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Morning Market Review for June 2, 2020

Soybeans rise on Chinese purchases. (Comments are updated by 7:30 a.m. Central Time.)

Wheat falls on strong European and U.S. weather forecasts

  • Corn up 1 cent
  • Soybeans up 4-5 cents, soyoil up $0.29, soybean meal up $0.5
  • Wheat down 1-4 cents

*Prices as of 6:55 am CDT.

Corn: Corn prices inched slightly higher this morning, following rising energy prices. July and September futures each gained $0.0025/bushel to $3.235 and $3.275, respectively in pre-market trading.

Cash corn prices were largely unchanged yesterday. The lone exception was a $0.01/bushel increase in basis to $0.06 below July futures prices on the Mississippi River at Savanna, Illinois. Low futures prices suppressed new cash sales after July futures closed $0.0225/bushel lower to $3.2325. Cash supplies on hand were plentiful, further deterring farmers from booking new sales.

Corn basis and change

Renewable fuel credit prices have been rising over the past month while the Environmental Protection Agency (EPA) decides whether or not to appeal a January 2020 ruling from the 10th Circuit Court of Appeals saying the EPA overstepped its boundaries on some small refinery exemption (SRE) waivers. Small refineries have been snatching up biomass based (D4) credits, which closed yesterday at $0.60/credit, to show they have taken a financial hit on the required credits, which could potentially justify a waiver under the Renewable Fuel Standard. D4 credit prices are up 30% since the 10th Circuit Court’s ruling in January.

USDA released monthly grains crushing and co-products production data yesterday, providing a more comprehensive view of corn usage during the height of the COVID-19 pandemic in April. Total corn consumption dropped 36% from March 2020 to 299.0 million bushels in April as decreases in fuel production erased 165.3 million bushels of demand from ethanol production.

But there were a couple glimmers of hope in yesterday’s report. Industrial alcohol production rose by 4.0 million bushels to 11.8 million bushels of corn consumption for April 2020 following a spike in demand for hand sanitizer. Corn consumption for alcohol also increased 2.3% during lockdown as consumers resorted to alternative forms of entertainment to pass the time in quarantine. The April 2020 total of corn consumption for alcohol was the second highest on record, topping out at 4.1 million bushels. It is a 12.1% increase in corn consumption from the same time last year.

6-2 - Graphic 6 - Corn Consumption.png

April dried distillers’ grains with solubles (DDGS) production dropped 38% from March 2020 to 1.01 million tons, following declines in ethanol output due to demand destruction at the onset of the pandemic. This number will likely increase in the May report, following a recovery in the ethanol market.

June WASDE reports are only a week away. Advance Trading’s Larry Shonkwiler takes a deeper dive into old crop corn projections in the most recent Ag Marketing IQ column. Ethanol and export forecasts are expected to decline in this month’s report and leave higher old crop stocks in bins heading into harvest. Lower Grain Consuming Animal Units estimates could result in lower livestock feed demand despite record cattle number. But there could be hope if meat processors can contain COVID-19 outbreaks at packing plants and restart the meat supply chain.

Corn planting continued to deviate towards the five-year average after another week of soggy weather stalled planting progress east of the Mississippi River. For the week ending May 31, corn planting across the U.S. was 93% complete, as the five-year average of 89% for the same time period inched closer. But last week’s soggy weather did little to harm corn conditions. Condition ratings surpassed trade estimates by 3% as USDA reported 74% of the crop to be in good to excellent condition.

North Dakota reported 75% of their corn crop had been planted as of May 31, up from 54% last week. Corn growers in the Roughrider State took advantage of a week of nice weather and planted 672,000 acres across 6.2 days suitable for fieldwork. But North Dakota’s last prevented plant date for corn was Sunday. The Peace Garden state will likely fall 800,000 acres short of their 3.2 million-acre corn planting intention outlined by USDA for the 2020 growing season.

Corn weighed for export increased 1.2 million bushels or 2.8% on the week to 44.4 million bushels in yesterday’s grains inspection for export report. Corn cargoes destined for Japan led all international corn buyers for the week. Over 17.4 million bushels of corn were weighed for export inspection at facilities in the U.S. Gulf and Pacific ports en route to Japan.

