AgriVisor Market Recap

Friday, July 10, 2020
The early portion of today’s trade was spent getting final positions in place for the monthly WASDE report. Hopes of sizable changes to balance sheets diminished as the report drew closer, and the reality that even with smaller volumes than seen in June, ending stocks will still be more than enough to satisfy demand set in. Trade was unfazed by the announcement of large flash sales and instead focused on what appeared to be moderating weather outlooks for the Corn Belt next week. Many regions of the Corn Belt will receive from 1 to 2 inches of rain over the weekend, helping to stabilize crop conditions and limit production losses. 

The USDA did adjust corn plantings to match the June 30th revisions, but left yield alone in the July supply and demand report. The US corn crop this year is now projected at 15 billion bu, 995 million bu less than the previous estimate. The USDA lowered feed and residual demand but made a slight increase to industrial demand to put 2020/21 ending stocks at 2.65 bbu. While a reduction of 675 million bu from June, this is still an ample amount. The 2019/20 ending stocks estimate increased 145 mbu to stand at 2.25 bbu. 

As with corn, soybean acres were adjusted to reflect the June revisions from the March intentions. The average yield per acre was left unchanged at 49.8 bpa to give the US a 4.135 bbu crop, 10 mbu more than predicted last month. Ending stocks were bumped to 620 mbu and when the additional production was added in it was enough to raise 2020/21 carryout to 425 mbu, 35 mu more than the June estimate. The only change to soybean demand was a 45 mbu increase to crush. 

Very few changes were made to US wheat balance sheets, with old crop ending stocks declining from the June estimate by 43 mbu to a 1.824 bbu total. The 2020/21 carryout on wheat is now pegged at 942 mbu, up from June’s 925 mbu. 

The biggest change to the global balance sheets for the 2020/21 marketing year was a 23 million metric tons decrease to the world corn supply. While down, this still leaves the world with a comfortable 315 mmt corn reserve. The global soybean reserves are expected to decrease 1.2 mmt to a 95.1 mmt total. The global wheat supply is also forecast to shrink a minimal 1.3 mmt to a still adequate 314.8 mmt. One surprising global number was an increase to Brazil’s soybean crop of 2 mmt, giving the country a 126 mmt crop. 

Now that this report has been released, trade will again focus on weather and crop reports for daily market decision making. Forecasts still indicate rising temperatures next week, but to what extent is questionable. Crop ratings will be closely monitored as well following last week’s heat and the impact it was expected to have had on fields. We will also continue to monitor demand as we approach the end of the marketing year on corn and soybeans. 

The daily flash sales report this morning contained friendly data for the grains. China booked a huge 1.365 million metric tons of corn from the US. This was split with 765,000 mt for the 2019/20 marketing year and 600,000 mt for the 2020/21 marketing year. China also booked 320,000 mt of US wheat in two separate purchases for delivery in the 2020/21 marketing year. 

Along with these sales came an announcement from China’s Minister of Ag that the country will likely import more corn and soybeans this marketing year than earlier thought. Chinese corn imports are now estimated at 6 mmt for the 2019/21 marketing year, a 2 mmt increase from the initial estimate. Soybean imports are now at 94 mmt, up 3 mmt from the group’s June projection. 

Farm gate movement of stored corn and soybeans has been on a rise over the past week. This was initially the result of the friendly stocks and acreage reports but has been excelled by weather. While this has applied pressure to interior basis values in some regions, the elevated movement is actually beneficial long-term. There were concerns that without farmer selling prior to harvest we would see both old and new crop deliveries at the same time, causing logistic issues in several regions. This will likely limit basis loss this coming harvest season. 

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.