Watching This Week: US Grain Stocks, India's Oilseed Prices, And Storm Cindy's Impact

COMMODITIES

June Grain Stocks Hinge on Feed and Residual Use:

Corn futures face a demand test when the USDA’s quarterly grain stocks report is released on Friday. The baseline estimate for corn stocks, as of June 1, is roughly 5 billion bushels, or 5% higher than a year ago. This outlook is based on weekly export and biofuel production data combined with historical assumptions around food and feed use. We see the report pivoting on food and residual use, especially as cattle-on-feed is increasing, but average slaughter weight is trending below year ago levels. We also suggest that logistics companies and grain handlers focus on on-farm stock levels, particularly if new crop yields fall short of expectations.

AGRICULTURE POLICY

Indian Growers Could Impact Global Oilseed Prices:

Domestic oilseed prices in India have plummeted to a five-year low on prospects of a normal monsoon season and a jump in May imports. Soybean prices are now below the mandatory support price. In response, growers are calling on the Indian government to support domestic prices by increasing the import duty on crude edible oil. However, any action may come too late, as planting is right around the corner. As a result, India’s soybean production forecasts may need to be cut in the coming months. We recommend that oilseed traders keep a close eye on the import duty debate in India, as a significant tariff increase could hit global palm and soybean oil prices.

CLIMATE-WEATHER

Cindy Storms Inland Raising Cotton Flooding Risk:

Rising cotton production in India and Pakistan has sent global cotton futures to year-lows. Yet, inclement weather in the United States could provide support to cotton futures. Storm Cindy plowed inland this past week. Some corn, cotton, soybean, and rice growers have already seen flooding damage. We are particularly concerned about the impact on cotton regions in the storm’s path, owing to the geographical concentration of production. As such, we encourage textile companies and traders to closely monitor flooding damage in key cotton growing areas this week.