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Morning Market Review for May 22, 2020

Reduced Chinese growth outlook drags grains lower. (Comments are updated by 7:30 a.m. Central Time.)

Rising tensions between the U.S. & China underpins weakness in soy & wheat complexes

  • Corn down 1-2 cents
  • Soybeans down 2-4 cents, soyoil down $0.34, soybean meal down $0.1
  • Wheat down 3-8 cents

*Prices as of 6:55 am CDT.

Good Morning! Markets will be closed on Monday in observance of Memorial Day, therefore there will not be a morning or afternoon daily newsletter from Farm Futures. Enjoy the long weekend, stay healthy, and as always, thank the healthcare workers in your life for their service!

Corn: Corn futures tumbled this morning as lower energy prices amid reduced Chinese growth forecasts caused investors to question ethanol demand. Strong planting progress also raised concerns of a record-high harvest this fall. July corn futures prices fell $0.0125/bushel on the sentiment to $3.165. September corn futures followed $0.015/bushel lower to $3.215.

Cash corn prices were weaker at river terminals on the Illinois and Mississippi River yesterday as flood waters kept several elevators along the Illinois closed and export demand dropped. Basis rose $0.01/bushel to $0.09 below July futures prices at a processing facility in Blair, Nebraska. Cash bids also strengthened $0.04/bushel to $0.28 below July futures at a Lincoln, Nebraska elevator as slow farmer sales prompted facilities to stimulate cash prices in an effort to drum up corn inventories.

Corn basis and change

Corn prices look to have hit a bottom on April 21 after July futures closed at $3.09/bushel. There are several supply and demand concerns that could be bullish for corn prices if they materialize. Total Farm Marketing’s Naomi Blohm breaks down the four factors that will lead corn prices higher in the latest Ag Marketing IQ column.

Soybeans: Reduced Chinese growth outlooks and lingering issues with African Swine Fever in the Chinese hog industry send July soybean futures prices tumbling $0.0375/bushel to $8.3125 in overnight trading. July soyoil futures shed $0.34/lb to $26.77 and July soymeal prices were down $0.1/ton to $282.4 this morning.

Soybean basis continued falling at processing facilities yesterday as two Iowa sites draw down inventories gear up for seasonal downtime addressing maintenance issues. Cash offerings rose $0.01/bushel to trade even with July futures prices on the Mississippi River at Savanna, Illinois. Cash sales remained slow as selling targets remained lower than desired profit levels for most Midwestern farmers.

Soybean Basis Change

China and Mexico went on a soybean buying spree last week as export shipments rose to 18.4 million bushels for the week ending May 14. 2019/20 sales also surpassed analyst expectations, rising 27.3 million bushels from the previous week to 44.4 million bushels. For more information on yesterday’s weekly export report, check out Farm Futures' analysis here.


Wheat contracts price changes

The wheat complex traded lower a round of technical selling this morning after concerns over Russian production forecasts led futures prices higher for the past three trading sessions. Uncertainty surrounding diplomatic relations with China also weighed on the wheat complex this morning and sent the dollar rising. The ICE Dollar Index traded 0.37% higher this morning.

Cash offerings for soft and hard red winter wheat were mostly unchanged across the Midwest and Southern Plains yesterday. Yield estimates from the Kansas Wheat Tour continue to report lower estimates than USDA projections. The average after two days of the tour stands at 42.0 bushels/acre while USDA’s latest estimate pegs the Sunflower State’s crop at 47.0 bu./ac.

Protein premiums for hard red winter cash wheat delivered to or through Kansas City by rail rose wheat containing ordinary levels to 12.4% protein yesterday on increased demand from flour millers, as shown below:

wheat protein content, basis range, change

Ukraine reported weekly export figures this morning. As of today, Ukraine has sold 732.1 million bushels of wheat, accounting for 98.6% of its 742.2 million-bushel export quota enforced at the onset of the COVID-19 pandemic to ensure domestic price stability. That leaves the Black Sea exporter 10.1 million bushels of wheat left to sell before their marketing year ends on June 30. We could realistically see Ukraine enforce their export ban as early as next week.

Jordan issued a 4.4 million-bushel tender for wheat overnight. The tender, which closes next Thursday, can be sourced from optional origins. But in the wake of Russian export bans and the impending Ukrainian ban, it is likely the wheat will be sourced from France.

Weather: Rain will continue in the Central Plains today. Accumulation is expected to total up to two inches from Eastern Nebraska to Southwest Arkansas, according to NOAA's 24-hour precipitation monitor. The rain system will push up into the Upper Mississippi Valley by tomorrow afternoon.

North Dakota, which has enjoyed a rare week of clear weather, will likely see sunny skies come to a close on Sunday when a precipitation system from the Northern Rockies moves in. Prevent plant dates for North Dakotan corn fall on Monday, at which time there could be a significant amount of corn acres that do not go into 2020/21 production. As of this past Monday, the Roughrider State still needed to plant 2.65 million acres of corn to match their 3.2-million-acre planting estimate for the spring from USDA.

Financials: Coronavirus cases in the U.S. as of this morning totaled 1,577,758 cases, up 25,905 cases from the same time yesterday according to the Johns Hopkins Coronavirus Resource Center. It was the largest single-day increase in cases this week. The death toll rose by 1,290 lives from yesterday to 94,729 deaths.

Meat packing plants remain open and running despite conditions still being favorable for COVID-19 transmission. Physical distancing remains a challenge as high processing speeds require more manpower on fabrication lines. Weekly slaughter rates are up 6.2% in the pork industry and 9.3% for cattle as capacity returns to about 80% of normal. Slaughter capacity fell to 60% to 70% in April as staffers fell prey to the virus.

Flimsy plastic barriers and faulty personal protective equipment (PPE) are common on packing floors and provide limited protection for workers against the virus. Over a dozen large processing facilities have reopened after coronavirus outbreaks occurred among workers. Rigid absenteeism and sick pay policies continue to incentive workers to report for shifts if they are exhibiting symptoms.

China announced overnight they would be developing new food security measures in the wake of the coronavirus pandemic. Soybean stocks hit record lows in China as the world’s second largest economy attempted to restart their economy earlier this spring. But COVID-19 and South American rain caused significant shipping delays at that time, throwing China’s food supply into peril. China has increased purchases of U.S. farm goods as part of that effort, inching closer to Phase 1 trade agreement targets.

Global stocks wobbled lower this morning as tensions between the U.S. and China deepened. China lowered its growth rate for the year but did not provide a formal target, which further underpinned weakness in global stock prices. Dow futures traded 56 points or 0.23% lower to 24,320 points amid investor concerns. Energy prices tumbled on the weakened outlook out of Beijing with U.S. crude oil futures leading the fall, down $1.97/barrel to $31.95.

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