Corn exports remain 30% lower from the 2018/19 marketing year. The global coronavirus pandemic has weighed heavily on U.S. grain exports and corn has not been exempt. But this week’s corn export inspections total offers a glimmer of hope: With 1.775 billion bushels of corn expected to be exported by the end of the 2019/20 marketing year, weekly export totals will have to average 45.5 million bushels for the rest of the marketing year to be realized. Yesterday’s 44.4 million-bushel total hints that goal is achievable in the weeks to come.

Soybeans: Prices in the soy complex rose in overnight trading on renewed hope for Chinese demand despite a state-issue order banning national companies from purchasing U.S. soybeans. July soybean futures prices were up $0.045/bushel to $8.45. July soyoil prices gained $0.29/lb on the sentiment to $27.89 while July soymeal futures added $0.5/ton to $283.6.

Cash soybean bids rose along the Illinois and Mississippi Rivers yesterday after state-owned Chinese companies purchased at least three cargoes of U.S. soybeans out of the Pacific Northwest. Processing demand at a Lincoln, Nebraska crush facility fell $0.05/bushel to $0.30 below July futures prices. Country grain movement remained slow as many farmers are opting to wait for their newly planted crops to progress before further booking any new crop sales.

Soybean Basis Change

USDA released soybean crush data yesterday. April 2020 crush figures came in at 183.0 bushels, rising above analyst estimates of 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. Once refined soybean oil topped 1.22 billion pounds in April 2020, down 21% from March on reduced restaurant demand for soyoil amid pandemic lockdown conditions.

Soybean planting progress also drifted closer to the five-year average in the latest Crop Progress report, though maintained steady pace. As of May 31, 75% of the nation’s soybean crop was in the ground, only 10% higher than last week and a mere 7% higher than the five-year average. Soybean crop conditions entered their first week of the Crop Progress reporting series at 70% good to excellent, buoyed by warming temperatures and sufficient rainfall.

Plagued by yet another cold and wet spring, North Dakota had only planted 51% of their soybean crop as of Sunday. While the Peace Garden State made rapid gains from last week’s total of 29%, they remained well behind the five-year average of 80% complete for the same time period. But with 3.23 million soybean acres left to be planted, North Dakota still has time to complete their 6.6 million-acre goal for the season before the June 10 prevented plant deadline.

Weekly soybean export inspections rose nearly 2.0 million bushels from last week to 14.6 million bushels for the week of May 22-28. The 15.7% weekly increase was led by 5.0 million bushels en route to Egypt sourced from the U.S. Gulf last week. Soybean exports to China were noticeably small, totaling a mere 567,706 bushels at interior loading facilities.

While yesterday’s numbers were a positive sign for domestic soybean demand, the reduced amount of cargoes loaded out to China is concerning amid the heightened tensions between the United States and China in recent days. Marketing year to date Chinese soybean demand from the U.S. is 48.6% lower than the five-year average. For more coverage of the weekly grains inspection for export report, check out Farm Futures’ analysis here.

Wheat:

Wheat contracts price changes

Favorable weather forecasts in the Southern Plains as harvest ramps up as well as precipitation in Europe benefited wheat yields, sending the wheat price complex lower in overnight trading. A weaker dollar capped losses as the ICE Dollar Index fell 0.25% in overnight trading.

Cash offerings for soft red winter wheat weakened $0.05/bushel to $0.20 lower than July futures prices for Chicago SRW wheat.

Spot basis bids for hard red winter wheat in Kansas rose $0.04/bushel to $0.12 below July Kansas City wheat futures prices at an elevator in Wichita and $0.06/bushel at a Newton facility to $0.06/bushel to $0.24 below July HRW futures. Oklahoma and Texas spot basis bids remained unchanged as farmer sales continued to be light as harvest approaches.

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

wheat protein content, basis range, change

Ukraine wheat exports are expected to drop 37.6% to 547.4 million bushels in 2020/21 following harvest projections that peg the new crop at 852.4 million bushels. Ukrainian wheat exports are expected to reach 753.2 million bushels this year, despite a 742.1 million-bushel export quota enacted at the onset of the coronavirus pandemic to stabilize domestic food prices.

