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E-Visor Reports: Market Watch

 
Friday, July 17, 2020
Much of the demand interest in the market recently has been on exports, but we should be placing just as much on domestic usage. The USDA is currently predicting new crop corn usage for ethanol at 5.2 billion bu and feed and residual at 5.85 billion bu. These two numbers have fluctuated recently, especially on ethanol. The ethanol industry was devastated when the Covid-19 outbreak happened last spring and has yet to fully recover. Several plants were closed when this happened and those with historically poor margins remain idled. Some of these are unlikely to resume operations even if margins do improve, as energy demand has yet to rebound to pre-Covid levels on a whole. Some models indicate this demand will never fully recover. As a result, it is hard to justify the increase in corn demand the USDA has pegged from the industry between old and new crop. Feed demand is more likely to increase though as US animal herds continue to build. Soybean crush is also being questioned. The slow down in ethanol manufacturing has generated increased crush demand as meal is needed to fill in the void from reduced Distiller Grain availability. The most uncertainty on domestic demand right now is on wheat, however. The milling industry saw an increase in demand when the Covid-19 outbreak happened as consumers bought up large volumes of flour and other products. In turn, mills processed large volumes of wheat and pushed for deliveries as well. This demand dropped off faster than expected though, and now many of these mills are now sitting with ample supplies of wheat. This comes right as the wheat harvest is gaining momentum across the US and inventories are building. This has put more pressure on wheat basis than normally seen during a typical harvest season. 

Highlights
* Total US prevent plant acres this year at 6.6 million
* Prevent plant down from 17.5 million in 2019
* CRP acres nearly steady from last year
* China reports no quality with stored grains/soybeans
* Brazil raises meat export forecast
* EU expects drought to continue
* SAM weather remains stressful
* US dollar becomes volatile
* Global economic outlook is uncertain
* Trade hopeful on Chinese buying

Corn
* Gulf basis mostly steady
* Pollination stress seen as limited
* Rating improvement possibly Monday night
* Privates lower US yield 2 bpa
* Brazil yield at 80.6 bpa as harvest advances

Soybeans
* Uncertain Chinese demand going forward
* Ratings may improve next week
* Global oilseed market weakens
* US yield left unchanged
* China bookings new crop from Brazil

Wheat
* US harvest pressure starting to lift
* Russia offers under-cut global market
* Ongoing stress for Argentine crop
* EU, Black Sea, Australia also seeing drought develop
* Parts of US see excessive rain on spring crop

Livestock
* Wholesale values decline
* Restaurant demand is uncertain
* Beef sales last week at 27,767 mt; 2nd highest of 2020
* Weekly pork export sales at 38,488 mt
* Pork sales +22% from last week, +76% from last year

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