AgriVisor Market Recap

Thursday, July 30, 2020
Trade was mixed for much of today’s session as positioning ahead of month end increased. Conflicting demand numbers added to the choppy tone of the market, as weekly sales heavily favored soybeans, but the US saw huge flash sales on corn. Weather forecasts also gave the market mixed signals as current conditions are putting some stress on the corn crop, but long-range models are highly favorable for soybean production. All contracts were pressured by poor economic data that not only weighed on equity markets, but on the energy complex as well. 

Export sales for the week ending July 23rd heavily favored soybeans over the grains. Soybean bookings were a modest 9.47 million bu on old crop, but a huge 122.9 mbu on new crop. It is not surprising that the majority of these new crop sales were to China. Corn sales were disappointing with a negative 1.15 mbu on old crop due to cancelations and a light 25 mbu on new crop. We had huge flash sales on new crop corn announced though, with China booking 1.937 million metric tons and an unknown taking 130,000 metric tons. Last week’s wheat sales were a mediocre 24.86 mbu. 

US meat exports were solid on the week. Beef sales for the week ending July 23rd totaled 29,500 metric tons, a calendar year high. This was also the most US beef sold for export in one week since May 2018. Pork sales for the week were a large 39,500 mt. This was split mostly between China and Mexico. 

One benefit for US corn demand is the record values being seen on Chinese corn. Chinese corn has rallied 27% in recent months and is now at the highest level since 2015. China suspended its corn supports in 2016 as domestic reserves swelled, and production has dropped since. Chinese corn demand has started to increase in recent months though, and now corn is actually in short supply in some regions of the country. This is the main reason why we are seeing the corn import activity we have in the past few weeks. 

Current weather forecasts are causing little excitement in the marketplace. Most forecasts are calling for moderate weather to start August which will generate favorable conditions for ear fill on corn. These are also favorable for pod setting and filling on soybeans. While we can easily see weather conditions change, current weather is again limiting the amount of risk premium we are seeing added to futures values. 

One country that is greatly benefiting from weather this year is Australia. Timely rains returned to Australia this year following several consecutive years of drought and wheat production has rebounded. Australia is now expected to raise a 26.7 million metric ton wheat crop in the 2020/21 production season, a large 75% increase from a year ago. This compares to the ten-year average of 24 mmt. Many producers in Australia claim this year’s wheat crop will be the best in many seasons. 

A country that is not seeing favorable weather conditions is Argentina. A La Nina weather event is building which typically brings drought to Argentina. A reported 69% of Argentina has been drier than normal in the past 90 days, with 50% of the country seeing less than half of its normal precipitation. This has caused losses in wheat production, and now thoughts are it will impact corn yields as well. Some reports have Argentina’s corn production falling by 2% and coming in under the USDA projection. 

Ethanol export values have started to improve in recent weeks. The current value on ethanol at the US gulf is $1.38 a gallon, a 4% increase from a week ago. Ethanol still has a long recovery though as values are 12% under a year ago. One benefit for ethanol is that even with a recovery, US offerings are still 14 cent per gallon under those from Brazil. While this is down from 17 cents last week, it is still favoring the US in the global market. 

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.