Closing Comments; Wednesday, June 3rd, 2020
Agrivisor - SETZ - Wed Jun 03, 2:01PM CDT

Buying again surfaced in the market today with most interest on soybeans and wheat. Soybeans took support from a flash sale of 186,000 metric tons to an unknown buyer and a general desire by the funds to hold a long position in the complex. Wheat gained on fund buying as well, along with renewed beliefs the EU crop will be smaller than thought from ongoing drought. Corn futures did not benefit from the same buying today and held closer to unchanged. All contracts benefited from a weakening US dollar but were held in check by favorable weather outlooks.

As expected, ethanol manufacturing for the week ending May 29th increased from the previous week. A total of 5.36 million barrels of ethanol were manufactured during the week, the 5th consecutive week of elevated output. While positive, this is still a 26.7% reduction from last year. Ethanol stocks decreased another 700,000 barrels during the week, making it the 6th week of declines. Ethanol reserves now stand at 22.48 million barrels, which is just under the volume in storage a year ago. Corn usage for ethanol during the week totaled 77.7 million bu.

We are starting to see more discussion in the market over this year’s acreage forecasts. In the March planting intentions report the USDA published planted acreage of 97 million acres on corn and 85 million acres on soybeans. While these were immediately disputed, trade is now indicating they may be closer to the actual plantings than previously thought. Several analysts are now using corn acres of 94 to 95 million in their crop estimates, up from previous beliefs corn acres would only total 92 or 93 million. Soybean acres are seeing less dispute, with most analysts holding to the USDA figure.

When it comes to planted acres, the most attention is on the fringe states, mainly North Dakota. North Dakota suffered from excessive rainfall last year which not only impacted plantings but harvest as well. In fact, some regions of the state still have last year’s crops in the field. This has actually generated worse planting conditions this year for some farmers in the state. As of May 31st the state only had 75% of its intended corn and 51% of intended soybean acres seeded. Now that the state is past the final corn plant date for insurance, increases to this number may be minimal.

As the export season ends in Ukraine, it is likely we will see record grain exports out of the country. Ukraine is on track to export a large 54.1 million metric tons of grain this year, 17.4% more than a year ago. Of this total, 20.2 mmt is wheat and 28.4 mmt is corn. Trade is now looking forward to the 2020/21 marketing year and how much competition we may see there.

We are now able to start looking toward the end of the year and what we may see for export totals, with an emphasis being placed on soybeans. To reach the yearly USDA projection on soybean sales, bookings need to average 27 million bu per week. So far this calendar year sales have averaged 33.7 million bu. Over the past six weeks however, sales have only averaged 15.3 million bu. History also shows us that from now through the end of the marketing year weekly sales tend to average 31.2 million bu.

The crush pace on last year’s soybean crop continues to run above expectations. For the marketing year the United States has crushed 1.45 billion bu of soybeans. This is a 2.6% increase from a year ago, with only a 1.6% increase being projected. Hopes are some of this increase will negate the slow down we have seen in soybean exports.

Livestock values have been under pressure this week, with the most losses coming in hogs. This is coming from the resumption of processing at packing plants in the US following Covid-19 outbreaks. Packers are also facing a large backlog of hogs to process, and these are coming in at higher weights due to longer feeding times. Declining wholesale values have pressured all livestock futures.

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