** US corn in good shape heading into pollination. Condition reportis in corn are 76% G-E & 5% P-VP. ** Brazil second crop corn has seen some losses due to drought. Harvest over 50% complete. ** World corn carryout seen near a record high, but significant dislocations noted. ** Ethanol margins 15 c/gal positive. Hogs profitable. Feedlots/Dairy starting to turn black again. ** US Corn should see active exports through the summer. Black Sea winning O-N-D business. ** Funds in the process of liquidating large (and losing) long corn position. Now slightly net short.
Overnight corn trade was generally steady to a touch lower, though the weakness picked up some steam toward the close of the AM break. Wheat surrendered some ground after a short-covering spasm, dragging many other grains down with it. Crop Progress data after the close continued the trend of “unchanged at lofty levels”, not doing the corn market any favors as it tries to stabilize the recent slide. The USDA maintained a 76% Good-Excellent rating and 5% Poor-Very Poor rating on the US corn crop, which continues to outpace the prior year’s 70% and 9%. As expected, ratings tended to downtick in most states, though the improvements in the central Midwest (“I” states up 1-2% G-E) tended to hold up the average.
Pollination moved up to 79% of the crop, which is about 9% ahead of normal. Near- term weather conditions generally remain conducive; seasonable temps, and decent rain chances for roughly 50-60% of the Belt. Longer-range forecasters starting to raise red flags again over the potential for another “hot and dry” period beginning in the first week of August? Still has not verified on the gov’t maps, which advertise continued “warm and wet” conditions? First estimates are starting to trickle out ahead of August 12’s crop report, which will update production statistics. Private analyst AgResource pegged the US corn crop at 14.6 billion bushels on a 169.8 bpa yield. Some very early harvest getting under way in the southeast.
The corn market met downside price count objectives Friday and we continue to encourage some profit-taking on shorts near that level ($3.33 CZ). We are not yet calling a bottom, but would suggest corn may be able to find its footing for a minute. A trade up to the $3.50-$3.60 level basis CZ should be regarded as a sale. Sell October calls and buy Sept puts on such a rally?
Corn trade was broadly two-sided to start the week, holding mostly steady, which was right in the middle of the intraday range. Funds were believed net even for a second session in a row in corn, as they are likely having some mis-givings building up a big short with corn already pressed into the low $3’s with another month of weather to go. They are estimated net short about 20,000 contracts when factoring in CFTC data from Friday. Basis remained steady/firm as the farmer holds fast. Mid-day grain inspections remained large for the time and date, offering the market some timely support. The USDA pegged shipments for w/e 7/21 at 1.31 mmt, which raised the YTD corn shipment total to 39.0 vs. 40.2 in the prior year. The pace of new sales has certainly slowed of late, but shipments of existing sales continues to run at a rapid pace. The majority continues to be loaded out at the Gulf, which was hinted at given rising basis levels there. 5-6 cargos were also loaded off the PNW, mostly to Korea. Taiwan picked up a cargo of Oct/Nov corn from the US overnight; India still trying its best to source non-GMO corn and not having much luck. South Korea rejected some Argentine feed wheat for a non-approved GMO trait? Cattle had a great day yesterday, finishing limit-up with expanded limits today. Ethanol gained on corn, with cash margins still in decent shape – 30-35 c/bu, 10+ c/gal.
There is a crop report on Tues. USDA will issue wheat production estimates. It is hard to see them as bullish. Yield reports have been record like across almost all of the hard wheat belt. This is the report that will incorporate the new acreage estimates and make adjustments for the larger bean and corn stocks shown on Jun 1.This coming report might moderate price action for the next two days. But there is a very strong probability that the corn and bean markets gap higher overnight. This is extremely important for corn as it would likely leave a 4 day island. If that island is still in place after the Tues crop report, it likely puts last week’s lows as the lows for the summer. There is always a danger of anticipating the trade’s reaction to weather. The forecast change 3 times a day. But the technical signals will be very compelling if this happens. If the island does not develop or if the crop report turns the market back down, it could be very bearish with the next down side counts well below the current trade
Psychologists call habituation, as we learn from a recent related Reason article by A. Barton Hinkle (“Americans Forget How Good They Have It“), which reminded me of the Louis CK video above and inspired this post. Here’s an excerpt from Hinkle’s article:
When desktop computers were first available you had to assemble them yourself with a soldering gun and spare parts from an Erector set. Then you had to program the thing, in FORTRAN or COBOL or some other language that sounded like an alien planet in a 1950s sci-fi movie. And if you wanted to store any information, you had to write over your favorite Van Halen casette tape with your dad’s cassette recorder.
Today, less than $400 will get you a run-of-the-mill machine with a 2-gig processor, 8 gigs of RAM, and a terabyte of hard drive space in case you want to store movies on your PC. All of the movies.
Most people don’t, though, because they can live-stream everything in high-definition over connections so fast that the end of the movie arrives before the middle does. A few years ago people Googled “free wi-fi” a lot because there wasn’t much of it. Now 89 percent of the public thinks free wi-fi is listed in the Bill of Rights, and if the YouTube video of the kid falling off the swing buffers for more than a picosecond they’re never going to set foot in that McDonald’s again dammit, because what an outrage.
This is what psychologists call habituation—the tendency to get used to things, no matter how good or bad. You buy a new car and for the first few weeks you absolutely love it, but then one day you find the shine of it has worn off and it’s just a car.
A few decades ago rich people could buy encyclopedia sets on the installment plan. Now most of us walk around with a little box in our pocket that gives us instant access to nearly the entirety of human knowledge. And it’s like that in field after field.
Robert J. Samuelson recently noted that the middle class is shrinking—not because people are getting poorer, but because they are getting richer. The share of the populace that qualifies as upper middle class has more than doubled since 1979. But you listen to Bernie Sanders or Donald Trump and you’d think America has been sliding downhill since the Johnson administration. Don’t believe it for a second.
Here’s my version of that demographic shift over time in the chart below, showing the increase over time in the share of high-income US households making $100,000 or more (in constant dollars) – from 8.1% of households in 1967 (about 1 in 12) to 24.7% in 2014 (about 1 in 4).
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