Midday Comments: 7/31/2020

Beans edged higher on Thursday as USDA’s Weekly Export Sales data reported massive new-crop export sales for the week ended July 23. Corn failed to hold early session 3c gains & settled only fractionally higher even though USDA announced a huge new-crop corn sale to China—the third largest single day corn purchase by any country ever.  A benign US Corn Belt weather outlook that increases the likelihood of trendline or better corn & soybean yields continues to fuel expectations for price-depressing, plentiful supplies. Corn has been pressured all week by the combination of weaker Gulf export demand & rising cash supplies as farmers clean out bins ahead of fall harvest.  Wheat failed to sustain Wednesday’s upsurge & closed lower on conflicting global supply-demand signals. While private estimates for the size of Russia’s wheat output have eased slightly during the past month, they remain about 4% higher than USDA’s July forecast.  The Russian crop outlook is being partly offset by above-average early season US wheat export sales trends, keeping wheat price trends choppy.  At Thursday’s close, Sept. corn futures ticked up 1/4c, Dec. corn edged 1/2c higher, August soybeans gained 1/4c, Nov. beans rose 3c, Aug. soymeal rallied $2.90/ton, Aug. soyoil jumped 0.31c/lb., Sept. soft red winter wheat declined 3.25c, & Dec. SRW wheat lost 2.5c.  August contracts of soybeans & soy products ended with top range gains as traders anticipated Friday’s first notice day deliveries on futures would be nil on beans & meal & well absorbed by commercials on soyoil.
 
Corn futures were steady to fractionally higher, & soybeans & wheat posted modest gains on Thursday night. Corn prices continued to hover near contract lows with traders still expecting 2020/21 ending stocks to be the highest since 1988.  Soybeans again found speculative support as prices approached recent chart support above $8.90-8.92 & first notice day deliveries on August futures were zero on beans, 24 contracts on soymeal & only 412 contracts on soyoil.  Forecasts that Brazilian farmers would expand soybean plantings by 3% & boost bean output by 8% to 130+ mmt in response to strong demand from China kept bean rallies in check.  Wheat moved slightly higher on reports that Ukraine grain exports declined by a third in July to 2.33 mmt, including 1.19 mmt of wheat, 424,000 mt of corn & 714,000 mt of barley.  News that French farmers advanced wheat harvest by 19% to 90% completed & that wheat conditions declined 1% to 56% good-excellent in the week ended July 27 also gave wheat a fundamental boost.  With the US dollar index still languishing near two-year lows, hopes for improved US grain exports to counter ample output underpinned prices.  At the 7:45 am pause in electronic trading, Sept. & Dec.  corn futures were each unchanged, Aug. beans were 5c higher, Nov. beans were up 3.5c, Aug. soymeal had gained $1.70/ton, Aug. soyoil was 0.42c/lb. higher, Sept. SRW wheat was up 2c, & Dec. SRW wheat was 1.75c higher.
 
Grains continued their overnight trends as Friday’s regular trending session unfolded.  USDA did not announce any fresh grain sales to China, but new-crop corn  sales to Mexico & soymeal sales to the Philippines argued that exporters are finding value at current prices.  With the month coming to an end, corn futures by late morning were poised to be about 22c lower for the month & 84c lower on the year, soybeans were up about 12c from the end of June & 32c higher year-on-year & wheat was up about 41c for the month & nearly 44c higher than end-July 2019.  At 11:30 am, Sept. & Dec. corn futures were each steady, Aug. beans were up 4.5c, Nov. beans were 2.75c higher, Aug. soymeal was do9wn $0.80/ton, Aug. soyoil was 0.58c/lb. higher, Sept. SRW wheat was up 1.25c, & Dec. SRW wheat was 2.5c.
 
In export news, USDA announced on Friday morning that that 4.500 mb of 2020/21 US corn was sold to Mexico & 222,000 mt of 2020/21 soymeal were sold to the Philippines. On Thursday, the farm agency reported 76.256 mb of 2020/21 US corn were sold to China & 5.118 mb of new-crop corn were also sold to unknown destinations.  The Chinese purchase was the third-largest daily export corn sale ever made to a single country & the largest single-day corn sale ever reported to China.  (The two largest corn sales were to the USSR in Jan. 1991 & Oct. 1989, respectively.)  Given that recent sales of Chinese government stockpiles have been at record-high prices in excess of $7.39/bu., it would appear that China really needs out corn. But the fact corn futures closed virtually unchanged & near its intraday lows speaks volumes to how bearish market sentiment is toward feed grains right now.  Traders seem convinced that Chinese corn purchases from all sources will be limited to their WTO obligations of 6-7 mmt (236-276 mb).  If one combines Thursday’s USDA Weekly Export Sales data for new-crop commitments with Thursday’s daily sale, China has already booked 225 mb of US new-crop corn.  China also has a trade agreement with Ukraine that requires it to buy at least 40 mb of corn. The trade’s muted reaction to Thursday’s large Chinese purchase thus assumes that China is nearly done with US new-crop corn buying.  Worse, traders are wary that China may cancel previous commitments if given a reason to do so prior to Election Day.  It’s no secret that Pres. Trump needs Rural America to be re-elected.  Would cancellations of past purchases during fall harvest have a chilling impact on US farm prices, & thus influence farmers’ view on the success of Trump’s “managed trade” policies??? With 2019/20 corn & soybean exports the worst since the Drought of 2012/13 severely restricted supplies & old-crop grain sorghum exports the second-worst since 2013/14, evidence is already clear that Trump’s negotiation strategies alienated our best customers & allowed foreign competitors to take global market share away from us.
 
Locally, corn basis slid another 4c lower, soybean basis declined a penny & wheat basis was steady on Thursday. Gulf corn basis levels have collapsed this week as Midwestern farmers are cleaning out bins & late-season export demand for US corn erodes as exportable supplies from South America increase.
 
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"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.