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Afternoon Market Recap for June 2, 2020

Chinese purchases boost optimism for soy demand.

Wheat tumbles on rains in Europe, harvest progress in the Southern Plains

Corn: Corn prices followed the energy complex higher this afternoon. Prices were also supported by easing planting pace as spring fieldwork approaches completion. July corn futures were up $0.0075/bushel to $3.24. September futures rose $0.0125/bushel to $3.285.

Cash corn prices reported this morning dropped $0.02/bushel to $0.07 below July futures prices at a Blair, Nebraska processing facility. Rising ethanol demand sent basis bids at an Annawan, Illinois ethanol facility up $0.02/bushel to $0.05 below July futures prices. Little other price action was reported as of press time.

After enforcing restrictions on ethanol producers after finding impurities in alcohol-based hand sanitizers at the pandemic’s onset, the Trump administration eased its stance to allow higher production of the topical cleansing agent. As lockdown measures destroyed fuel demand in Mid-March, many Midwestern ethanol plants attempted to pivot to hand sanitizer production, which has been in short supply since the pandemic’s onset.

But regulators found several impurities, including the carcinogen acetaldehyde, in sanitizer produced at fuel ethanol plants, prompting the Food and Drug Administration (FDA) to encourage production restrictions. But upon further testing, the FDA modified guidelines to allow safe amount of impurities in an effort to alleviate the hand sanitizer shortage. Renewable Fuels Association President Geoff Cooper disputed the admiration and FDA’s actions, stating that "we do not believe the new guidance will help alleviate the hand sanitizer shortage in any meaningful way.”

Corn planting progress blazed past last year’s speeds as improved weather conditions and a well-stocked supply chain allowed farmers to plant at a rapid pace. But does planting pace dictate harvest potential? Could it mean more than 97 million corn acres planted this year? There are other technical and meteorological considerations to give to weekly Crop Progress reports, Bryce Knorr writes. Check out the latest Ag Marketing IQ column for more insights about how to predict production outcomes at this point in the growing season.

Soybeans: Optimism over Chinese demand sent soybean futures soaring today. Strength was also underpinned by slowing planting progress in the Eastern Corn Belt. July soybean futures were up $0.115/bushel to $8.52. July soyoil futures traded $0.38/lb higher to $27.98 and July soymeal prices added $0.8/ton to $283.9.

Cash soybean prices rose $0.04/bushel to $0.16 over July futures prices at a Lafayette, Indiana crushing facilitiy. Basis also rose on the Illinois River at Seneca, Illinois by $0.04/bushel to $0.02 ahead of July futures. Farmer sales remained slow as many growers focused on fieldwork in the wake of low commodity prices.

USDA announced a private export sale of 4.8 million bushels of soybeans to China this morning for delivery in the 2020/21 marketing year. The announcement confirms a Reuters report yesterday that indicated three cargoes of soybeans had been sold out of the U.S. Pacific Northwest for delivery in China in October or November. The sales announcement comes amid rising tensions between the world’s two largest economies and only a day after Beijing ordered state-owned grain companies from purchasing U.S. soybeans and pork.

Iowa Senator Charles Grassley is confident China will uphold their end of the Phase 1 purchasing agreements despite the most recent escalation with the U.S. over Hong Kong and the origins of the coronavirus. The head of the U.S. Senate Finance Committee told reporters this morning that upon speaking with U.S. Trade Representative Robert Lighthizer that China does not want to disrupt trade progress with the U.S. Any disruptions are likely to be temporary. "I don’t have any reason to think that China long-term (is) not going to keep their agreement and that’s Lighthizer’s view after his conversation with the vice premier of China that he briefed me on. So I’m not worried about it,” he said.

Wheat:

Wheat contracts price changes

Improving weather forecasts in the Black Sea and Europe dragged futures prices lower for the wheat complex today. Harvest progress in the Southern Plains was reported as 3% complete as of Sunday, 1% higher than the five-year average. The quick pace weighed heavily on hard red winter wheat futures in Kansas City. The ICE Dollar Index was 0.10% lower, providing a cap on losses in the wheat complex.

Spot basis bids for hard red winter wheat in Kansas was unchanged this morning. Farmer sales remain slow as harvest begins across Texas and Oklahoma. For more details on harvest progress, check out Farm Futures’ coverage of Weekly Crop Progress reports by clicking here.

Protein premiums for cash wheat sales delivered by rail through Kansas City were unchanged this morning, as shown below:

wheat protein content, basis range, change

Ukraine wheat exports are expected to drop 37.6% to 547.4 million bushels in 2020/21 following harvest projections that peg the new crop at 852.4 million bushels. Ukrainian wheat exports are expected to reach 753.2 million bushels this year, despite a 742.1 million-bushel export quota enacted at the onset of the coronavirus pandemic to stabilize domestic food prices.