About 91% of the nation’s spring wheat crop was planted as of Sunday, 5% lower than the five-year average for the same time period. North Dakota continued to hold back planting progress, with only 52% of intended acres planted as of May 31, which coincided with the first round of prevented plant dates in the state. There is a strong possibility these acres will shift into soybeans, provided supply chains can support a last-minute shift.

USDA rated the spring wheat crop as 80% good to excellent in the first reporting week for spring wheat conditions, soaring past trade projections of 66% good to excellent. Winter wheat ratings slipped 3% from the previous week to 51% good to excellent for the week ending May 31 as a heat wave across the Southern Plains over the weekend dried out the crop. Crops reached full maturity in Texas, Oklahoma, Arkansas, and California, exacerbated by dry weather.

About 77% of the winter wheat crop was headed, up from 68% a week ago but 4% behind the five-year average. About 3% of the crop was harvested as of May 31, 1% ahead of the five-year average and led by rapid combining pace in Texas where 32% of winter wheat had been harvested as of Sunday. For more on this week’s Crop Progress report, check out Farm Futures’ analysis here.

Wheat cargoes weighed for export increased nearly 1.3 million bushels or 7.4% from the previous week to 18.3 million bushels for the week ending May 28, 2020. China was the top destination for U.S. wheat last week, with 6.9 million bushels of wheat weighed at customs to be sent to the world’s second largest economy. The burst in Chinese demand was an optimistic sign as China reopens their economy following the fallout from the global pandemic.

USDA set lofty export goals for U.S. wheat shipments amidst a global pandemic that has dramatically reduced the competitiveness of U.S. wheat on the global market. The 2019/20 export projection was 970 million bushels, or 50% of old crop production. But with barely a week left in the marketing year, U.S. wheat shipments are on more realistic pace to reach 900 million bushels of wheat exports than 970 million bushels for the current marketing year.

Weather: Another clear day of weather should enable farmers to continue with spring fieldwork progress today, according to NOAA's short-range forecast. There will be a chance for rain across the Central Plains and the Upper Mississippi River Valley overnight. Total rainfall could reach up to an inch in Wisconsin, Iowa, and Southern Minnesota.

Financials: Coronavirus cases in the U.S. as of this morning totaled 1,811,277 cases, up 21,036 cases yesterday morning according to the Johns Hopkins Coronavirus Resource Center. The death toll rose by 764 lives to 105,147 deaths as of press time.

The coronavirus pandemic has hit the Brazilian meatpacking industry – hard. In Brazil’s Rio Grande do Sul state in the southern region of the country, over 2,400 meat packing staffers have fallen victim to the virus. That total accounts for more than a quarter of all COVID-19 cases in the state as the virus runs rampant through the 24 meat processing facilities in Rio Grande do Sul.

Lax containment efforts widely criticized by Brazilian President Jair Bolsonaro have led to over 500,000 cases of the virus and 30,000 deaths. As the disease tears through the country, its 446 meat plants are left vulnerable to staffing shortages as more employees fall prey to the virus.

If you’ve already finished planting for the season, congratulations! But don’t take too much time to rest on your laurels, Darren Frye writes. Now is the opportune time to be evaluating farm goals and performing a mid-year review to make sure cost management and marketing plans are on track. Check out Frye’s latest Finance First column for more helpful pointers about how to guide your farm to financial success this year.

Stock futures inched up this morning on optimism over economic recovery progress following the onset of the COVID-19 pandemic. Yesterday, the Congressional Budget Office announced it will likely take at least a decade to recover from the economic fallout succeeding the pandemic. Economic output will likely not recover to pre-pandemic levels until fourth quarter 2029, according to the non-partisan budget agency. Dow futures were up 142 points or 0.56% to 25,605 points.

Energy futures rose this morning after Saudi Arabia and Russia neared a deal to continue output cuts through September 1. Brent crude oil futures were up $1.06/barrel to $39.38 on the news.

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