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Morning Market Review for June 1, 2020

Wheat tumbles on eroding Chinese relations. (Comments are updated by 7:30 a.m. Central Time.)

Corn and soybeans inch lower after a quiet trading weekend

  • Corn down 3-4 cents
  • Soybeans down 3-5 cents, soyoil down $0.08, soybean meal down $0.6
  • Wheat down 2-10 cents

*Prices as of 6:55 am CDT.

Corn: Corn futures inched lower as diplomatic tensions between the U.S. and China heightened over the weekend. July corn futures dropped $0.0325/bushel to $3.225 this morning while September corn futures prices were down $0.03/bushel to $3.27 in pre-market trading.

Cash corn prices were mixed across the Corn Belt on Friday. Rail locations in Columbus, Ohio and Evansville, Indiana raised their spot basis bids. Cash offerings dropped on the Illinois and Mississippi Rivers but rose on Lake Erie in Toledo, Ohio. A Chicago-land corn processor dropped basis $0.10/bushel to $0.05 over July futures after rising $0.15/bushel earlier this week. Farmers were slow to book new cash sales as the July corn contract dropped to $3.2575/bushel at the close of business on Friday.

Corn basis and change

The weekly Commitment of Traders report released by the CFTC on Friday found speculators to be bearish on corn. Money managers added 29,485 short positions for the week ending May 25, growing their position as a net seller of corn to 276,203 contracts. Falling futures prices through the reporting week and expectations of a large 2020/21 crop sent speculators abandoning long positions on corn.

USDA will release their weekly Crop Progress report this afternoon. As of last week, 88% of the nation’s corn crop had been planted, which was slightly below trade estimates. A week of wet weather across the Midwest will likely see most states, especially in the Eastern Corn Belt, struggle to stay above the five-year average mark in today’s report.

Soybeans: China retaliated against President Trump’s Friday remarks about the administration’s displeasure with China’s enforcement of national security laws in Hong Kong. China’s state-owned firms will halt purchasing U.S. soybeans and pork after Friday’s announcement that special treatment for Hong Kong would end. July soybean futures dropped $0.0425/bushel to $8.365 on the news. July soybean oil futures were down $0.08/lb to $27.30. July soymeal futures prices traded $0.6/ton lower to $282.60 prior to the opening bell.

Spot basis bids for soybeans were largely unchanged on Friday as July futures prices dropped $0.0625/bushel to $8.4075. The lone exception was on Lake Erie at Toledo, Ohio where basis rose $0.02/bushel to $0.08 below July futures prices. Farmers began locking in prices on old crop bushels in commercial storage.

Soybean Basis Change

Speculators added 4,724 short positions to their overall long position on soybeans as concerns about Chinese demand weighed on the soy complex for the week ending May 26. Money managers’ net long position shrunk to 5,813 contracts on the week, down from 12,064 net long positions the week prior. The hedge funds were also bearish on soybean meal, adding 9,588 short positions to end the week at a net selling position of 41,775 short contracts.

Similar to corn, soybean planting progress will likely show signs of deviating towards the five-year average in today’s Crop Progress report after starting at a rapid pace this year following a week of soggy weather across the Midwest. As of May 24, 65% of the crop had been planted compared to the five-year average of 55% for the same time period.

USDA releases soybean crush data today for April. Analyst estimates place the April crush at 182.5 million bushels. NOPA crush estimates released in mid-May totaled 171.8 million bushels for 95% of U.S. processors for April 2020, which was the highest estimate for the month on record, despite reduced restaurant demand for soyoil amid pandemic lockdown conditions.

Wheat:

Wheat contracts price changes

The wheat complex suffered from eroding diplomatic relations between the U.S. and China this morning as well as oversupply concerns. Hot and dry weather conditions forecasted across the Plains this week could degrade crop conditions ahead of harvest, providing a safety net for losses. European stocks are closed for holiday today, muting overseas trading activity.

Cash offerings for soft and hard red winter wheat were unchanged across the Midwest and Southern Plains Friday afternoon. Low future prices and low old crop stocks in on-farm storage limited new cash sales. Farmers with old crop bushels will likely wait for either higher cash offerings or until they need the storage capacity for new crop bushels to book new sales.

Protein premiums for hard red winter cash wheat delivered to or through Kansas City by rail rose on Friday, as shown below:

wheat protein content, basis range, change

Speculators ended the week of May 20-26 with mixed sentiments on the wheat complex. Money managers added 5,108 long positions to their net selling position on Chicago soft red winter wheat, shrinking their overall short position to 12,204 contracts on weather concerns in Europe. But improving hard red winter wheat conditions in the Southern Plains led hedge fund managers to add 12,225 short positions to Kansas City wheat, growing their net short position to 25,743 contracts.

All eyes will be on spring wheat planting progress in today’s Crop Progress report. North Dakota was 18% behind the five-year average at 70% complete in last week’s report. With the Roughrider State surpassing prevented plant dates as of yesterday and most yield potential decreasing after the middle of May, much of their remaining spring wheat acreage may be converted into soybean acreage in the coming weeks.

Winter wheat conditions increased by 2% in last week’s report to 54% good to excellent. The trend could continue in today’s report after a week of favorable growing conditions across the Southern Plains. A heat wave moving through the area early this week could inflict further damage on the crop as harvest progresses through Texas and Oklahoma this week.

Continued dryness in France has led the local farm agency, FranceAgriMer, to downgrade the soft wheat crop to 56% good to excellent, a percent lower than the previous week. The current week’s ratings, released Friday, marked the lowest good to excellent rating for the French soft wheat crop in 9 years. Persistent dryness is expected to continue this week, but conditions will likely remain well above the low 24% good to excellent rating mark set in 2011.

Weather: Forecasts for the start of the week in the Midwest are exponentially more dry compared to the same time a week ago, according to NOAA's short-range forecast. The Eastern Corn Belt should have a chance to dry out early this week and catch up on planting progress as temperatures heat up across the Corn Belt.

Financials: Coronavirus cases in the U.S. as of this morning totaled 1,790,191 cases, according to the Johns Hopkins Coronavirus Resource Center. The death toll rose to 104,383 deaths as of press time.

Dow futures wobbled 43 points or 0.17% higher to 25,421 points this morning as concerns over diplomatic relations between the U.S. and China threatened economic growth prospects. Global investors were largely relieved that President Trump’s comments on Friday had little overall economic impact to the ongoing dispute. Markets brushed off concerns over the weekend’s race riots around the country, though analysts noted that reopening progress could be upended if widespread curfews are enforced.

U.S. sweet crude prices slipped $0.10/barrel lower to $35.39 this morning on concerns between relations with China. But other prices in the energy complex  rose this morning, led by a $0.30/barrel rise in Brent crude oil prices to $38.14.

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