bushels. The print was up 13% from the previous week, but down 15% from the prior four-week average. Japan was the largest buyer. Net soybean sales were near the lower end of pre-report expectations at 8 million bushels. The print was down 24% from the previous week and down 18% from the prior four-week average. Egypt was the largest buyer. And then wheat sales uh for the new marketing year that began on June 1st, exceeded expectations at 24 million bushels. The print was up 4% from the prior week with Mexico as the largest buyer for the week. What are your overall thoughts on export sales? And then also notably, uh, China has yet to buy any new crop uh soybeans.

SPEAKER_01 14:14

Right. Um, so old crop uh sales for corn, pretty solid. And actually, I think the new crop sales for corn were also uh above what you know we would consider trade estimates. But uh the new crop uh uh export book isn't off to the best start compared to you know where we were for uh this year's export sales. Um, yes, the Chinese are notably absent. Uh that's been something that uh has been talked about that China's gonna purchase the additional $17 billion of agricultural products. Um I think when we've discussed this over the last couple of weeks after that uh was first uh announced or that that White House fact sheet was released, uh for the Chinese, it makes a lot of sense if there's not a problem with domestic weather, um, that they would just be patient and look to procure corn, wheat, whatever it is, sorghum, uh at at what would be seasonally the best time, which would likely to be maybe about two months from now, as we progress into mid-August. That seems to be when the market likes to make some blows after we see that seasonal move lower through July. So if I'm China, um, unless I start to sniff a bit of a weather concern in the United States, um, I am I'm gonna be patient and look to procure uh whatever I need to buy uh at lower levels over in the next couple of months. Um so on the wheat side of things, we actually had uh some pretty good export sales there. Um, but uh I again when we think about wheat, there's the reduction in production, but there is still uh enough wheat in the world, and and we're not gonna see the um you know the market get uh concerned about just one particular region of production moving forward. We already kind of priced that issue

Cattle

SPEAKER_01 16:03

in as far as the hard red wheat crop. Um and and so right now the cinema's return to there's enough wheat in the world.

SPEAKER_00 16:11

Uh cattle futures, they were higher yesterday. Live cattle were three cents to a buck eighty five higher, and feeders saw gains ranging from 325 up to 543, with the exception of the May 27 contract, which lost 27 cents. What are your thoughts on this cattle market?

SPEAKER_01 16:26

Um, when we talked about cattle earlier in the week in the uh premium program, we said that uh, you know, technically we were looking for some additional short-term upside. Uh, I like the idea of the August feeders returning back to the 365-ish area. So that's gonna be about another five bucks higher than where we had settled yesterday. Uh, I like the idea of the August live cattle uh returning back to maybe the 247 area. Uh so maybe four and a half to five dollars higher there. I do think if we start to revisit those price levels, that producers need to really think about uh again implementing some type of downside coverage in both products.

SPEAKER_00 17:04

Sounds great. Thank you for joining me here this morning, Brian. Everyone have a great day, a wonderful weekend, and we will be back on Monday.