Closing Comments; Monday, June 22nd, 2020
Agrivisor - SETZ - Mon Jun 22, 2:00PM CDT

Corn, soybeans, and wheat all struggled to start the week as a lack of bullish news combined with more favorable weather outlooks to weigh on futures. The current trend of heat followed by cooling temperatures and rains is expected to continue creating favorable conditions for much of the United States. This does not mean we do not have pockets of crop stress, but not a widespread crop loss. We did see some concern over the rising Covid-19 cases in the US, but the market shrugged these off as being a result of elevated testing. A lack of fund participation limited all futures today while support came from an absence of selling pressure.

One of the surprises we did have in trade today was an increase to the Brazilian corn crop. The firm Safras raised its corn crop projection to 108.4 million metric tons, well above most other estimates that range from 99 to 101 mmt, including the USDA. Safras is basing its estimate on a larger Safrinha crop which they peg at 75 mmt. Their previous estimate was 69.5 mmt. Safras claims the larger estimate is from the likelihood of elevated corn acres given the higher returns that can be generated with the current currency exchange rate.

One thing that is being noted by analysts is the average corn yield being predicted in Brazil. Scouts in the country have corn yield ranging from 84 to 86 bushels per acre. This compares to the 90 bpa the country averaged a year ago. This low yield also shows how much potential the Brazilian farmer has for yield and crop size as they continue to improve their farming practices. This will only increase the pressure the US sees in the global corn market.

In Argentina we are seeing the soybean harvest draw to a close for the year. As it does, lower production is being noted. It appears as though the Argentine soybean crop will total 49.8 mmt this year, roughly 10% under last year’s crop, and just under the USDA estimate. Soybean production in Argentina is also down 1.4% from the five-year average, mainly from the less than ideal weather the country was affected by, but also from a reduction in plantings due to increased export taxes.

What may be an even greater factor for the US when it comes to South America at the present time is the currency exchange rate. The US dollar had started to fall in comparison to the Brazilian Real and Argentine Peso, but this trend has reversed. We are now seeing both of the South America currencies falter as economic and political issues arise in those countries. The Argentine Peso is now at record lows versus the US Dollar. This has increased commodity sales from the countries as farmers can generate higher income to help negate unfavorable tax rates.

Export loadings for the week ending June 18th were mixed for trade but offered little in the way of a market influence. Corn inspections for the week were right at the needed amount per week at 51 million bu. Soybeans inspections fell well short of the needed amount with just 9.37 mbu. Wheat inspections came in at 22.5 mbu, well above the 18.3 mbu needed per week.

According to data from the US Grains Council, US ethanol is becoming more affordable for global importers. US ethanol for export ended last week at $1.37 per gallon. This was up 1 cent from the previous week, but down a large 14% from a year ago. US ethanol is now 13 cents per gallon cheaper than ethanol sourced from Brazil which is also favorable for exporters.

The June cattle on feed report surprised trade with higher cattle numbers. As of June 1st the United States had 11.67 million head of cattle on feed, 99.5% of the amount of a year ago, and above trade expectations. Placements in May were also higher than expected at 2.04 million head which was 98.7% of a year ago. Thoughts are this was a result of poor pasture conditions in regions of the US Plains. Marketings were less than expected in May at 72.5% as packing plants continued to recover from Covid-19 closures.

RISK DISCLAIMER: The risk of loss in trading commodity futures and options is substantial. Before trading, you should carefully consider your financial position to determine if futures trading is appropriate. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results. The information contained in this report is believed to be reliable but is not guaranteed to accuracy or completeness by AgriVisor, LLC. This report is provided for informational purposes only and is not furnished for the purpose of, nor intended to be relied upon for specific trading in commodities herein named. This is not independent research and is provided as a service. As such, this is considered a solicitation.




 

Market Commentary provided by:

Karl Setzer Grain Commentary