AgriVisor Market Recap

Thursday, June 11, 2020
Trade was weaker to start today’s session as positioning developed ahead of the monthly WASDE report. The general feeling heading into this release was that ending stocks would increase, especially on the grains. Soybean losses were limited by the flash sale of 720,000 metric tons to China, most of which were for the 2020/21 marketing year. Sharp losses in the equity markets and benign weather outlooks also weighed on commodities, although the possibility of heat building in the Corn Belt limited losses. 

Very few changes were made to the domestic balance sheets in the July supply and demand report. Carryout on old crop corn, soybeans, and wheat in the United States all increased a minimal 5 million bu, putting corn at 2.1 billion bu and soybeans at 585 million bu. Wheat carryout climbed to 983 mbu. None of these were significant and had little influence on market values. 

Only subtle changes were made to new crop domestic balance sheets as well. Corn carryout increased 3 mbu to 3.32 bbu. Soybean ending stocks decreased by 10 mbu as strong crush projections negated an expected slow-down in exports. This put 2020/21 soybean carryout at 585 mbu. Wheat carryout was a little less friendly as ending stocks rose to 925 million bu, a 16 mbu increase. 

Not to be left out, global balance sheets were mostly stable from May as well. Global corn carryout decreased a minimal 2 million metric tons to 337.9 mmt. Soybean ending stocks also decreased a slight 2 mmt to 96.3 mmt. The world wheat supply is expected to increase slightly though to a total of 316 mmt, 6 mmt more than the previous estimate. 

The only change to South American production expectations was on the Argentine soybean crop which was lowered 1 mmt for a 50 mmt production figure. Argentina’s corn crop was left unchanged at 50 mmt. Brazilian crops remain at 101 mmt for corn and 124 mmt for soybeans, both of which are higher than private predictions, especially those from Brazilian firms. 

Export sales for the week ending June 4th were at the top end or above what was expected. Corn sales for the week totaled 26 million bu on old crop and 1.6 mbu of new crop. Soybean bookings were a large 36.9 mbu old crop and 44.4 mbu new crop. Wheat sales reached 9.9 mbu. Of the soybeans sold, 30.8 mbu were to China. 

Economists are starting to pay close attention to the US economy as more states open back up. While this has given the US economy support, it may not be as great as hoped. Workers are reporting shorter work hours, and some are reporting pay cuts as business is not back to pre-Covid levels quite yet. Many employers claim it may be several weeks before they know what new business structures will look like. This is limiting investor interest in all markets, including commodities. 

One industry the United States has seen rebound faster than expected was in livestock processing. Many packing plants across the United States are reporting numbers that are little changed from before the Covid-19 outbreak. Initial indications were it would take months for numbers to rise, but this has not been the case. This rebound has allowed consumer price to decline as well and generate more demand. 

Weather conditions are starting to become more of a factor in price discovery. Current models indicate temperatures will to warm as we move into the end of June. The start of July is also expected to be warm with normal to above normal temperatures. These outlooks are being tempered by the adequate soil moisture much of the Corn Belt currently has. 

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.