Morning Comments; Wednesday, May 20th, 2020
Agrivisor - SETZ - Wed May 20, 6:32AM CDT

While most of the May WASDE report is well behind us, one number keeps getting attention, and that is the unexpected increase to old crop soybean carryout. The USDA increased its old crop carryout by 100 million bu, all because of a decreased export outlook. While soybean exports have trailed projections most of the marketing year, this was expected by trade given the huge crop out of South America. Chinese buying has escalated in recent weeks though with several sales of both old and new crop soybeans taking place. If this pace continues, which is fully expected, it is not out of the question we could see the USDA decrease its 580 million bu ending stocks estimate on old crop soybeans. This may be most beneficial to the new crop contracts though, as new crop ending stocks are already at a historically low 405 million bu. Any decrease to old crop carryout will obviously impact new crop stocks as well. One factor that is limiting market response to the low new crop ending stocks projection is the possibility of elevated soybean plantings. There are thoughts some farmers across the US are going to seed more soybeans than initially intended given current market economics and weather conditions. An increase to plantings of 5% is being talked by several analysts at this time. While this seems like a minimal amount, it would help build the soybean reserve. We are also seeing a huge 131 million metric tons projection for Brazil’s next soybean crop which means they will have plenty of product for the global market. The biggest unknown in the entire world soybean market is China, and if that country will continue with its heavy import pace.

Highlights

* USDA Covid-19 relief package raises many questions

* Chinese govt shows concern with possible 2nd wave of Covid-19

* Japan govt declares itself in a recession

* Trade waits for Chinese purchasing clarity

* Chinese purchases from US up considerably in past 10 weeks

* Low waters continue to cause logistic issues in Argentina

* No Dakota planting remains slower than last year

* US dollar continues to soften

* OPEC may continue with oil cuts

* EU cuts crop forecast due to drought

Corn

* Fringe areas struggle to get planted

* Corn acres still adequate if reduced

* Trade perceives weather as favorable

* Ag Rural lowers Brazil production to 97.7 mmt

* Chinese corn purchases in past 10 weeks at 1.19 mmt

Soybeans

* US soy oil stocks near 7 year high

* Export basis weakens even with demand

* Fund long position greatest since November 2019

* SAM exports are slowing

* Chinese soy purchases last 10 weeks at 1.6 mmt

Wheat

* French wheat exports outside EU up 38%

* Trade starting to lower spring wheat acreage estimates

* Australian weather may be turning too wet

* Record production in India

* US overpriced in global market

Livestock

* Slaughter continues to recover

* Wholesale boxed beef declining

* Pork cut outs on decline as well

* Markets now worried about lost demand

* Chinese pork imports up 800% in past 3 years

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