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Afternoon Market Recap for May 26, 2020

Soybeans grab double-digit gains Tuesday.

Corn and most wheat contracts also move higher in today’s session

Grains were mixed but mostly higher Tuesday. Soybeans led the way with double-digit gains, fueled by overall economic optimism and a large sale from China announced this morning. Corn caught some of the spillover weakness. Wheat was mixed but mostly higher following reports of lower production potential in Ukraine and Russia. Chicago SRW contracts bucked the overall trend, however, closing with modest losses today.

Most of the eastern Corn Belt could see another 1” or more total rainfall between Wednesday and Saturday, per the latest 72-hour cumulative precipitation map from NOAA. Areas farther west will be drier for the rest of the week but still could gather some measurable accumulations. Next week, expect much warmer-than-normal temperatures – especially in the Plains – with seasonally dry weather also likely, per NOAA’s latest 8-to-14-day outlook.

On Wall St., optimism over reopening the country has stocks surging, with the Dow climbing nearly 700 points higher this afternoon to 25,155. And the S&P 500 broke above its 200-day moving average for the first time in more than two months, which economic experts say is a signal that longer-term growth is probable moving forward. Energy futures are also on the mend, with crude oil rising another 2% this afternoon to just under $34 per barrel. Gasoline and diesel saw slimmer gains but are still firmly in the green today. The U.S. Dollar softened moderately.

Last Friday, commodity funds were et sellers of soybeans (-2,000), soyoil (-3,500) and CBOT wheat (-5,000) contracts but were net buyers of soymeal (+1,500). Net corn contract estimates held steady, meantime.

Corn prices found some positive traction Tuesday, thanks to some technical buying partly spurred by spillover strength from other commodities (particularly soybeans). July futures added 1.5 cents to $3.1950, with September futures up 1.75 cents to $3.2450.

Corn basis bids were steady to firm in the central U.S. Tuesday, rising 1 to 3 cents higher across a handful of Midwestern locations today. Farmer sales have been generally slow so far this spring.

Corn export inspections slipped 8% from a week ago to land at 43.0 million bushels for the week ending May 21. Analysts were generally expecting a bigger haul, with trade guesses ranging between 39.3 million and 55.1 million bushels. Cumulative totals for the 2019/20 marketing year are still far behind last year’s pace after reaching 1.077 billion bushels. Last week, Mexico (11.1 million) and Japan (10.2 million) led all destinations, as they often have this year.

Ahead of this afternoon’s weekly crop progress report from USDA, analysts expect the agency to show U.S. corn plantings at 90% complete, up from 80% a week ago.

Brazil’s 2019/20 second corn crop production is down 4% from earlier estimates to 2.823 billion bushels – even despite 5.2% more planted acres this year – per the country’s Agroconsult consultancy. Drought in some key production areas are to blame, per Agroconsult.

South Africa is preparing for a bumper corn harvest this year, estimated by analysts to reach 608.6 million bushels, which would surpass 2019’s tally by 37%, if realized.

Preliminary volume estimates were for 215,333 contracts, moving moderately ahead of Friday’s final count of 147,203.

Soybean prices started the holiday-shortened week with a round of technical buying spurred by the announcement of a large sale to China this morning – closing the session with double-digit gains after rising steadily throughout the day. July futures climbed 14 cents to $8.4725, with August futures up 12.25 cents to $8.4875.

Soybean basis bids were narrowly mixed at two interior river terminals Tuesday while holding steady across most other Midwestern locations today.

Private exporters reported to USDA the sale of 9.5 million bushels of soybeans to China. Of the total, 23% is for delivery during the current marketing year, with the remainder for delivery in 2020/21. Private exporters also announced the sale of 216,000 metric tons of soymeal for delivery to unknown destinations in 2019/20.

But tensions between the U.S. and China remain high, with White House economic adviser Larry Kudlow telling reporters today that President Donald Trump is so “miffed” with China over its handling of the coronavirus pandemic that the trade deal between the two countries is not as important to him as it used to be. Kudlow also stated in the interview with Fox Business that “one of our key policy issues” is paying American companies located in China to relocate back to the states.

For the month of April, China showed a clear preference for Brazilian soybeans, snapping up more than 218 million bushels from that country last month, while purchases from the U.S. only reached 24.5 million bushels in April (falling 62% year-over-year).

Soybean export inspections continue to show lackluster results in May, sliding another 6% from a week ago to 12.2 million bushels. That tally was below all trade estimates, which ranged between 12.9 million and 22.0 million bushels. Cumulative totals for the 2019/20 marketing year are still modestly higher than last year’s pace, at 1.289 billion bushels. China chipped in a disappointing 184,000 bushels last week, with Mexico (4.7 million) emerging as the top destination.

