AgriVisor Market Recap

Tuesday, June 30, 2020
The early portion of today’s session was spent getting final positions in place ahead of the USDA acreage and stocks reports. While this generated some last-minute short covering, buying was limited by last week’s improvement to crop ratings. While this cannot be associated with a yield prediction, it does indicate that for now at least the crop is stabilizing. The acreage side of the USDA reports shocked trade with lower than expected numbers, some of which was offset by higher stocks on the grains. 

According to the USDA, US corn stocks as of June 1st totaled 5.22 billion bu, nearly equal to last year’s inventory, and well above trade estimates for 4.95 bbu of inventory. Soybean stocks on June 1st were close to the average estimate at 2.386 bbu. This is a large 397 million bu less than the US had in inventory a year ago. Wheat inventory to start June was above estimates at 1.04 bbu, which was 40 mbu under the 2019 volume. 

The acreage numbers are where trade was caught off-guard. US corn plantings this year are now pegged at 92 million, 3 million under the average trade guess and 5 million fewer than what came out of the intentions report. Soybean plantings were more in line with trade estimates at 83.8 million but were still 1 million under the average guess. Soybean plantings did increase 300,000 from the intentions report. Wheat plantings are projected at 44.3 million, also in line with trade guesses, and 300,000 fewer than the March intentions. 

Compared to last year, corn plantings are expected to be 2.3 million higher, soybeans will be 7.7 million higher, and wheat will be down 860,000 acres. The real focus is on harvested acres though, with corn projected at 84 million, soybeans at 83 million, and wheat at 36.7 million. The most attention is on corn, where harvested acres this small will reduce the national corn supply. 

Given these harvested acres and projected yields, US crops this year will total 15 bbu on corn, 4.13 bbu on soybeans, and 1.82 bbu on wheat. These would all be under what the USDA is currently predicting for crop sizes. 

Wheat harvest is not only getting underway in the United States, but in the Black Sea as well. Most activity so far has been in Ukraine as that country has benefited from near perfect growing conditions all season. Ukraine officials are expecting to see high yields on all grains this year as a result. Trade is keeping a close eye on Ukraine activity as it has become a main supplier of grains into the Asian market. Russian authorities are not as optimistic on yields, and we have already seen export forecasts reduced as a result. 

Trade tensions between the US and China are on the rise. China is not pleased with the US stance on China’s handling of Hong Kong as well as other countries. Chinese officials claim the US stance and how it has reacted may jeopardize the guidelines that were set in the Phase 1 agreement. While many US analysts have doubted China would reach its agreed to levels, this is the first time China has indicated it may not import as much as promised. 

Another issue that is rising between the two countries is food security. China has started to request countries provide Covid-free certificates when making exports. Hardly any have agreed to this requirement, but the US has said it will provide documents that any crops were grown, harvested, and shipped in the safest manners possible. To guarantee any commodity is Covid-free is nearly impossible, as there is now way to determine where a product may have picked up the virus, including in Chinese ports and testing facilities. 

Chinese officials have announced a new strain of Swine Flu that is showing signs of being a potential pandemic. While there is no immediate threat to people, China is very cautious of any virus following the Covid-19 and African Swine Fever outbreaks. This is especially the case if the virus is as easily transmitted to humans as some experts claim it could be. There is now speculation on what China will do with infected hogs, and if it will lead to additional Chinese pork demand. 

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.