E-Visor Reports: Market Watch

Thursday, June 18, 2020
One factor from last week’s supply and demand data continues to weigh on trade, that being the stocks to use ratios. These are all higher than in recent years indicating the domestic market has plenty of corn, soybeans, and wheat. In the WASDE report, the stocks to use was reported at 15.3% on old crop corn and 22.5% on new crop corn. Stocks to use on soybeans was 15% on old crop and 9.1% on new. The ratio on wheat was 46.3% on the 2020 crop and 44.6% on the 2021 crop. These are all historically high and why the USDA is expecting commodity values to remain depressed for the remainder of the marketing year and into next year as well. Until we see these numbers decline it will be hard to sustain a market rally, regardless of what we see in the day to day market. There are two ways we traditionally see these ratios change, either elevated demand or decreased production. If we see and alteration this year it will likely need to be from a combination of both. US crop production is expected to be large this year given recent and current growing conditions. That does not mean we will not see issues develop before harvest and crop size be reduced. At the same time, demand has been good, but not quite what was hoped for by trade, especially on soybeans. Either way, in order to see prices rally we will need to see these numbers shrink. 

* More US plants coming back on-line
* Weekly production up 28,000 barrels
* Ethanol stocks down 456,000 barrels
* Average Us corn basis -23 July futures
* Corn basis strongest since March
* Average soy basis 4.5% narrower than low
* Farmers selling remains light
* China closes schools, businesses to prevent Covid spread
* China also limits travel
* Mexico to limit farm labor sharing with US/Canada

* DDG exports remain strong
* DDG values fall compared to soy meal
* Larger EU carryout expected
* Seasonals do not support corn futures
* New crop selling very limited 

* Egypt ups US imports
* Meal demand slows
* Crush margins fading
* China has only covered 12% of Phase 1 agreement
* June sales currently total 82.8 mbu

* New crop exports -23% from year ago
* Harvest pressure building
* US sees large yields, low protein
* Russian plantings up 1.23 million acres
* EU lowers crop estimate

* Labor issues remain at packing plants   
* Funds holding long cattle futures
* Retail beef values hold firm
* Restaurant demand on the rise
* Large US hog supply a concern

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.