AgriVisor Market Recap

Friday, June 26, 2020
As it has been all week, positioning ahead of next week’s reports and month and quarter end dominated today’s trade. Unfortunately, this caused traders to shore up positions and move to the sidelines, which pressured commodity trade. A lack of much for fresh news was also limiting to futures, even soybeans, where a flash sale of 132,000 metric tons to China was announced this morning. We also had a flash sale of 203,500 mt of sorghum to an unknown buyer. We did see more interest on weather today as high temperatures are being forecast for parts of the Corn Belt with limited rainfall. 

A big story in the market today was the increase we have seen in Covid-19 cases across the United States. In fact, yesterday’s new cases were a record at 39,061. These are coming from states that lifted travel restrictions, and concerns are we may see some again tighten their guidelines on businesses, especially restaurants. The worry with this weighed on the equity market today and caused the US dollar to rally which is negative for commodities. It also generates worries that we may see a decline in commodity demand if consumers again stay home. 

Another concern with rising Covid cases is what it may do to energy demand if travel is reduced. This is especially the case for the US ethanol industry where production has been on a steady rebound and now trails last year by just 16%. Ethanol values dropped a large 14 cents/gallon yesterday though as thoughts we will see more travel restrictions weighed on the industry. 

The May import data from China has been released with a notable difference in soybean totals. In the month of May China imported 9.38 million metric tons of soybeans, a 27.4% increase on the year. Of this total, 8.86 mmt originated from Brazil. This was a 41% increase from last May and the highest soybean trade between the two countries in two years. At the other end of the spectrum, China only imported 492,000 metric tons of US soybeans in the month. This was a 50% reduction from last May and the lowest monthly amount since January 2019. This divergence was the result of high Brazilian sales due to the country’s cheap currency values. 

A story that has been in the market over the past several weeks is if China will achieve its projection on Ag purchases from the US under the Phase 1 trade agreement. Officials from both sides claim this is likely to happen, but current ag trade data does not verify these opinions. So far this calendar year China has booked roughly $10 billion of ag products with a yearly goal of $36.5 billion. With half the year gone, this target seems unlikely. What should be getting more attention is if China and the US are willing to work out further trade deals given the recent strain on relations between the two parties. 

When it comes to Chinese trade, there is a development taking place that could impact all business with the country. China has requested that exporters submit Covid-Free certificates with soybeans when deliveries are made. None of the world’s soybean suppliers are willing to do this, including the US and Brazil. The objection to this is that there is no way to prove the soybeans are Covid -free once they leave their origination point. Sellers are also stating there is no evidence that Covid can be spread through food products. 

An interesting weather fact has been released from the firm T-Storm Weather. Since the year 2012, US topsoil has decreased between the dates of June 15th and June 25th. The opposite happened this year though, with soil moisture actually building. A large 53% of the US corn producing region remains drier than normal though, which is the highest amount in the past eight years. 

Yesterday’s hog inventory report weighed heavily on the complex today. June 1st US hog numbers were reported at 105% of last year’s total, above trade expectations for a 103.7% increase. The total number of hogs in the US now stands at 79.6 million. This compares to just 68.4 million in June of 2016. 

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.