News > Top Ag News > Midday Comments: 5/06/2020

Midday Comments: 5/06/2020

May 06, 2020

Bolstered by a 20.5% daily upsurge in crude oil futures, grains inched higher on Tuesday as traders shrugged off Monday afternoon’s USDA Weekly Crop Progress report that indicated the 2020 US corn & soybean planting pace was above average & that winter wheat condition ratings improved slightly in the week ended May 3.  Aided by excellent conditions in the western Corn Belt, US farmers advanced corn sowing by 24% to 51% of planting intentions & upped bean sowing by 15% to 23% planted by May 3.  Both rates were 12% ahead of the 5-year average with the corn pace the fastest since 2015 & bean planting the fastest rate ever.  While traders expected to see the quick advancement of corn & soybean planting, they were surprised by a 1% improvement to 55% good-excellent in winter wheat condition ratings. That was still 9% below last year’s same-week rating.  The fact that spring wheat planting only jumped 15% higher to be 29% planted—14% below the 5-year average—also mitigated the slightly bearish winter wheat data.  Reports that Mexico bought old- & new-crop US corn & China purchased old- & new-crop US beans combined with news that dry weather was hurting both Brazil’s Safrinha corn crop & late-season Argentine bean prospects to offset the US crop data, too.  Census Bureau monthly trade numbers that confirmed that US corn, soybean, wheat & grain sorghum exports continue to be significantly above USDA’s grain inspections totals were also muted by the fact that Sept-March corn exports were the slowest since 2012/13 & cumulative 2019/20 bean exports were still the second-slowest since 2011/12 thru the end of March.  At Tuesday’s close, July corn futures gained 1.5c, Dec. corn ticked 1/4c higher, July beans jumped 3c, Nov. beans edged 3/4c higher, July soymeal rallied $1.00/ton, July soyoil rose 0.16c/lb., July soft red winter wheat was up 1.25c, & Dec. SRW wheat was 1.75c higher.
 
Grains struggled in Tuesday night’s trading session as crude oil turned lower.  Traders awaited the 9:30 am release of the EIA Weekly Petroleum Status report that was expected to show further reductions in US crude oil output, but improved gasoline demand, stable ethanol output & smaller ethanol stockpiles.  USDA Ag Sec’y Perdue issued further orders to meatpackers to restart operations with enhanced COVID-related safety requirements, but worker absenteeism is running about 30% in those plants that remain in operation.  Do you think Mr. Trump & Mr. Perdue will don  masks & hit the production lines to prove to Tyson, JBS, National Beef & Cargill workers government orders will keep them disease-free?  Traders are turning their attention towards next Tuesday’s USDA WASDE report that is expected to be sobering.  While US & global equity markets are willing to look past historical, Depression-era unemployment & worst-ever GDP data, grain traders refuse to ignore the potential for reduced old- & new-crop usage & higher ending stockpiles for both 2020 & 2021.  Reports that Argentina’s exports of biodiesel have ground to a halt weighed on soyoil futures since depressed fuel usage will ultimately boost soyoil stockpiles.  At the 7:45 am pause in electronic trading, July corn futures were down 1/4c, Dec. corn was 1.25c lower, July beans were down 3/4c, Nov. beans were 2c lower, July soymeal was up $1.40/ton, July soyoil was 0.38c/lb. lower, July SRW wheat was down 2.75c, & Dec. SRW wheat was 2c lower.
 
Grains extended their overnight losses on Wednesday morning as crude oil & petroleum products remained weak. This week’s EIA petroleum report indicated that US oil producers cut oil output by 200,000 barrels to 11.9 mil.brl./day, but commercially-owned crude oil inventory still climbed 4.590 mil.brl. (MB) to a near-record 532.221 MB.  Gasoline supplies declined 3.158 MB to 256.407 MB, but distillate inventories rose 9.518 MB to 151.490 MB & total commercially-owned petroleum supplies jumped 17.916 MB (+1.3%) to a record-high 1,395.429 MB.  The report was more friendly to the ethanol industry. Ethanol output rebounded 11.36% from the previous week’s record-low to 175.812 mil.gal. even as ethanol stockpiles declined 30.030 mil.gal. to a 6-week-low 1,075.704 mil.gal.  Ethanol futures attempted a feeble rally, but couldn’t lift corn or soyoil futures to gains. At 12:52 pm, July corn futures were down 3c, Dec. corn was 3.25c lower, July beans were down 5.25c, Nov. beans were 6.25c lower, July soymeal was down $0.60/ton, July soyoil was 0.48c/lb. lower, July SRW wheat was down 3c, & Dec. SRW wheat was 2.75c lower. Given the April-May price break in grains & livestock, it’s no wonder that farmer “sentiment” is a three-year lows, according to Purdue University.
 
In export news, USDA did not report any daily export sales on Wednesday. On
Tuesday morning, the farm agency announced that 1.780 mb of 2019/20 & 2.516 mb of 2020/21 US corn were sold to Mexico, & that 4.997 mb of 2019/20 & 8.892 mb of 2020/21 US soybeans were sold to China. On Wednesday, South Korean feed mills reportedly purchased 5.433 mb of South American feed corn for October arrival. The firm had sought offers for US, Europe, South America & South Africa corn.   
 
Tuesday’s monthly Census Bureau “official” trade data showed that 181.719 mb of corn, 19.584 mb of grain sorghum, 94.486 mb of beans & 67.120 mb of wheat were exported during March. That brought Sept. 1-March 31 corn exports to 800.784 mb, 65.0 mb higher than USDA’s inspection data reported during that period.  Cumulative corn exports for 2019/20 are still the slowest since 2012/13 for that 7-month period.  Total Sept-March bean exports stood at 1,214.730 mb, 38.550 mb more than USDA inspected during that period. While 2019/20 bean exports are 71.911 mb above last year, they are still the second-worst for the first 7 months of the marketing season since 2011/12. June 1-March 31 wheat exports totaled 771.656 mb, 19.0 mb above USDA inspections for that period.  While wheat exports were 56.626 mb better than last year in the first 10 months, April-May 2019 wheat exports were robust.  That has not been the case this year, & that could make USDA’s current 985 mb export forecast difficult to reach.
 
Locally, corn & wheat basis levels were steady & soybean basis was a penny higher on Tuesday. Markets are willing to pay more for May delivery than for June, suggesting that farmer deliveries remain slow even as domestic feed & export demand are solid right now.
 
Would you like CBOT futures prices reported to your phone? Top Ag can send you nearby & harvest futures prices for corn, soybeans & wheat at 9:45 am, 11:15 am & 1:45 pm each day.  We provide the service for free, but you may have to pay for text messages--depending upon your phone plan. Call Scott or Jacob at Okawville at 243-5293 or Mike at Trenton at 224-7332 & we'll get you set up! 
 
"Closing Comments" are written by David Marshall, First Choice Commodities LLC, Nashville, IL.  To learn more about his farm marketing advisory or commodity brokerage services, contact him at dmarshall@firstchoicecommodities.com or call (618) 327-4370 (voice/fax) or (618) 314-0918 (cell). This commentary is not intended for specific trading strategies. We strive to insure this information is reliable, but we cannot guarantee its accuracy or completeness.  Commodity trading involves risks. You should fully understand those risks before trading.
 


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