JUNE 1 GRAIN STOCKS

The importance of USDA's quarterly tallies of grain stocks cannot be overemphasized. They are the heart of fundamental analysis and the main check and balance on USDA's World Agricultural Supply and Demand Estimates (WASDE) estimates. Grain stocks reports have been known to shatter prior illusions of grain demand, and there is always a chance that will happen again Friday.Dow Jones' survey of analysts expects 5.26 billion bushels (bb) of U.S. corn stocks on June 1. If true, that means 11.68 bb of U.S. corn would have disappeared in the first three quarters of 2017-18, slightly less than 11.72 bb of disappearance a year ago. Because of this year's drought in Argentina and dry weather in Brazil, there is a chance that grain stocks will be lower than expected.For soybeans, the outlook is more bearish, thanks to last fall's record U.S. soybean harvest, Brazil's record harvest in early 2018 and China's success in avoiding U.S. soybean purchases while trade tensions are high. Dow Jones' survey is looking for 1.22 bb of U.S. soybeans on hand as of June 1, up from 966 million bushels (mb) from a year ago.One thing to keep in mind Friday is that even if USDA's count of soybean stocks comes in less than expected, buyers may still be reluctant to respond ahead of next Friday, July 6. On that day, China is set to enact a 25% tariff on U.S. soybeans. Because soybean prices have already suffered sharp declines in June, a bearish report on Friday could also see a muted price impact.June 1 wheat stocks happen to mark the end of the 2017-18 season for wheat and are expected to total 1.10 bb, according to Dow Jones, slightly above the 1.08 bb predicted in the June WASDE report. It is difficult to argue that wheat stocks will be lower than expected when U.S. exports were such a struggle in 2017-18. If there is good, but not necessarily bullish news for wheat prices, Friday's report will probably not have much price impact, as traders are now more concerned about the new-crop season.The anticipation of Friday's USDA reports will likely feel familiar to traders with dry mouths and tight guts in the minutes leading up to 11 a.m. CDT. However, the context of this year's reports are different with corn looking at the anticipation of lower world corn supplies and soybeans wondering if or when the world's largest soybean buyer will return anytime soon. Friday's reports will offer important clues for where prices go from here, but we also need to remember how far prices have already fallen.