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Afternoon Market Recap for June 3, 2020

Soybeans rally on another Chinese sale .

Weakened dollar makes U.S. soy competitive on the global market

Corn: Corn price action was mostly muted today despite reports of stronger ethanol output. Concerns about a large 2020/21 crop offset any potential gains. July and September futures prices were both unchanged at last glance at $3.2425/bushel and $3.285/bushel, respectively.

Cash corn prices were mixed at elevators in the Eastern Corn Belt this morning. Basis increased a penny per bushel to $0.05 below July futures prices on the Mississippi River at Savanna, Illinois but fell $0.02/bushel to $0.05 below July futures on the Illinois River at Seneca, Illinois. Strong weekly ethanol production supported a $0.02/bushel rise in basis to $0.03 below July futures at an Annawan, Illinois ethanol plant. It is the second basis increase for the plant in as many days.

Weekly ethanol production for the week ending May 29 rose 5.7% to 32.1 million gallons/day of production. Last week’s production consumed 83.3 million bushels of U.S. corn for the week. It was the fifth consecutive week of ethanol output increases. Weekly ethanol stocks continued to shrink as blending demand improved and ethanol plant capacities limited excess output, falling 29.4 million gallons on the week to end at 944.0 million gallons as of May 29.

Ethanol demand for blending has risen 43.4% since the early days of the pandemic to 30.2 million gallons/day of demand from refineries, but still remains nearly 21.7% lower than pre-pandemic demand levels. Gasoline demand improved nearly 4.1% over Memorial Day weekend to 317.1 million gallons/day as Americans celebrated the national holiday as well as easing lockdown restrictions.

But how long will the ethanol recovery last? With many plants tightening costs and reducing excess production capacity, it seems unlikely that long-term production levels will return back to pre-pandemic output. Consumer confidence continues to remain shaky amid the ongoing pandemic and rising unemployment, preventing many Americans from travelling during the historically busy summer driving season.

North Dakota passed final corn plant dates on Sunday, May 31, 2020. A week of good weather boosted planting progress to 75% as of Sunday, but prevented planting acreage could start rising, Commstock’s Matthew Kruse writes. While the totals are not likely to significantly impact ending stock figures for 2020/21, there could be some pricing opportunities for farmers Kruse points out in the latest Ag Marketing IQ column.

Soybeans: Soybean prices continued their rally as a stronger Brazilian real and weakening U.S. dollar sent Chinese buyers flocking to American soybeans. July soybean futures were up $0.075/bushel to $8.58. July soyoil prices shed $0.04/lb to $27.90. July soymeal futures rose $1.9/ton to $285.6.

Cash soybean prices strengthened on the Mississippi River today as export demand from the U.S. Gulf picked up amid recent sales to China. Basis was mixed at crush facilities in the Western Corn Belt as inconsistent farmer sales in recent weeks has led to varying levels of inventory at processing locations.

USDA announced a 6.8 million-bushel soybean sale to an unknown buyer earlier today. Many analysts believe the shipment will go to China after a Reuters report on Monday found state-owned Chinese firms to have booked soybean purchases despite orders from Beijing to ignore American pork and soybean availability amidst rising diplomatic tensions. Over 2.4 million bushels are earmarked for shipment in the current marketing year while the remaining 4.4 million bushels will be exported after the new marketing year begins on September 1. China is believed to have picked up U.S. soy purchases after Brazil’s currency, the real, strengthened in recent days.

An oil refinery in Cheyenne, Wyoming is fully converting its operations to a renewable biodiesel plant. The HollyFrontier Corporation will spend $125 million - $175 million to retrofit the aged Cheyenne refinery to produce 90 million gallons of renewable biodiesel annually by the start of 2022.

The conversion comes as profit margins for oil companies took heavy losses in the early days of the pandemic. Rising maintenance costs and a nationwide trend towards cleaner fuel also supplemented reasonings for the switch. The refinery will lay off 200 employees once crude oil consumption ceases at the end of July 2020.

But the oil industry’s loss is the U.S. soy grower’s gain. USDA slashed annual biodiesel production estimates for 2019/20 by 363 million pounds to 7.5 billion pounds amidst the energy collapse during the COVID-19 pandemic. Despite not coming online for another two years, the updated facility lends support to USDA’s 2020/21 bullish biodiesel use estimate of 8 billion pounds of soyoil consumption for biodiesel processing.

Wheat:

Wheat contracts price changes

Conflicting yield reports out of the European Union and early harvest progress in the Southern Plains supported rising wheat prices. The ICE Dollar Index dropped 0.44% in today’s trading session, contributing to this morning’s price gains in the wheat complex.

Spot basis bids for soft red winter wheat were unchanged this morning. Cash offerings for hard red winter wheat in Kansas weakened this morning after posting gains earlier this week. An Enid, Oklahoma facility strengthened basis $0.15/bushel to stimulate new cash sales which have been slow as farmers await the impending harvest.

