Morning Comments; Thursday, May 28th, 2020
Agrivisor - SETZ - Thu May 28, 6:35AM CDT

We are seeing a well-defined division in the market between fundamental based trade and fund attitude. For the past several weeks funds have held a short position in corn and a long position in soybeans. This short position in corn coincides with the latest supply and demand numbers that show record production for the United States this year, which has been forecast for the past several months. A new crop carryout estimate on corn of 3.3 billion bu is also keeping fund attitude on the short side as there is little reason to own futures given this outlook. So far, the opposite has been true on soybeans. While old crop soybean stocks are high, the USDA is more optimistic on new crop balance sheets. A large 175 million bu decrease in ending stocks is projected from old to new crop, and that is with a pretty lofty production estimate. It really is not that hard to come up with a scenario in soybeans where stocks tighten even more, and could drop to a level that would warrant at least some type of rationing on the domestic side. This is why funds have held on to their long position in soybeans for the past several weeks. The entire market seems to be disregarding the fundamental issues that have arisen in recent weeks, mainly the planting issues in several parts of the Corn Belt. We are now at the final plant date in regions where the greatest delays are taking place, and to see farmers take the insurance option rather than force a crop in is highly likely. The question now is how many acres may go unseeded, and if they will significantly impact balance sheets. Given projected carryout on corn, we may have to see a sizable decrease to receive a market reaction.

Highlights

* More optimism shown on US equity markets

* Fixed rates in china lowest since 2008

* Worries remain over Covid resurgence

* China crude oil imports -7.5% in April

* Political unrest develops in Brazil

* Covid temporarily closes some Brazil ports

* China buys large volume of sorghum

* Brazilian Real continues rally

* Only 54% of North Dakota corn planted

* Heat to build in US Plains/WCB

* US meat shortages still a possibility

Corn

* Seasonal tendency for corn to rally

* Funds content with large short position

* Export activity remains light

* Brazil corn loadings well below year ago

* 2.3 million acres unplanted in N/S Dakota

Soybeans

* Argentine crush just 3.6 mmt in April

* Chinese demand continues for spot soybeans

* China buying Brazil soybeans for fall delivery

* Localized reports of reseeding

* North Dakota just 7% planted on soybeans

Wheat

* Prevent plant likely on spring crop

* Tours indicate smaller winter crop than USDA

* Timely rains a benefit for US Plains

* US dollar losses fail to bring buyers

* Chinese buying -49% from year ago

Livestock

* YTD cattle slaughter at 12.1 million

* YTD cattle slaughter -7% from 2019

* YTD hog slaughter at 50.09 million head

* 2019 slaughter was at 50.65 million

* China sees hog values 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.




 

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Karl Setzer Grain Commentary