Morning Comments; Tuesday, May 26th, 2020
Agrivisor - SETZ - Tue May 26, 6:38AM CDT

We are starting to see a slight shift in attitude in the market that will become more noticeable over the next several months. Given the huge increase in the world grain supply we are now back into what would be termed a “buyers market.” This reflects the huge global stocks that are being predicted for corn and wheat. The world soybean supply is not as large so sellers still control that complex, but that may only last until the next South American harvest gets underway. The buyer that will be watched the most in this over the next several weeks is China. Historically China is the world’s leading commodity importer, but only wants to make imports when it favors them. This lack of alternatives for soybeans may force them to come to the United States, at least until they become comfortable with their purchases and have enough coverage to last until the South American export program gets underway. This is roughly seven months away though, and given the state of Chinese soybean reserves, purchases will be needed. This also brings into question the large decrease that was seen in the May balance sheets just as Chinese demand started to ramp up. The majority of this week’s trade will be spent getting final positions in place ahead of month end. None of the spot contracts go into delivery which will limit this activity and its response on futures. Funds have built a sizable positions in corn and soybeans though, so at least some rebalancing is expected. Funds are holding an unusually large short position in corn, so buying would be expected. Just the opposite is expected in soybeans, where funds have a long position.

Highlights

* Much of US now at final plant date on corn

* Slower planting pace expected tonight

* Most attention will be on Dakotas

* 21 US crude oil rigs went offline last week

* China finally takes US ethanol

* China opens door for additional US imports

* US/China tensions still building

* Rapid rise seen in Brazil’s Covid cases

* Covid surge could impact Brazilian exports

* Covid Relief sign up begins today

* Sparse fresh news limiting market interest

Corn

* China to start corn auctions this week

* Minimal increase to planting expected tonight

* Ethanol use on corn too high

* July oats remain at a premium to July corn

* Planting near 90% tonight

Soybeans

* Currency spread favors Brazil less

* Chinese soy values become volatile

* US gulf values become choppy

* Market sees no flash sales last week

* Planting near 70% tonight

Wheat

* Yearly sales above USDA estimate

* Damage reports on winter wheat increasing

* Russian exports up despite smaller crop

* Black Sea weather improves

* Big jump in spring planting expected

Livestock

* May 1st cattle on feed 95% of year ago

* April placements 2nd lowest on record, -22% from 2019

* April marketings lowest on record, -24% from 2019

* Slight up tick seen in consumer demand

* Wholesale values continue to decline

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.




 

Market Commentary provided by:

Karl Setzer Grain Commentary