Expectations of a lower crop yield in Black Sea regions as harvest approaches in Europe has underpinned strengthening wheat prices in key Eastern European growing areas. Ukrainian wheat prices have risen $0.08 - $0.11/bushel higher over the last week as drought conditions deteriorated crop conditions. Ukraine announced yesterday they would be slashing 2020/21 exports by 37.6% to 547.4 million bushels after forecasted production of the new fell to 979.1 million bushels.

Weather: Scattered showers will stretch across the Central Mississippi River Valley and into the Eastern Corn Belt today, according to NOAA's short-range forecast. The precipitation system will linger over the area through tomorrow while another system moves in the Central Plains from the Rocky Mountains. Between a half and full inch of rain accumulation can be expected today from Kansas and Nebraska eastward to Pennsylvania.

Financials: Coronavirus cases in the U.S. as of this afternoon totaled 1,841,629 cases according to the Johns Hopkins Coronavirus Resource Center. The death toll rose to 106,696 deaths as of press time.

Agribusiness headlines dominated the news today. Tyson Foods, Inc., announced today it was returning to pre-pandemic absenteeism policies. Recent policies granted leniency for sick time as the COVID-19 virus raged through meat packing facilities. But the reversion to old policies, which penalize staffers for calling in sick, could further threaten the stability of the meat processing industry in the U.S. Tyson is the country’s largest meat processor.

The CEO of the nation’s second-largest poultry processing company was indicted this morning on price fixing and bid rigging allegations in the broiler chicken industry from 2012 to 2017. Jayson Penn of Pilgrim’s Pride, along with former Pilgrim’s vice president Roger Austin and Claxton Poultry Farms’ Mikell Fries and Scott Brady, were indicted on the price-fixing charge. The charge is the first in the Justice Department’s ongoing criminal antitrust probe which has been investigating price collusion in the poultry industry since late 2016.

U.S. soy growers may want to keep an eye on this case. The outcome could alter chicken pricing strategies, which would have a short-term impact on soymeal demand. About 55% of soybean meal allocated for livestock feed goes to poultry farms.

Grain processing behemoth Cargill announced this morning it would no longer release quarterly earnings to the public in an effort to limit costs and focus on long-term strategy execution. The nation’s largest privately held company will continue to publicly disclose annual sales and operating cash flow reinvested into the company. As a privately-owned company, Cargill is not required by its stakeholders to disclose financial information to the public, unlike rivals ADM and Bunge. The news is a blow to grain producers, brokers, and analysts alike who derived valuable demand information from Cargill’s segment-by-segment performance reports. Cargill skipped their most recent quarterly earnings reports amidst the COVID-19 pandemic.

USDA farmer assistance programs are in the early days of operation. The Payroll Protection Program received a slight makeover this week as well. Bob Krogmeier digs into the details of the new aid packages in his latest By the Books column on the Farm Futures’ website.

Dow futures rallied 269 points or 2.21% higher today to 26,312 points on optimism for more stimulus support from Congress. Energy futures continued their slide as a multinational call to further reduce production cuts was postponed. Diesel futures were down $0.0037/gallon to $1.0551 on the sentiment.

Closing Prices for Key Commodities 
  High Low Last Change
Corn                     $/bushel  cents/bu      
20-Jul 324.5 321.25 324.25 +0
20-Sep 329    326    328 1/2 -0
Soybeans        
20-Jul 858    851 1/4 858    +7 4/8
20-Sep 859 3/4 853 1/2 859 1/4 +6 4/8
Soymeal                $/ton        
20-Jul 286.8 283.8 285.6 +1.9
Soyoil                    cents/lb        
20-Jul 28.2 27.78 27.9 -0.04
Wheat                    $/bushel        
20-Jul 515 1/2 506 1/2 512 1/4 +4 2/8
20-Sep 519 1/4 511 1/4 515 1/2 +3 2/8
KC Wheat        
20-Jul 459 3/4 450 1/4 457 3/4 +7 0/8
20-Sep 467    457 1/4 465 1/4 +7 2/8
MPLS Wheat        
20-Jul 521 1/2 517 1/4 520 3/4 +3 6/8
20-Sep 532 1/4 528    531 1/2 +3 6/8
Live Cattle             cents/lb        
20-Jun 95.75 94 95.55 +0.25
Feeder Cattle         cents/lb        
20-Aug 134.575 132.6 134.4 +0.975
Lean Hogs             cents/lb        
20-Jun 51.45 48.65 48.65 -3.75
Crude Oil  $/barrel *Energy prices may not represent final settlements      
20-Jul 38.18 35.88 36.87 +0.06
Diesel        
20-Jul 1.108 1.0462 1.0588 -0.0333
Unleaded Gasoline   $/gallon        
20-Jul 1.1352 1.0917 1.1128 -0.0055
Natural Gas        
20-Jul 1.861 1.771 1.809 +0.032
Ethanol Futures        
20-Jul 1.156 1.14 1.14 -0.008
U.S. Dollar Index        
  97.615 97.165 97.235 -0.424
Gold                      $/ounce        
20-May 1726.3 1684.5 1692.6 -32.6
Copper        
20-May 2.4965 2.4925 2.4925 -0.002
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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