Despite slow U.S. wheat exports during the pandemic, European soft wheat exports have increased 63% since a year ago to 1.15 billion bushels for the current marketing year to date. The strong dollar continues to dissuade global customers from purchasing U.S. wheat in favor of the cheaper European and Black Sea region product.

Weather: Another clear day of weather should enable farmers to continue with spring fieldwork progress today, according to NOAA's short-range forecast. There will be a chance for rain across the Central Plains and the Upper Mississippi River Valley overnight. Total rainfall could reach up to an inch in Wisconsin, Iowa, and Southern Minnesota.

Financials: Coronavirus cases in the U.S. as of this afternoon totaled  1,820,523 cases according to the Johns Hopkins Coronavirus Resource Center. The death toll rose to 105,644 deaths as of press time.

The Purdue Center for Commercial Agriculture in partnership with the CME Group released results from their monthly Ag Economy Barometer this morning. After the barometer bottomed out in April 2020 as ethanol demand, commodity prices, and consumer confidence eroded in the pandemic’s early days, May farmer sentiment inched upwards as commodity demand stabilized and government relief packages were granted.

But farmer faith in the economy has a long ways to go before it can return to pre-pandemic levels. At least 81% of farmers in the Purdue-CME study  are somewhat or very concerned about the viability of the ethanol industry. And while 6% fewer farmers surveyed believed land prices were going to fall from the April survey, 29% of farmers believed that operating revenues would be low enough to decrease farmland prices in the next year.

Purdue University/CME GroupFarmland Price Expectations

Despite widespread social unrest over the coronavirus pandemic, racial disparities, and diplomatic relations between the U.S. and China in the preceding days, U.S. stock futures were still poised to close higher at the end of today’s trading session. Dow futures were 98 points or 0.39% higher at last glance at 25,573 points.

Stimulus cash infusions from the Federal Reserve and Congress underpinned the stock market’s rise today. “There’s just so much stimulus, it’s propping up the market,” said Oanda analyst Edward Moya. “The stock market is now no longer a true reflection of the economy, and you’re going to see that remain the case for several years.” Projections released from the Congressional Budget Office yesterday estimate the economy will not recover to pre-pandemic levels of output and consumer confidence until the fourth quarter of 2029.

Saudi Arabia and Russia, along with several other oil-producing countries, will move a call about output reductions to Thursday. The group is rumored to be close to a deal that would continue to extend production limitations through September 1. Brent crude oil futures rose $1.22/barrel to $39.54 on the sentiment. Diesel futures were up $0.0622/gallon to $1.0912 at last glance.

Closing Prices for Key Commodities 
  High Low Last Change
Corn                     $/bushel  cents/bu      
20-Jul 325.25 322 324 +0.75
20-Sep 329    326    328 1/2 +1 2/8
Soybeans        
20-Jul 856    838 1/2 852    +11 4/8
20-Sep 858    841 1/2 854    +10 6/8
Soymeal                $/ton        
20-Jul 285.2 282.9 283.9 +0.8
Soyoil                    cents/lb        
20-Jul 28.01 27.48 27.98 +0.38
Wheat                    $/bushel        
20-Jul 517 1/4 506 3/4 509    -6 2/8
20-Sep 519 3/4 511    513 1/4 -5 0/8
KC Wheat        
20-Jul 464    450    451    -11 4/8
20-Sep 469 3/4 457 1/2 458 1/4 -11 0/8
MPLS Wheat        
20-Jul 522 3/4 515 3/4 516 1/2 -4 6/8
20-Sep 531 1/4 526 3/4 527 1/4 -4 4/8
Live Cattle             cents/lb        
20-Jun 98.5 95.3 95.3 -3
Feeder Cattle         cents/lb        
20-Aug 136.35 133.175 133.8 -2.325
Lean Hogs             cents/lb        
20-Jun 54.4 52.075 52.15 -2.45
Crude Oil  $/barrel *Energy prices may not represent final settlements      
20-Jul 36.89 35.28 36.7 1.26
Diesel        
20-Jul 1.0945 1.0338 1.0898 0.0608
Unleaded Gasoline   $/gallon        
20-Jul 1.1206 1.066 1.1128 0.0461
Natural Gas        
20-Jul 1.801 1.758 1.779 0.005
Ethanol Futures        
20-Jul 1.167 1.152 1.167 +0.019
U.S. Dollar Index        
  97.9 97.42 97.72 -0.1
Gold                      $/ounce        
20-May 1745.5 1721.8 1725.4 -12.4
Copper        
20-May 2.495 2.471 2.495 +0.0205
Fertilizer Swaps     (as of 6/2)  
DAP Tampa-index     289 -1
DAP-New Orleans     286.6 +4
Urea-New Orleans     200.62 -1
Urea-Middle East     215 -3
Urea-Black Sea     200 -5
UAN (32%) New Orleans     143.3 +1.65
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