Corn and Soybean Ratings Climb Above Average

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🌽 Crop Conditions & Harvest Progress
US crop conditions improved modestly last week. Corn ratings rose to 68% good-to-excellent, while soybeans increased to 66%, both slightly above average. Spring wheat saw a stronger jump to 55%, now above normal levels. Winter wheat improved to 27%, though it remains historically weak for this time of year. Harvest is moving quickly, with 25% complete—well ahead of both last week and last year’s pace.

📈 Markets Rally on Iran Deal Hopes
Equity markets surged Monday on news of a preliminary US-Iran peace deal. The Dow hit a record high (+0.9%), while the S&P 500 (+1.7%) and Nasdaq (+3.1%) posted strong gains. Optimism around easing inflation and lower interest rate pressure drove the rally. Crude oil fell 4.8% to $80.75, though prices remain significantly higher year-over-year. Even if the Strait of Hormuz reopens soon, lingering uncertainty and congestion could delay a full return to normal shipping.

🚢 Fertilizer Shipments Still Constrained
Fertilizer logistics remain tight despite the potential reopening of the Strait. Shipowners are cautious, and fertilizer cargo is being deprioritized behind energy shipments. A backlog of vessels—including 40+ fertilizer ships—continues to clog the route, with flows still down roughly 90% since the conflict began. While prices have eased مؤخراً, US fertilizer costs remain elevated versus last year.

🛢️ NOPA Crush Mixed but Historically Strong
NOPA reported a May soybean crush of 208.8 million bushels—down slightly from April but still a record for the month and up 8.3% year-over-year. The decline was tied to seasonal maintenance downtime. Soybean oil stocks dropped sharply to 1.74 billion pounds, a five-month low and below expectations, signaling tighter near-term supply.

🚢 Export Demand Remains Solid
US corn export inspections fell to 1.6 mmt but remain robust overall. Soybean shipments were strong at 522,687 mt, up sharply week-over-week and more than doubling last year’s pace, though China accounted for just 26%. Wheat exports disappointed at 334,292 mt, trailing expectations and running below last year.

🐛 Screwworm Outbreak Expands, Supports Cattle
The New World screwworm outbreak has spread into west-central Texas, with cases now confirmed across multiple counties and species. Containment challenges persist due to limited sterile fly production, raising concern about further spread. The situation is indirectly supporting cattle prices, as movement restrictions tighten already constrained supply.

Transcript

Crop Conditions Improve

SPEAKER_00 0:08

Good morning, everybody. It is Tuesday, June 16th, about 5 30 a.m. Central Time. As I speak, I have Brian Split joining me here again this morning. The grain markets are trading lower here this morning, and we're going to start off with USDA's crop progress report that was released yesterday. U.S. corn and soybean conditions improved last week. The corn crop was rated 68% good to excellent nationally as of Sunday, up from 67% the prior week and above 67% on average. The soybean crop was rated 66% good to excellent nationally compared to 65% last week and 64% on average. The spring wheat crop saw a more notable increase, rising to 55% good to excellent, up from last week's 52% and above 54% on average. Winter wheat conditions, while still historically poor, showed a slight improvement to 27% good to excellent from 25% the prior week. However, the rating was still the lowest for the week since 1989. Meanwhile, harvest progress is advancing rapidly, with 25% of the crop now harvested up sharply from 11% last week and well ahead of last year's uh 9%. It appears that the majority of the crops throughout the Corn Belt states have uh right around the average for um both corn and soybean conditions, with the exception of Missouri and Nebraska. So uh what are you hearing about uh crop conditions throughout the Corn Belt?

SPEAKER_01 1:38

Uh McKenzie, there's definitely some areas of concern, uh, as there are any given year. But uh right now, I think the bottom line is when you look at it in aggregate, uh to your point, we are holding up versus averages. Um, when you look at the numbers and some of the state-by-state uh movement, maybe notable was that uh Iowa corn was down 5% and it's good to excellent rating. And um, you know, that'd be something to watch moving forward as we kind of progress through the next several weeks and look at uh, you know, the 10-day models, the GFS and the Euro kind of really vary between where they're putting some of these higher moisture totals. Um, so that that probably will be uh something to really see how the uh the location evolves because that could be something that further draws uh some of these good to excellent ratings down if we uh continue to get too much moisture in some areas. And that was kind of that conversation we had yesterday. It was like, when is you know to too much of a good thing become something that the market starts to take note of? But we're not at that

Stocks Rally and Crude Declines

SPEAKER_01 2:39

point yet. And um, you know, again, right now, when we think about the big picture of good to excellent ratings, uh we're we're holding up versus averages just fine.

