Closing Comments; Thursday, June 25th, 2020
Agrivisor - SETZ - Thu Jun 25, 1:38PM CDT

Trade was on the defense to start today’s session as even though selling was not that heavy, there was very little interest in buying. The most interest in the market is simply shoring up positions ahead of next week which brings the long-awaited USDA data as well as month and quarter end. Trade will have very little interest in daily happenings until then, and possibly after unless we see a weather threat develop. Additional pressure today came from the outside markets and worries that the build in Covid cases will again pressure commodity demand.

Export sales data for the week ending June 18th gave the market little support. Corn sales were split with 18 million bu old crop and 1.65 million bu new crop. Soybean bookings came in at 22.1 mbu old crop and a large 20.6 mbu new crop. Wheat sales reached 19.06 mbu. These totals were all within trade estimates and above the volume needed per week to reach yearly targets.

Meat exports were mixed on the week. Beef sales totaled 24,373 metric tons, a 21% increase on the week and 61% more than the same week a year ago. Pork sales totaled 24,000 mt, 19% less than the same week last year. China accounted for 4,518 mt of pork sales last week.

The International Grains Council updated their world production forecasts this morning, raising them for the second consecutive month. The IGC is pegging world grain production at 2.237 billion metric tons this year, 7 million metric tons more than their May projection. Elevated world corn production was the primary cause of this increase, as that crop is forecast to be 3 mmt larger at 1.17 bmt. Grain consumption was left mostly unchanged from last month, which will cause ending stocks to increase 8 mmt to a more comfortable 635 mmt.

Estimates have been released for next week’s acreage projections by the USDA. Corn acres are projected at 95.14 million, down 1.85 million from the March intentions, but up 5.44 million from last year’s plantings. Soybean acres are estimated to be 84.83 million, a 1.32 million increase from the intentions report and a large 8.73 million more than US farmers planted last year. Wheat acres are expected to come in at 44.72 million, 70,000 fewer than the March figure and 430,000 less than what was planted a year ago.

Estimates have also been released for the quarterly stocks data. Thoughts are that as of June 1st, the United States held 4.96 billion bu of corn, 244 mbu fewer than a year ago. Soybean inventory is expected to have been 1.39 bbu, 392 mbu less than last year. Wheat stocks are estimated at 987 mbu, down 93 mbu from a year ago.

The wheat market is starting to face more harvest pressure, which has caused weakness in the complex. Pressure is more than normal this year though, as yields are higher than expected, but quality is mixed. Many regions are reporting lower than usual protein content in this year’s wheat, which may impact demand for the grain in the global market. This is especially the case with some of our leading competitors reporting better than expected crops, mainly Russia and Australia.

Ethanol values have been on the rise in the past week which is starting to impact export demand. US ethanol at the gulf is currently being offered at $1.41 per gallon. This is up 2% from a week ago, but still 16.3% under the asking price from last year. The concern in the industry is that the spread between the US and Brazil has narrowed to 6 cents per gallon on ethanol offerings.

The increase in Covid-19 cases across the United States is again becoming a factor in the entire market complex. Investors are again pulling monies out of the equity market and placing them back in the US Dollar, which is negative for commodities. There is also renewed concerns over commodity demand if US businesses again close, even if just temporarily. The most worry is on energy demand if travel is again halted.

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Market Commentary provided by:

Karl Setzer Grain Commentary