AgriVisor Market Recap

Wednesday, July 15, 2020
Trade was again mixed today, with corn under pressure and soybeans and wheat higher. Corn continues to suffer from a lack of buying interest that gave us support last week. All eyes in the corn complex are now on weather, and current conditions are favorable for production. Until this changes, corn futures will struggle, even with elevated demand such as we have seen from China. This demand continued today with flash sales of 132,000 metric tons of corn and 389,000 me of soybeans to China for the 2020/21 marketing year. Wheat was the leader in the market today as losses in global production negated the high yields reported on the US winter crop. Soybeans were firmer today with support coming from news China booked 5 US cargoes, but were limited by a lack of active buying interest. 

Ethanol manufacturing in the United States continues to rebound from its spring lows. According to data from Mid-Co Commodities, ethanol production for the week ending July 10th was up 119,000 barrels from the previous week. This put total production for the week at 6.5 million barrels and made it the 11th straight week of higher output. Ethanol reserves decreased by 12,000 barrels from the week before, putting stocks at 20.6 million barrels. This compares to 23.37 million barrels in storage a year ago. The weekly production equates to 95.5 million bu of corn usage which puts the industry on track to meet the yearly projected total. 

The National Oilseed Processor Association, or NOPA crush report for June was released today with a higher than expected soybean usage number for the month. A reported 167.26 million bu of soybeans were crushed in June, 5 mbu more than trade was expecting. While this was the 3rd consecutive month of reduced soybean usage, it was the largest June crush total on record, and compares to 148.8 mbu from June in 2019. Even with the elevated crush soy oil stocks declined from May, but were up from June of 2019. 

A dark cloud over the US commodity market is the growing competition it is seeing in the world market. The most talked about remains Brazil, where soybean competition is persistent. This week Brazil raised its soybean export forecast to 8.9 million metric tons from a previous 8 mmt estimate for July. Brazil also raised its corn export forecast for the month to 5.55 mmt from the previous estimate of 5.16 mmt. These forecasts not only bring into question the size of Brazil’s commodity surplus but force the US to remain competitive in the global market. 

Another country that is expected to increase competition for the US is Ukraine. Ukraine now pegs its yearly wheat exports at 17.3 mmt, 800,000 metric tons more than earlier thought. The Ukraine corn crop was also increased by 1.2 mmt this week, meaning we will likely see additional sales on that grain as well. Ukraine took sales away from the US into the Asian market last year, and these numbers indicate that competition will grow this year. 

Severe flooding has taken place in China recently and caused crop damage in several areas. The flooding has also caused an increase in African Swine Fever cases according to officials in that country. The spread of ASF is hampering the build in pork production that China has seen. Hopes are this will lead to additional US pork exports. 

Even with this decline, China is seeing its hog herd rebuild. This is coming from the expansion we have seen to hog production facilities in China as the country brings updated farms online. The ASF outbreak devastated China’s hog herd, cutting numbers 40% as herds were wiped out from the disease. Since the low in September of 2019, we have seen the nation’s hog herd increase 21% though as these facilities are filled. China has also seen its sow herd increase by 29% since that time, which will bring even more hogs into the supply line. 

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.