Ahead of this afternoon’s weekly crop progress report from USDA, analysts expect the agency to show another big leap forward in soybean plantings, moving from 53% complete a week ago to 69% as of May 24.

Preliminary volume estimates were for 190,837 contracts, firming slightly above Friday’s final count of 175,681.

Wheat prices were mixed but mostly higher on news of lower production potential for some key overseas competitors. Spillover strength from other commodities also lent support. July Chicago SRW futures dipped a penny lower to $5.0775, while July Kansas City HRW futures gained 3.75 cents to $4.4825 and July MGEX spring wheat futures added 4.75 cents to $5.1875.

Wheat export inspections dropped slightly week-over-week, landing at 16.8 million bushels. Analysts were generally expecting a larger haul, with trade guesses ranging between 14.7 million and 22.0 million bushels. Cumulative totals for the 2019/20 marketing year are maintaining a very slim lead over last year’s pace, with 896.2 million bushels. China was the top destination last week, with 6.1 million bushels.

Ahead of the next crop progress report from USDA, out later this afternoon, analysts expect the agency to show 77% of this year’s spring wheat crop is now planted, up from 60% a week ago. For the 2019/20 winter wheat crop, analysts expect USDA to move the percentage rated in good-to-excellent condition from 52% last week up to 53%, on the heels of some beneficial rains in the Central Plains.

With drought conditions still prevalent in some of Russia’s key wheat production regions, the country’s IKAR consultancy has again downgraded its 2020 crop projection by another 0.8% to 2.778 billion bushels. Russia is the world’s No. 1 wheat exporter.

Unfavorable growing conditions also has Ukraine’s wheat crop on its heels, as the country’s state-run forecasting center said earlier today that production may only reach 856 million bushels this year. Ukraine is the world’s No. 4 wheat exporter.

Analyst APK-Inform has also reported that Ukraine has already bumped up against its wheat export quota limit for the 2019/20 marketing year, which runs through the end of June. That means the country’s wheat exports are effectively dried up for the next five weeks unless the government reverses course.

Japan is looking to buy 4.1 million bushels of food-quality wheat from the United States, Canada and Australia in a regular tender that closes later this week. Of the total, 59% is expected to be sourced from the U.S.

Preliminary volume estimates were for 80,036 CBOT contracts, sliding moderately below Friday’s final count of 107,857.

Closing Prices for Key Commodities 
  High Low Last Change
Corn                     $/bushel  cents/bu    
20-Jul 323 316.5 319 1.5
20-Sep 327.5 321.25 324 1.75
Soybeans        
20-Jul 849 832.25 847 14
20-Sep 852.25 837.75 849.75 10.75
Soymeal                $/ton        
20-Aug 288 285 286 0.1
Soyoil                    cents/lb        
20-Aug 27.54 26.92 27.45 0.59
Wheat                    $/bushel        
20-Jul 512.25 504.25 506.75 -1
20-Sep 515.75 508 510.5 -1.25
KC Wheat        
20-Jul 452.25 441 447.25 3.75
20-Sep 459 448.75 454 2.75
MPLS Wheat        
20-Jul 520.5   517.75 4.75
20-Sep 531.75 522 528.75 4.5
Live Cattle             cents/lb        
20-Jun 99.825 97.85 99.775 2.075
Feeder Cattle         cents/lb        
20-Aug 134.65 130.975 134.65 4.5
Lean Hogs             cents/lb        
20-Jun 59.65 55.7 59.55 3.65
Crude Oil  $/barrel *Energy prices may not represent final settlements      
20-Jun 34.81 32.48 34 0.75
Diesel        
20-Jun 1.034 0.969 0.9851 0.0031
Unleaded Gasoline   $/gallon        
20-Jun 1.0758 1.0182 1.0424 0.0042
Natural Gas        
20-Jul 1.95 1.842 1.929 0.048
Ethanol Futures        
20-Jun 1.17 1.071 1.165 0.06
U.S. Dollar Index        
  99.785 98.895 98.895 -0.993
Gold                      $/ounce        
20-Jun 1737.2 1703.9 1707.4 -27.2
Copper        
20-May 2.4565 2.4025 2.4395 0.0305
Fertilizer Swaps     (as of 5/22)  
DAP Tampa-index              290.0 -11
DAP-New Orleans              282.2 -2
Urea-New Orleans              201.2 -25
Urea-Middle East              217.5 10
Urea-Black Sea              205.0 4
UAN (32%) New Orleans              141.7 -8.82
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