Grains rally on a lower dollar
Happy June Dairy Month to my fellow dairymen and women! A month ago, dairy farmers across the country were grappling with supply chain logjams that forced them to dump milk priced as low as $11.23/cwt. Today, June Class III milk futures are trading at $20.23/cwt, marking a $8.07/cwt rise in the past two days as foodservice demand comes back online in full force. Total Farm Marketing’s Naomi Blohm breaks down the fundamentals driving the milk market rally in the latest Ag Marketing IQ column.
Corn: Corn prices traded $0.03-$0.05/bushel higher today as the U.S. Dollar continued to weaken amid widespread civic unrest. Strength was also underpinned by rising prices in the wheat complex and a favorable export report.
Cash bids for corn were mostly unchanged through the Midwest today. Basis firmed slightly on the Mississippi River, up a penny per bushel to $0.04 below July futures prices at a Davenport, Iowa loading facility. Corn sales were light as low futures prices and spring planting activity continued to deter farmers from booking new cash sales.
Corn recorded a strong week in U.S. export channels for the week ending May 28. 2019/20 corn export sales rose 42.6% from the previous week to 30.1 million bushels, landing on the higher end of analyst expectations. And export shipments jumped up by 11.2 million bushels – over a quarter – from last week to 53.0 million bushels.
Japan was by far the largest buyer of U.S. corn this week, with 17.6 million bushels destined for the Land of the Rising Sun. 2020/21 corn export sales dropped 40.9% from last week to 1.1 million bushels this week, at the lower end of analyst expectations. For a recap of this morning’s report, check out Farm Futures’ Weekly Export Sales report analysis for further insights.
USDA is projecting 1.775 billion bushels of corn to be exported in the 2019/20 marketing year. This week’s figure of 53.0 million bushels keeps the U.S. on track to meet that goal. If U.S. corn growers can export at least 45.0 million bushels of corn per week for the remaining 14 weeks left in the current marketing year, ending U.S. stocks on September 1 will likely remain steady at 2.1 billion bushels of corn, or 82 days of supply left at the start of harvest.
Soybeans: Soybean prices continued their rally today on news of another round of export purchases. July futures prices gained $0.1075/bushel to $8.6925 while July soybean meal futures followed suit, rallying $4.0/ton higher to $290.3. July soyoil futures prices followed competing Malaysian soyoil futures prices lower, down $0.06/lb to $27.80.
Cash soybean sales increased across the Midwest as growers took advantage of a $0.2825/bushel rally in July soybean futures over the past three days. July futures notched two-month highs to close out today’s trading session on a string of export purchases from China and unknown destinations. Mississippi River cash bids strengthened today to source the recent sales.
USDA announced a 4.4 million-bushel soybean sale to an unknown buyer this morning, though many analysts believe the shipment will go to China despite orders from Beijing to limit American pork and soybean purchases amidst rising diplomatic tensions. Half of the sale will be shipped by the end of August and the other half will be exported in the 2020/21 marketing year beginning in September. Today’s sale marks the fourth consecutive day of alleged Chinese soybean purchases. China’s interest in U.S. soybeans has piqued in recent days after Brazil’s currency, the real, strengthened and the U.S. dollar fell.
The ICE Dollar Index is on pace to close at its weakest level in three months amid civic unrest across the country during the middle of a pandemic. As of market close today, the dollar has weakened 3.2% in the past two weeks as global economies attempt to reopen.
The news is a great sign for U.S. soybean exporters because it has made U.S. grain prices more competitive with South American grains on the global market. In fact, U.S. soybeans are now cheaper than Brazilian soybeans. It is particularly welcome news as Brazilian soybean stocks are depleted on rising export shipments to China. Brazil has already exported 44% of soybeans harvested this year, up from 28% in the same period for the past two years. But rising tensions between the U.S. and China could offset a weak dollar and threaten future soybean sales if care is not taken in diplomatic relations.
Old crop soybean sales fell by 16.2 million bushels or 2.5% from the previous week to 23.4 million bushels for the week ending May 28 in the most recent export sales report. It was a rough week for U.S. soy growers as nearly 5.2 million bushels of export orders were cancelled. Egypt led all buyers of U.S. soybean for the current reporting week with just shy of 7.0 million bushels of soybean exports.
Despite booking several new export sales this week, Chinese soy exports remained relatively low, registering nearly 322,504 bushels for the current reporting week. At 58.8 million bushels of total soybean exports this year, Chinese soy shipments are 24.0% higher than a year ago. However, Chinese soybean demand is 48.8% lower than the five-year export average. The export sales do spark hope for export demand, but price benefits are not realized for U.S. growers until those shipments leave port.
