E-Visor Reports: Market Watch

Wednesday, July 08, 2020
Over the past week we have seen basis values soften across much of the Corn Belt, which really is not that much of a surprise. The primary reason for weaker basis is the rally we have seen in futures following the June 30th USDA reports. This caused farmers to move more of their farm stored inventory and the combination gave end users adequate coverage for now. Some processors already claim to have enough coverage to last until new crop harvest begins. This convergence is a process that takes place every year at this time and causes elevated volatility in the cash market. Buyers are not willing to pay any more for elevated old crop stocks than they have to if they can wait until new crop bushels are available. This is especially the case in years like this on corn where old crop quality it less than average. Another reason for a weaker basis is positioning for fall harvest. Some terminals across the interior market claim to be full of old crop inventory and are worried about getting the bushels moved ahead of the upcoming harvest. One benefit has been the increase in both crushing on soybeans and ethanol manufacturing for corn, but these have yet to totally make up for the losses in production when the Covid-19 outbreak took place last spring. Mediocre exports are also preventing interior terminals from moving as much inventory as hoped. Any weakness we may see in basis may be limited though as buyers will likely show more interest in pushing for new crop inventory to blend with old crop, especially on corn. Much of today’s session will likely again focus on weather forecasts, mainly if heat returns to the US next week. Some models are increasing their precipitation chances, which weighed on overnight trade. 

* Covid cases continue to rise
* States again closing some businesses
* China economy showing signs of recovering
* SAM still impacted by drought
* US sees cool down this weekend, heat to return
* July may go down as one of hottest in past 125 years
* US ethanol futures at $1.31/gallon
* Ethanol futures highest since February
* EPA places biofuel mandate on hold
* US/China trade tensions building
* Positioning increases for WASDE

* Gulf basis firming 
* Defer pricing contracts coming due
* Country sales rising
* Open interest declining as shorts are covered
* Delayed pollination from early heat

* China accounts for 58% of new crop demand
* Processors bids weaker on elevated movement
* Analysts predicting higher soybean yields than USDA
* Brazil nearly sold out of reserves
* China crush margins rebound

* US exports up 6% from year ago
* EU production -10% from weather
* Russian wheat crop lowered to 80.9 mmt
* Harvest pressure builds in US 
* Drought starting to cut Argentine crop

* US yearly beef exports equal to year ago
* May beef exports down 20% from last year
* May pork exports a record 618 million pounds
* Pork exports a record for 12 consecutive months
* Retail values starting to firm

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.