SPEAKER_00 2:48

On to the stock market rally that we saw yesterday. Um, the rally occurred amid news of the preliminary US-Iran peace deal. The Dow Jones rose 0.9% to a record high, while the SP 500 gained 1.7% and the NASDAQ jumped 3.1%. The move came after President Trump indicated that a deal had already been signed, raising expectations for easing inflation pressures and reducing the need for higher interest rates. Trump also indicated that the Strait of Hormuz is expected to reopen on Friday. Meanwhile, oil prices moved lower yesterday, with WTI crude falling 4.8% to settle at 80.75 per barrel. Despite the decline, oil prices remain roughly 40% higher than a year ago. Even if the strait reopens as expected, it will likely take time for shipping flows to fully normalize. And of course, uncertainty remains over whether the agreement will hold. Um, in your opinion, how uh sustainable is this market rally?

SPEAKER_01 3:47

Uh well, uh we'll probably know how sustainable it is about this time next week because uh the uh everything that's supposed to happen is supposed to happen Friday. The grain markets are closed on Friday because of Juneteenth. So that's now a three-day weekend for the exchange. And uh that'll leave the market uh you know unopen until Sunday night. And so there potentially could be things to digest. Um, there could be things not to digest because we uh you know have the agreement in place and uh the market continues to move in that uh direction. But uh, I don't think that that's a given. Um right now things do look positive in the equities from where we had finished Friday. We did gap higher on on the futures, uh, gapped over it looks like about the 10 and 20 day moving average in the SP. We had the uh the crude oil market and the other energy products gap lower. Uh they're adding to their losses this morning. So at least for the time being, uh the market continues to believe that this is going to be something that comes to fruition um you know going into the weekend. But again, long weekends, a lot can happen.

SPEAKER_00 4:54

Right. Um, and we saw the grain markets follow crude up through this situation. Will we see it see the markets follow it back down um as this progresses, in your opinion?

SPEAKER_01 5:05

Um, bigger picture, uh, it's likely, but day to day that does not have to be the case. And yesterday, I think, is a really good example where we had crude oil down five dollars a barrel for a lot of the session. And initially, that was definitely weighing on the corn market as uh we had started the day session. Uh, but for some reason, over the course of the session, we were able to uh finish slightly higher on the day. Uh, we couldn't get the uh kind of that daily reversal higher that I wanted to see and get back above Friday's high, but nonetheless, it did fight the current of the day with uh energy markets lower. Um, I think it's really gonna boil down to if there is a story directly related to ag uh because of a uh uh assumption of additional demand coming in, if there's some evidence that China comes in that that might be something that could uh fight the current of weaker energy values, uh, or we have some type of a weather market that says, all right, we need to price in the idea that um that yield could be below trend. Uh to what extent would be dictated by the circumstances. Uh, but um without that type of event

Fertilizer Shipments Through the Strait of Hormuz

SPEAKER_01 6:17

happening, we are likely to see uh lower crude oil if that were to come to fruition continue to pressure on ag values.

SPEAKER_00 6:26

Uh fertilizer shipments are expected to face delays even if the strait of Hormuz reopens. Ship owners, of course, will likely move cautiously as the uh as the as access security, as they assess, excuse me, as they assess security conditions and determine whether uh the US-Iran peace deal will actually hold. Additionally, fertilizer shipments will take a backseat to higher priority cargoes such as oil and natural gas. Currently, there's a backlog of hundreds of vessels waiting to pass through the strait, including more than 40 ships loaded with fertilizer. Compared to pre-conflict levels, fertilizer shipments through the waterway are down 90%. Fertilizer prices have pulled back in recent weeks as the Iran war risk premium has diminished and the northern hemisphere planting season comes to a close. However, prices in the U.S. uh are still well above year-ago levels. So it appears that even if the strait reopens, it will be a while before fertilizer moves through. So, does that mean that we're gonna see fertilizer prices continue to say stay elevated, or will the war risk premium wearing off um kind of continue to ease those prices?

