Heartland Daily Newsletter - Soybeans and Oil

Commentary

Today soybeans took the limelight, as soybeans took on the attitude that corn had the day after the USDAs May crop report. In May, the USDA put out this optimistic carry out for new crop corn at 2.5 billion, and the next day the market started rallying, eviscerating both yield and acreage production potential. Yesterday after making large cuts on corn production, but the USDA essentially left optimum potential on beans, leaving yield production at a hefty 49 bushels per acre, knowing full well half the crop is going in after early June and 15 million acres of it going in after June 15. Right now, it is hard for soybeans to even produce a 46 BPA/acre potential due to the lateness of the majority of the crop getting planted. Soybeans do mature by photosynthesis, but optimum weather has to be maintained now through August to think we can have yields in the upper 40s.

The outlook for above-average rains across much of the belt is now the focus, especially the Eastern belt which is struggling to get the crop in and the rains return this weekend. What gets planted this week will get shut down again with little activity likely through next week. With 15 million acres of beans to be planted as of this Sunday, its possible we can be dealing with 5 million acres preventive plant, offsetting the possible 2 million acres that were coming over from corn. You start doing the math and knock 3 million acres total off bean plantings times 46 bushel to the acre, and lower the total national yield on the other production to 46 bushels, next thing you know you're crowding a 700 million bushel carry out. This could get explosive for soybeans into the end of the month.

Midwest weather forecast: A quiet start for June looks to get active again with storms posed to make returns this weekend and potentially lasting into the opening of July. Some of those forecasts have as much as 5-8 inches of rain over the next 15 days to be focused on the Southern Midwest. The northern Midwest were plantings are trying to get finished, show totals of 4 to 6 inches of rain could be added up over a 15 day period.

The EU weather forecast leans favorable, and large small grain crops are being made. Dryness will plague the SW Russian wheat crop for another week with better rains hinted at in the 2-week forecast. Australian wheat areas have enjoyed their best rains in years for winter wheat seeding.

The US dollar, via rolling over of the spot contract, is breaking up trending support. The US dollar closing under 9630 this Friday would be a sign of further weakness coming. This is favorable for commodities.

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Corn

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Crude Oil

In spite of the upcoming OPECmeeting at the end of this month, and their communications claiming that they can tamper down the demand concerns by maintaining production quote cuts is not enough to support the oil. Rallies earlier in the week on that OPEC talk were eliminated on todays oil inventory builds.

API

Crude +4.85mm (-1.0mm exp)

Cushing +2.4mm (+1.97mm exp)

Gasoline +830k (+700k exp)

Distillates -3.5mm (+1.1mm exp)

DOE

Crude +2.21mm (-1.0mm exp)

Cushing +2.096mm (+1.97mm exp)

Gasoline +764k (+700k exp)

Distillates -1.0mm (+1.1mm exp)

After last week's biggestUS aggregate energy inventory build in history, hope was for some draws this week but once again that hope was dashed as EIA reported builds in Crude and Gasoline stocks (and at Cushing).U.S. crude stockpiles rose to the highest since July 2017 as oil production hovered near record highs.

Oil prices have certainly disappointeda lot of oil bulls from earlier in the year who were all predicting a return to the mid-70s. We were not as optimistic. The seasonal tendency for oil to peek in May was met with an end of April high, and losses since then have certainly changed the dynamics for the driving season this year.

The $50.00 mark is a major technical numberand a psychological one. Bounces against it, or slightly through it as 49.00 is the .786 fibo support, should find buying to stabilize this market into the June 25 OPEC meeting. The next change in trend date for oil is June 20.

Support target 48.75-50.25.

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Beans

Soybeans did plug oneof their two gaps earlier in the week but still left one open. Todays rally on planting concerns closed prices back above the purple line. Soybeans closing above 900 going into the end of the week is very significant.

In a bear market, the three waveABCrally wouldve said its all over with at the first of the month with the blue arrow marking the cycle turn. A close above 920 implies we are still working a bullish potential five wave up, and 960 becomes the target.

Long Nov Bean at 907 with 983 stop.

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Wheat

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Cattle

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2019 Hedge Recommendations

Corn

Sold 25% of 2018 corn stocks at 429.2, with 50% having been sold at a 409 average. Total sales are now 75%.

Sold 25% new crop 2019 on December corn at 4.47. Total sales are at 40%.

Sold 15% of 2019 corn crop at 3.96 Dec corn.

Wheat

Watch for upcoming alerts

Beans

Sold 25% of 2019 production at 910 on the November contract. Total sales at 25%


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