Closing Comments; Wednesday, June 24th, 2020
Agrivisor - SETZ - Wed Jun 24, 1:52PM CDT

Much of what took place in today’s session was simple consolidation ahead of month and quarter end. We are also starting to see more positioning ahead of next Tuesday’s long-awaited USDA acreage and stocks report. From now until then we will receive many private projections with likely a wide array of numbers. This action limited trade activity today, as did a lack of fresh news and mostly benign weather forecasts. Trade activity was limited by weak outside markets and ongoing worries over the long-term impact of ongoing Covid-19 cases.

Ethanol manufacturing for the week ending June 18th jumped a large 6.2% from the previous week. According to data from Mid-Co Commodities, ethanol manufacturing for the week totaled 6.25 million barrels, a 364,000-barrel increase from the previous week. This was the highest weekly production figure since the 3rd week of March. Ethanol stocks decreased on the week by 312,000 barrels and now stands at 21.03 million. This production indicates a corn usage of 91 million bu which is close to what the USDA is using in balance sheets.

The United States may soon see more pressure from Argentina in the global market on soymeal sales. Argentina is crushing more of its recently harvested soybean crop than normal, with total crush up a reported 1.2% from a year ago. One reason for this is demand, but also from the lack of soybean exports. Argentine farmers and exporters are hesitant to sell as many soybeans as in recent years due to the elevated taxes that are being attached to sales.

Another country the US is starting to see more export pressure from is Russia. The Russian wheat harvest will be getting underway within the next two weeks This is expected to bring Russia back to the export market, likely with values under what the United States is asking for its wheat. Farmers in Russia are comfortable with this year’s crops and are more willing to make sales as well. The most competition for the US may come from quality, as Russia’s wheat crop is expected to be higher in protein than the crop being harvested in the US.

Trade is starting to form a mixed opinion on Chinese soybean business. While relations between the two countries remains strained, China continues to buy US soybeans. For the year, Chinese soybean bookings are up 14% from a year ago and continue to build. Even with this growth, China is unlikely to reach its Phase 1 objective on total purchases. The question to many traders now is how far China may fall short of their initial target.

While old crop US sales of corn and soybeans have struggled recently, we are seeing elevated demand on new crop. New crop US corn sales currently total 140 million bu, a 14% increase from last year’s sales at this time. New crop soybean sales stand at 203.4 million bu, a large 77% increase from last year. Of these soybean sales, 55% are to China.

We are at a stage of the growing season when analysts start looking at past years and try to determine what may happen this year on crop development. While this is far from scientific and does not mean outcomes will be repeated, there are some interesting correlations being made. Over the past 40 years there are nine being found with soil conditions similar to what we have now. In four of these years the United States had record yields, while in just three yields were below trend. This is limiting the amount of risk premium traders are adding to futures at the present time.

We are starting to see a wide spread in corn values between the West and East corn Belt. The average cash value on corn in the Western Belt is currently $2.95 per bushel. In the eastern Belt the average cash bid is $3.13 per bushel. One reason for this is the volume of old crop corn that is still available in the west versus the east, but also from the prospects for another record crop in the west that will further elevate these stocks.

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.




 

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Karl Setzer Grain Commentary