The Good: The USDA report is being blamed for the sell off today and the poster boy for the move downwards today was corn. Corn finished the the 40 cent limit down today which pulled wheat and soybeans lower as well. The interesting thing is that the USDA WASDE report yesterday showed an ending stocks estimate for the 2021-22 crop year of 1.51 billion bushels. Although this number sounds bearish, the stocks to use ratio is sill the second lowest since the 2013-14 crop year. The 40 cent per bushel move lower today seems to be a bit overdone given the strong demand and tight ending stocks expected in the 2020-21 crop year as well as 2021-22. By the way, the July contract which is still firmly in the old crop position should reflect the 1.2 billion bushel ending stocks of the current crop year. USDA after all did reduce that estimate by just under 100 million bushels.
The Bad: No question the soil moisture situation in the Northern Plains is nearing a critical point with most of eastern Montana, north cents South Dakota and North Dakota remaining in extreme drought. Perhaps the trade should have looked at the monitor today before joining the spring wheat selling party. Spring wheat finished the day down 24.5 cents per bushel despite a relatively hot and dry forecast over the next 10 days. Oh well, the market seems to think there is plenty of time for the spring wheat (and other crops) in the Northern Plains to receive the much needed rains.
The Ugly: The canola market was so ugly today that it knocked the drought monitor off of its normal Thursday perch. The contract was locked limit down for most of the day and has dropped by just under C$150 per tonne in the past four trading sessions. This is the largest correction in the history of the canola contract. Most of the commercial positions are out of the July contract and have moved to the November contract. This has left the July contract a purely speculative contract, which moves at the whims of the fund traders. The main concern is that the contract has still another six weeks to go before the first notice day. There will be plenty of volatility ahead for the July canola contract!