July 23, 2020
With a lack of major summer weather threats affecting growing crops, it appears that the United States will be blessed with another bountiful harvest this fall.
Nationwide, corn yield is already anticipated to be at trendline or better. From what we heard about wheat harvest thus far, there were no glaring yield issues. And the next few weeks of weather will tell us about soybean yield. According to the weekly Crop Progress Reports, so far the soybean crop is rated quite well coming in at 69% good to excellent.
Short term outlook: bearish
Corn ending stocks may actually get larger. It seems likely that in the August USDA report, corn for ethanol demand may be trimmed for old crop, making ending stocks larger.
Regarding new crop, look for a yield increase and little changes to demand. The end result will most likely be larger carryout numbers.
Unless August weather forecasts come in horribly hot with no rain, trade will also expect a bigger soybean supply on the USDA balance sheet.
The daily Chinese buying has been lovely, yet all it is doing so far is keeping us on track to meet USDA export projections.
Seasonally, corn and soybean futures prices have a tendency to work lower into late August. Some producers may still be holding on to old crop corn in on-farm bins; with a big crop coming that old crop washing into the market over the next few months could put downward pressure on prices.
Long term outlook: It’s better
Optimistic with a chance of bullishness. As we head into the last months of 2020, and early 2021 there are a few things brewing globally that really have my attention. It would take a perfect concoction of sequential fundamental occurrences to justify a bullish story. Yet, we just may be setting up 2021 for just that.
I wrote last week how the U.S. Dollar index is testing major support levels on the monthly chart. That testing continued this week. Should support break, and the value of the dollar drop lower, that will be fantastic for our export demand.
There’s historic precedent for such a thing to happen. In 2008 and 2011, the value of the Dollar was at historic low levels, and our grain exports were red hot in both those years, leading to big price rallies for grains.
Next, we continue to keep an eye on the weather situation in China. Major rain continues in already flooded southern China where the rice crop is grown. Rice is an important food staple for China, and there is no word yet on how much of the crop is lost or damaged. In northern China we are now hearing of drought conditions.
While China will likely never disclose the true nature of any crop loss, what we can do is continue to monitor its imports of grain, not only from the United States, but South America as well.
Speaking of South America, La Nina is potentially forming. If it comes to fruition, South America would likely suffer a hot and dry growing season later this year.
Lastly, keep an eye on Palm Oil production in South East Asia. Between weather issues and labor shortages due to COVID-19, palm oil production may be down. If that is the case, then demand for soybean oil increases.
It would take a perfect blend of the above global demand and weather issues to justify any type of significant price rally ahead. In the meantime, don’t lose sight of any opportunities in front of you. Make sure you are current in your marketing tools to know how to manage risks and opportunities ahead.
Reach Naomi Blohm: 800-334-9779 and [email protected]
Disclaimer: The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.
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