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Morning Market Review for June 4, 2020

Soybeans dance with three-week highs on Chinese demand. (Comments are updated by 7:30 a.m. Central Time.)

Unfavorable weather forecasts and a weak dollar boost corn and wheat prices

  • Corn up 1-2 cents
  • Soybeans up 1-2 cents, soyoil down $0.28, soybean meal up $0.6
  • Wheat up 2-7 cents

*Prices as of 6:55 am CDT.

Corn: Wet weather forecasts going into the weekend sent July futures prices $0.015/bushel higher to $3.255 on concerns over planting progress. September futures also added $0.015/bushel this morning to $3.30.

Cash corn prices fell on the Illinois River yesterday at Seneca and Morris, Illinois but rose slightly on the Mississippi River at Savanna, Illinois. A Cincinnati, Ohio elevator weakened basis $0.09/bushel to $0.05 over July futures while a Burns Harbor, Indiana elevator raised basis $0.02/bushel to $0.13 below July futures prices. Strong weekly ethanol production supported a $0.02/bushel rise in basis to $0.03 below July futures at an Annawan, Illinois ethanol plant. It is the second basis increase for the plant in as many days.

Corn basis and change

USDA will release export sales data this morning. 2019/20 corn sales for the week ending May 28 are expected to range between 15.7 million – 35.4 million bushels while 2020/21 sales are pegged at 2.0 million – 11.8 million bushels. Corn weighed for export inspection this week totaled 44.4 million bushels, mostly on the Mississippi River. It was a positive sign for export demand as weekly export totals will have to average 45.5 million bushels for the rest of the marketing year to realize the 1.775 billion-bushel export forecast set by USDA for the 2019/20 marketing year.

Weekly ethanol production for the week ending May 29 rose 5.7% to 32.1 million gallons/day of production. Last week’s production consumed 83.3 million bushels of U.S. corn for the week. It was the fifth consecutive week of ethanol output increases. Weekly ethanol stocks continued to shrink as blending demand improved and ethanol plant capacities limited excess output, falling 29.4 million gallons on the week to end at 944.0 million gallons as of May 29.

Ethanol demand for blending has risen 43.4% since the early days of the pandemic to 30.2 million gallons/day of demand from refineries, but still remains nearly 21.7% lower than pre-pandemic demand levels. Gasoline demand improved nearly 4.1% over Memorial Day weekend to 317.1 million gallons/day as Americans celebrated the national holiday as well as easing lockdown restrictions.

North Dakota passed final corn plant dates on Sunday, May 31, 2020. A week of good weather boosted planting progress to 75% as of Sunday, but prevented planting acreage could start rising, Commstock’s Matthew Kruse writes. While the totals are not likely to significantly impact ending stock figures for 2020/21, there could be some opportunities for weather rallies Kruse points out in the latest Ag Marketing IQ column.

Soybeans: Soybean futures flirted with a three-week high on continued optimism over Chinese export demand in recent days. July futures were up $0.0175/bushel this morning to $3.5925. July soyoil futures prices dropped $0.28/lb to $27.58 while July soymeal futures rallied $0.6/ton higher to $286.9 in overnight trading.

Cash soybean prices strengthened on the Mississippi River yesterday as export demand from the U.S. Gulf picked up amid recent sales to China. Basis was mixed at crush facilities in the Western Corn Belt as inconsistent farmer sales in recent weeks has led to varying levels of inventory at processing locations.

Soybean Basis Change

Old crop soybean exports sales are expected to range between 18.4 million – 36.7 million bushels in today’s USDA weekly export report. New crop sales are projected by analysts to come in at 3.7 million – 20.2 million bushels for the week ending May 28. 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. While the number was on an upward trend, U.S. soybean exporters will have to average 26.0 million bushels per week for the rest of the marketing year to meet USDA’s export estimate of 2.55 billion bushels for the 2019/20 marketing year.

Recent soybean sales to China have rallied soybean prices this week. But keep an eye on export shipments in today’s report. Marketing year to date Chinese soybean demand from the U.S. is 48.6% lower than the five-year average. The recent sales are a positive sign for potential demand, but U.S. growers can’t fully realize the true price gains from supposed Chinese demand until those beans leave the port.

USDA announced a 6.8 million-bushel soybean sale  to an unknown buyer yesterday. Many analysts believe the shipment will go to China after a Reuters report on Monday found state-owned Chinese firms to have booked soybean purchases despite orders from Beijing to ignore American pork and soybean availability amidst rising diplomatic tensions. Over 2.4 million bushels are earmarked for shipment in the current marketing year while the remaining 4.4 million bushels will be exported after the new marketing year begins on September 1. China picked up U.S. soy purchases after Brazil’s currency, the real, strengthened in recent days.

The ICE Dollar Index is trading slightly higher this morning for the first time in over a week. As of market close yesterday, the dollar has weakened 2.4% in the past two weeks to its lowest levels since the early days of the COVID-19 pandemic as the global economy begins to reopen.

6-4 - Graphic 6 - U.S. Dollar.PNG

The news is a great sign for U.S. soybean exporters because it has made U.S. grains more competitive with South American grains on the global market. It is particularly welcome news as Brazilian soybean stocks are depleted on rising export shipments to China. But rising tensions between the U.S. and China  could threaten future soybean sales.


Wheat contracts price changes

A hot forecast for the Southern Plains and persistent dry weather in Europe supported price gains across the board in the wheat complex this morning. The ICE Dollar Index ticked slightly upwards this morning, but is still trading at pre-pandemic lows, also underpinning strength in the grains complex.

Spot basis bids for soft red winter wheat were unchanged in the Midwest yesterday. Cash offerings for hard red winter wheat in Kansas weakened this morning after posting gains earlier this week. An Enid, Oklahoma facility strengthened basis $0.15/bushel to $0.10 over Kansas City HRW wheat futures prices for July to stimulate new cash sales which have been slow as farmers await the impending harvest.

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

wheat protein content, basis range, change

Analysts estimate 2019/20 wheat exports sales to range between 1.8 million – 9.2 million bushels for the second to last reporting week for exports in the 2019/20 marketing year. New crop sales are estimated at 3.7 million – 22.0 million bushels in this morning’s export sales report. 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.

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 better pace to reach 900 million bushels of wheat exports than 970 million bushels for the current marketing year.

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 morning totaled 1,851,520 cases, up 19,699 cases yesterday morning according to the Johns Hopkins Coronavirus Resource Center. The death toll rose by 994 lives to 107,175 deaths as of press time.

USDA farmer assistance programs are in the early days of operation. The Payroll Protection Program received a slight makeover this week as well. Bob Krogmeier digs into the details of the new aid packages in his latest By the Books column on the Farm Futures’ website.

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. 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 this morning as more jobless claims are expected in today’s weekly report, stimulus funds run on fumes, and reports of a widening trade deficit are rumored for April. S&P 500 index futures traded 13 points or 0.42% lower to $3,105 on the bearish sentiments. Traders are anxiously awaiting the results of a European Central Bank monetary policy decision to expand its $840 billion emergency bond-buying program to $1.5 trillion while doing a little profit-taking on the side after several days of stock gains.

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 $0.58/barrel on the news to $36.71.

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