SPEAKER_01 7:41

Uh, I could see them being very well supported because it to me, this just then becomes a major logistical puzzle. And um, you know, to your point, you're gonna have higher priority items that are going to be uh treated initially, but there's there's going to be that effort of who needs fertilizer when for their growing season. I like to think that uh some of the people in charge are gonna be able to get this figured out and get uh fertilizer where it needs to be for that time of year. So part of that prioritization or triage, if you will, is who needs fertilizer for what growing season at what time of year, and we're gonna prioritize that that they get that product. Um so I think you know the the costs um uh of having the priority might be something that gets passed on. But uh overall, I mean, to we we've seen urea at the Gulf uh come down substantially, and and uh there's definitely the uh concerns that were um you know rather prevalent at the beginning of the war uh have definitely been um you know tempered quite a bit. Uh and and so you know it it's I think back to when Russia invaded Ukraine and the economist, you know, had pictures of wheat with skulls on the shafts, right? Um you know, when when the war started, there was a lot of

NOPA Crush

SPEAKER_01 9:03

that kind of hyperbole again. Um, and big picture, it just didn't turn out to be that uh that serious of an issue.

SPEAKER_00 9:11

Right. Um, NOPA released its May Crush data yesterday. The U.S. soybean crush declined compared to April as NOPA members processed 208.79 million bushels. Despite crush being down uh 1.4% month over month, it was up 8.3% from May of last year. And also the largest crush on record for the month. The May crush fell short of the average trade estimate of 216.02 million bushels. The decline in crush is attributed to processors idling their plants for seasonal maintenance and repairs. End of month, soybean oil stocks fell to a five-month low of 1.74 billion pounds, down 12% from April, but up 26% compared to last year. Stocks fell uh below all trade estimates, which averaged 1.86 billion pounds. What are your thoughts on the crush that we saw last month and also um our stocks levels?

SPEAKER_01 10:05

Right. So um, you know, if there is a uh uh lower than expected crush number, uh, it certainly isn't because of crush margins. Uh those are tremendous. Um, so it does fit into that seasonal uh you know idle time to make the the seasonal maintenance uh getting done. Now, as far as the uh the stocks, um, you know, we'll see what uh what happens moving forward with uh with bean oil stocks. There's a reason that uh this market is traveled to price levels that it currently resides. Uh however, um I do think that uh with where bean oil values are compared to some of the previous records, um, that might be something to help uh uh uh you know reduce the demand a little bit in the short term. And then we are at a point where seasonally we will see oil stocks decline. Uh, you know, why? Well, as we get towards the back end of the marketing year, you just typically have uh less old crop soybeans to crush moving forward, and then we see stocks build as we get to harvest,

Export Inspections

SPEAKER_01 11:11

and then we hit the high point of stocks as we get into the early winter point. So this is a a seasonal drawdown in stocks that does occur.

SPEAKER_00 11:20

Uh on to export inspections. USDA reported that uh 64 million bushels of corn were inspected for export during the week ending June 11th. The print was down 19% compared to the prior week and down 3.5% versus the same week last year. Soybean shipments were near the upper end of prereport expectations at 19 million bushels. The print was up 90, the excuse me, the print was up 27% compared to the previous week and up a whopping 132% versus the same week last year. China accounted for only 26% of the week's inspections. Uh wheat shipments fell below expectations at 12 million bushels. The print was up 3.4% from the previous week, but down 14% versus the same week last year. What are your overall thoughts on what we're seeing uh with inspections?

SPEAKER_01 12:10

Uh well, the the soybean inspections were uh were positive versus last year and positive versus the uh the previous week, and uh that maybe took some of the volume from uh from corn. So corn was close to last year, uh, but definitely down from the previous week. And and that again might be because of the increase in soybean inspections. Uh, we've got to get these soybeans uh out of the country. It's interesting when you look at who the major buyer of of soybeans has been for this particular crop year. Uh China is the second largest buyer, but it's actually been Egypt, which is incredible to think that uh that they are our our number one buyer of soybeans currently, Egypt.

SPEAKER_00 12:49

Is that is that tip have we seen that in recent years?

SPEAKER_01 12:52

Well, we've seen uh China be our our major buyer of soybeans, right? And then sometimes uh Mexico comes in there, but but Egypt? I I don't recall Egypt in in just from the top of my head, but uh you know that's part of this process is that uh as you uh have the uh the trade discourse with China and they buy less, uh other uh uh entities will buy more from us. And uh so there is that uh that just general shuffle of of who buys from where. Um and one other thing that uh we've definitely wanted to see uh was the increase in domestic demand for soybeans, which has happened uh with the addition of the uh biodiesel initiatives. And so um we'll see it it would be nice to get things kind of firing on all cylinders where we've got that domestic demand for biodiesel,

Cattle

SPEAKER_01 13:43

and then we do have China that comes in in a in a little bit larger way uh with a little bit more regularity to their purchases.

