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AgriVisor Market Recap

 
Monday, July 06, 2020
Weather has moved to the forefront of the market as an influencer on price discovery. Heat is forecast to continue for much of the Corn Belt for the remainder of the week which will start to be a factor for pollination on corn. Soybeans were the leader in today’s session as large sales were announced in the flash report with China booking 264,000 metric tons. China also booked 202,000 mt of corn and Mexico was in for 183,000 mt of US corn as well. All commodities benefited from a sharp drop in the value of the US dollar as well. Advances were capped by a lack of follow through buying and technical resistance, mainly on the grains. 

We are in the midst of the most active weather market we have seen in the past several growing seasons. All attention is on the heat that is impacting the entire Corn Belt with some regions seeing their highest temperatures of the past several years. Precipitation has been limited with these temperatures, and even with adequate subsoil moisture, crop stress is being seen. Some outlook models see this heat breaking down by the weekend, while others indicate even hotter temperatures will be seen next week. Funds have already covered a large number of short corn positions and extended their long soybean position as a result of these conditions. 

Much of the interest in the renewable fuel market from the Covid-19 demand destruction has been on ethanol, but biodiesel was affected as well. According to data from the Energy Information Administration, biodiesel production in the month of April totaled 143 million gallons. The was a decrease of 8 million gallons from March. On a positive note soy oil demand was actually up for manufacturing in April as the raw stock became more readily available than other products. 

Data from the United Nations’ Food and Agriculture Organization, world food values increased in the month of June. This was the first increase of the calendar year and credited to increasing demand following the Covid-19 outbreak which devastated demand for many products. One of the leading increases was to vegetable oils which were up 11.3% in the month. Dairy values also rose 4% in the month as consumer demand picked up and large reserves were worked through. 

According to Reuters News, the Covid outbreak has not slowed Brazilian soybean exports. For the month of June Brazil exported an estimated 11.9 million metric tons of soybeans, a 37% increase from June 2019. This pace has caused some firms to increase their export forecasts for the country to 78 mmt, 5 mmt more than their previous predictions. Of the soybeans Brazil has exported this year, 72% has went to China. 

The question now is how long we may see this Brazilian competition. Brazilian officials claim 93% of the crop that was just harvested is already booked for export. This compares to last year’s 71% sold and the average of 74.8% at this time. The record returns that were seen given the shift in global currencies has led to these sales. While the US has seen elevated soybean sales as Brazil slows its business, corn sales may suffer as Brazil ramps up its marketing of that crop. Brazil has also sold a large 40% of their 2020/21 soybean crop that will be seeded this fall. 

Export inspections for the week ending July 2nd were mixed. Corn inspections were on the light side at 37.9 million bu. Soybean loadings were on the high side at 19.1 mbu, and the highest weekly inspections since the first week of May. Wheat inspections were also on the light side for the week at 12 mbu. 

The livestock complex took support today from news China is suspending pork imports from two more Brazilian packing facilities. While no specific reason was given for this move, it is believed it is in response to the spread of Coronavirus through Brazil, which has the world’s second most cases. Last week China had said they would require certificates that imports were Covid free. The US would not agree to this but will offer documents that exports were handled in the safest means possible. China has now banned imports from a total of six Brazilian packing plants. 

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. 
 

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