AgriVisor Market Recap

Monday, June 29, 2020
Much of today’s session was spent getting final positions in place ahead of tomorrow’s quarterly stocks and revised plantings reports. Trade was also squaring up positions for month and quarter end. Weather was a factor in today’s trade as above normal temperatures are being forecast for much of the Corn Belt, although the length of these conditions is being questioned. Advances were capped by building concerns over the surge in US Covid-19 cases and what it could mean for the economy and commodity demand. 

Parts of the Corn Belt are forecast to experience above normal temperatures for the next several days, with some regions expected to see these last for the next two weeks and maybe more. The question with this is how much precipitation will be received, with some regions seeing none. These temperatures are more of a factor on corn as that crop is starting to move into the pollination stage of development. Funds are holding a record sized short position, and the possibility of production losses is giving the complex some much needed support. 

These weather conditions are already starting to cause some analyst to back off their corn yields. More and more analysts are starting to put the US corn yield closer to trend which would be 173.2 bushels per acre. This is a large 5.3 bpa under what the USDA is currently using in balance sheets. If correct, this decrease would take nearly 475 million bu off the US production figure using current acreage. It goes without saying this would greatly impact US and global balance sheets. 

The United States is not the only country seeing production losses from weather. The European Union has lowered its wheat crop forecast due to drought, putting it at 117.2 million metric tons. This compares to the 121 5 mmt prediction in June and last year’s wheat crop of 130.9 mmt. Argentina is also indicating its wheat crop could be smaller than first thought this year due to drier than normal conditions. These losses are being offset by elevated production in Australia and high yield reports on the US winter wheat crop. 

Stats Canada released its acreage estimates for the country for the 2020/21 growing year this morning. Stats believes the country will plant 20.8 million acres of Canola and 25 million acres of wheat this year. Corn acres are forecast to total 3.56 million and soybeans come in at 5.07 million. The most changes would be to wheat with 400,000 more acres in the 2019/20 marketing year, and soybeans would be down 630,000 acres. 

US export loadings for the week ending June 25th were mixed. Corn loadings were a solid 48.6 million bu, but still fell short of the volume needed to reach the yearly USDA projection. Soybean inspections also fell short of needs at 11.9 million bu. Wheat inspections topped the needed amount though with 18.3 million bu. The greatest concern with the report was the low loadings to China which were just half of a year ago. 

One source of corn demand that is expected to increase in the US is for feed. The United States continues to see elevated numbers of animals on feed, especially given the backlog caused by the Covid-19 outbreak. This is one of the main reasons for the 5% jump in hog numbers in last week’s inventory report. We are also seeing cattle move into feed lots sooner as pasture conditions deteriorate where drought is taking place in the Plains. The USDA is already forecasting a 350 mbu increase to feed demand in new crop balance sheets though, so any additional usage may not have a significant impact on balance sheets. 

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.