AgriVisor Market Recap

Tuesday, June 02, 2020
Soybeans were the leader in today’s session as fund buying ramped up. This was brought on by the confirmation of Chinese purchases in the flash sales report of 132,000 metric tons from the US, countering reports that bookings would be suspended. Soybean advances were limited by technical resistance and the fact funds are already holding a long position in the complex. Corn and wheat did not show as much strength as funds remain comfortable with their short positions in those markets. Weather is favorable for all crops at the present time as much needed heat is going to develop, but then break down and bring rains next week. A weaker dollar provided the entire market support. 

We continue to see mixed opinions when it comes to Chinese soybean demand. China has stated they will bypass the United States on soybean purchases in upcoming months, but at the same time, has booked US vessels for fall delivery. Chinese firms are claiming they will finish up deals that were currently being negotiated, and that led to the bookings being announced. This doubt is worrisome for US soybean traders as they feel demand may be over-estimated even without this loss of demand. This uncertainty is preventing soybean selling from taking place but is also limiting fresh buying interest as well. 

The April Fats and Oils crush report showed a monthly soybean usage of 183.4 million bu, slightly higher than what was expected. This total was down 4.6% from March though, mainly from fewer days for crushing. Meal and oil production were down an equal 4.6% as well. Yearly crush is still 2.6% more than a year ago and higher than USDA projections. 

The ethanol report for April has also been released, showing a demand of 245 million bu for the month. It is not surprising that this was down 40% from March and 44% from April of 2019 as many ethanol plants were idled due to the Covid-19 outbreak. Corn demand for the year stands at 3.34 billion bu, which is in-line with expectations and sets up to possibly reach the yearly proposed usage target of 4.95 billion bu. 

We are starting to see more private analysts release their own corn and soybean yield estimates. In the May balance sheets the USDA projected an average corn yield of 178.5 bushels per acre this year, and an average soybean yield of 49.8 bushels per acre. There are thoughts these could be higher given recent weather conditions, and possibly negate any potential loss to acreage. 

One of these analysts is Dr. Michael Cordonnier who believes yields will reach 179 to 190 bushels per acre on corn and from 50 to 52 bushels per acre on soybeans. He also believes we will not see much of a loss on corn acres given the recent planting pace and feels they will com in from 94 to 95 million compared to the USDA figure of 97 million. Cordonnier’ s soybean acreage is unchanged as he feels it is too early to update that figure. 

Not all agree with these higher yields though. The firm Barchart believes yields will be down from initial projections, coming in at 172 bushels per acre on corn and 48.8 bushels per acre on soybeans. There is little doubt we will see these numbers change several times throughout the growing season. 

Meat processing plants are starting to come back on-line across the United States. As they do, the processing rates for the United States are obviously rising as well. At the present time US cattle slaughter remains 11% less than before the Covid-19 outbreak, and hog slaughter is down 8% from prior to shut-downs. These rates now appear to be leveling out though, indicating we may be as high as we will get on processing rates for the immediate future. This is not surprising as we are seeing stricter regulations in packing plants that were expected to slow progress.