Closing Comments; Thursday, May 14th, 2020
Agrivisor - SETZ - Thu May 14, 2:11PM CDT

Corn, soybeans, and wheat were on the negative side most of the day as continued selling took place. Tuesday’s confirmation from the USDA that not just US but world commodity inventories are adequate has removed much of the interest we had seen from buyers. This has removed nearly all risk premium that was in the market though and opens the door from fresh speculative buying. Trade continues to overlook Chinese statements that the country wants to build its US imports, including another set of flash sales to China today of 198,000 metric tons of soybeans and 20,000 tons of soy oil. Advances were further capped by economic data that showed another 2.98 million jobless claims were processed last week.

Export sales for the week ending May 7th were mostly as expected by trade. Corn sales for the week totaled 42.25 million bu on old crop and 1.5 mbu for new crop. Soybean bookings hit 24.08 mbu on old crop and 16.17 mbu on new crop. Wheat sales were split with 7.48 mbu old crop and 5.5 mbu new crop. These totals were all above the amount needed per week to reach yearly USDA expectations. One supportive factor from the report was that China was listed as a primary buyer of both corn and soybeans.

Exports of US beef and pork were less promising. Beef sales last week were down 20% from the previous week and a calendar year low at just 4,191 metric tons. Pork sales were down 77% from the previous week at just 11,827 metric tons. The decrease in pork sales was the result of China only booking 6,100 tons.

Over the past several weeks the United States has seen a build in pork demand by China. Total Chinese exports are running at a record pace and a primary reason yearly shipments are up 116% from last year. This demand has been met with criticism by some groups who claim this pork should be used to cover tight food supplies in the United States. The difference in these exports is that Chinese pork is mostly unprocessed hogs, meaning the whole carcass leaves the country. This is actually a benefit for the US, as it further reduces stress on overflowing packing plants.

Even with this elevated demand, China continues to release pork from government storage. China has announced that they will be releasing another 10,000 metric tons of pork for auction. This will bring the total volume released to 320,000 metric tons as the country continues to recover from African Swine Fever. These releases indicate we will continue to see Chinese pork imports as stocks will need to be replenished.

Eleven US agriculture groups have stepped forward to ask congress for financial support. These groups claim a subsidy package is needed for the renewable fuel industry to help offset financial losses from the Covid-19 outbreak and its impact on energy demand. Over 130 US renewable fuel plants have either partially or fully shut down in recent weeks as travel restrictions have limited fuel demand. This request comes just as Congress has indicated it may start to limit the amount of subsidy packages it can give out given the current state of the US economy.

Much of the prevent plant insurance talk in the market has been on corn this year, but just as much attention should be on wheat. As of last Sunday, just 42% of the US spring wheat crop was seeded due to excessive spring rainfall and wet fields compared to the average 63%. We are now at a point where northern parts of South Dakota ae reaching the final plants date on the crop. By June 5th this will extend to all of North Dakota. Given the current state of the market and weather conditions, to see prevent plant on at least a portion of these acres would not be surprising.

This commentary is the sole opinion of Karl Setzer, Senior Commodity Risk Analyst for AgriVisor, LLC. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com.




 

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Karl Setzer Grain Commentary