But there were a couple glints of optimism for soybean exports in this week’s report. 2020/21 soybean export sales nearly tripled from 7.5 million bushels last week to 22.3 million bushels this week. And weekly soybean export shipments increased 5.6 million bushels to 17.7 million bushels. For the current marketing year, 1.32 billion bushels of soybeans have been exported from American ports, which is on pace to surpass last year’s total of 1.72 billion bushels.
A hot forecast for the Southern Plains and falling dollar supported price gains across the board in the wheat complex today. Cash offerings at milling locations in the Black Sea region strengthened, also supporting today’s rally. Favorable export results also boosted prices today.
Cash offerings for hard red winter wheat at a U.S. Gulf rail loading facility in Texas rose $0.30/bushel to $1.33 over July Kansas City HRW wheat futures prices on rising export demand. Wheat exports to China in the past two weeks totaled 13.1 million bushels, supporting this week’s rising cash bids across the Southern Plains. Basis also rose $0.05/bushel to $0.50 over July Kansas City futures at an elevator in Catoosa, Oklahoma. But farmer sales continue to be slow despite rising cash offerings as most farmers are waiting on favorable harvest progress before booking new sales.
In the second-to-last reporting week in the 2019/20 export year for wheat, old crop export sales inched 643,000 bushels lower to 8.4 million bushels. Over 1.8 million bushels of old crop wheat export sales were cancelled for the week ending May 28. New crop export sales followed suit, dropping 11.2% from a week ago to 16.3 million bushels. Ecuador was the top destination for wheat exports this week, with 7.2 million bushels shipped to the Central American country.
After this week’s report, the cumulative total of wheat exports for the year was 899 million bushels. It seems highly unlikely the U.S. will export an upwards of 70 million bushels of wheat this week to reach the 970 million bushel mark projected by USDA for 2019/20, but it would not at all be surprising if a 20-million-bushel export week in the final week of the year pushes the 2019/20 closer to 925 million bushels.
Weather: Scattered showers are forecasted in the Plains and Eastern Corn Belt today, according to NOAA's short-range forecast. Much of the Midwest is in store for a chance of showers going into the weekend, so farmers will likely have to play Frogger over the next few days to avoid precipitation and finish up spring fieldwork.
Financials: Coronavirus cases in the U.S. as of this afternoon totaled 1,861,966 cases, according to the Johns Hopkins Coronavirus Resource Center. The death toll rose to 107,685 deaths as of press time.
The CEO of the nation’s second-largest poultry processing company was indicted yesterday 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.
A U.S. appeals court rejected a federal regulator’s permit for dicambia herbicide yesterday. Effective immediately, German agrochemical giant Bayer AG will no longer be able to sell dicambia products in the U.S. as a result of the ruling. The Environmental Protection Agency (EPA) was believed to have grossly understated the risks of using dicambia in the ruling, which will block other companies from selling dicambia-based products, including Corteva and BASF.
Financial stocks stumbled lower today as weekly jobless claims dipped below 2 million for the first time since March 14, according to the U.S. Labor Department. About 21.5 million Americans are currently on unemployment benefits. Though high spikes in new unemployment cases are not expected to continue, jobless claims are expected to continue as the ongoing pandemic stifles consumer confidence. May unemployment rate data, released tomorrow morning, is expected to jump up 4.8% from April 2020 to 19.5%, the highest on since unemployment data recording began in 1948.
Stimulus funds are running on fumes, with 70% of the $1.6 trillion in aid disbursed to individuals and businesses across the country.
The U.S. trade deficit widened by 16.7% in April to $49.41 billion as global trade halted amidst the COVID-19 pandemic. S&P 500 index futures traded 22 points or 0.72% lower to $3,100 on the bearish sentiments.
Energy prices continued lower as hopes for a rescheduled meeting on production cuts between Russia, Saudi Arabia, and several other countries diminished. U.S. sweet crude prices dropped $0.18/barrel on the news to $37.11.
|Closing Prices for Key Commodities|
|20-Sep||333 3/4||328 1/4||333||+4 4/8|
|20-Jul||873 1/4||855 1/4||868 1/4||+10 6/8|
|20-Sep||873 1/2||857 1/4||869 1/4||+10 2/8|
|20-Jul||529||512||524 1/2||+12 4/8|
|20-Sep||532 3/4||515 3/4||528 1/4||+12 4/8|
|20-Jul||476 3/4||457||472 3/4||+15 0/8|
|20-Sep||483 1/2||464 1/4||480||+15 2/8|
|20-Jul||529 3/4||519 1/2||526 1/2||+6 0/8|
|20-Sep||540 1/2||530 3/4||537 1/2||+6 2/8|
|Live Cattle cents/lb|
|Feeder Cattle cents/lb|
|Lean Hogs cents/lb|
|Crude Oil $/barrel||*Energy prices may not represent final settlements|
|Unleaded Gasoline $/gallon|
|U.S. Dollar Index|
|Fertilizer Swaps||(as of 6/4)|
|UAN (32%) New Orleans||143.3||+1.65|