SPEAKER_00 13:51

Uh the New World screw worm outbreak has now reached west central Texas. The latest case was confirmed in a sheep in Tom Green County, approximately 200 miles from the initial detection and about 250 miles north of the U.S.-Mexico border. In total, 12 cases have been reported across six counties in Texas and one county in New Mexico. Confirmed infections have been identified in cattle, goats, sheep, and a dog. Concerns remain elevated. Sterile fly production has not yet reached the scale needed to effectively contain the pest. The outbreak has provided an unexpected boost to the cattle market as movement restrictions in affected areas further squeeze already limited supplies. Um, it appears that the USDA might have a hard time getting a handle on the screw worm as we uh enter these summer months. And as I just said, we don't have enough sterile fly production. Uh, but more importantly, what are your thoughts on the cattle market and what are you seeing when it comes um to these charts?

SPEAKER_01 14:52

Well, um I will say that uh initially the cattle market so far has taught us that uh screwworm was initially treated as bullish, right? Uh the opening after the initial onset was was very negative, but it it fought that off and turned around and finished higher. I don't know if that continues to be the case, big picture. Uh, but technically, and this is not something that is uh validated by any means. I'm kind of looking at what could this turn into? How could this chart evolve over time? So at the very least, we seem to have a little bit of a downward trending channel in live cattle. That would be dictated by that uh those those light blue lines that are traveling parallel to each other. Now, my concern would be that if we were to go back and kind of revisit that upper channel line in the short term, um, that would also revisit that longer term uptrend from underneath, which if we look back to the last kind of little spike high that we had had uh right at the end of May, uh it was a revisit of that trend line from underneath. So that trend line is going to continue to be a little bit of resistance. Now, depending on timing, if we go back up and test that convergence of those two lines in the short term, that lines right up with the other peak that we had uh back in um uh the early part of the year. And so that could be a left shoulder, right shoulder setup. Now, to validate that, we would then have to take out the low that was made uh on that poor opening from the initial screw worm trade, right? So I think everybody could likely agree that if for some reason we take out that initial uh you know opening low uh where we reverse to finish higher on the day, if that low is is violated, then that's gonna be a pretty negative uh development for the chart, right? So if this does evolve into a head and shoulder type of a pattern, that downside objective is circled, right? And uh that would be just the measured objective of the pattern. Now, I don't like this one as much as I like the potential of the feeder cattle head and shoulder top. This one has a lot more symmetry, um, the way it it looks to me. Um, and so the bottom line for this one is we've been in this huge uh channel, right? We've got kind of low to high to low, that set the pace of the channel. Uh the last high that was made back in April was at the upper end of that channel again. Uh so again, the the channel is dictated by those two initial lows. That sets the the angle of that trend. And then the uh upper channel line is that same angle. So the concern would be that maybe in the short term, uh, the additional news of scroom is traded as positive short term, but we for some reason aren't getting through resistance on the news. Um, so if we see this August feeder cattle, and this the I've just been generally telling my cattle guys to kind of keep an eye on uh for about 365, 365.50 on the August contract, if we start getting into that pocket and for some reason we're finding resistance there, um then that would be a concern if we start to see uh you know resistance develop at the same uh price level as we have for the potential left shoulder. So by no means is this a head and shoulder top. A lot of things have to happen for it to turn into one, which is the completion of the right shoulder and then the violation of the neckline. Uh, but that neckline is is very uh uh uh uh parallel to uh to the deck, if you will. Um and so you've got a very nice even neckline. Um and at some point, if we do take out that 335, 336 area, that would be extremely negative. So even you know, for some cheap flyer puts, if you look at if we were to get to 365 and you looked at a put out in August at that 335 area, um, you know, look back to what we did in uh October and into November of a year ago. Uh, just again, these large moves can happen pretty ferociously in a short period of time if there is a change of the narrative. Now, I don't know what the storyline is going to be over the next few weeks, uh, but if it evolves into something negative, we definitely have a setup to take this market right back to lows that we had last fall.

SPEAKER_00 19:05

Right. Yeah, and it definitely moves fast. All righty. Well, that is all we have for you guys this morning. Thank you for joining me, Brian. Everyone, have a fantastic day, and we will be back tomorrow.