Joe Barker

Jun 29, 2020

By: Mark Hanson

 

Highlights

  • First notice day for July futures is tomorrow.  Longs will risk delivery if not out of the position by the close of today.
  • COVID cases are spiking in several states in the south and west, forcing many states to reverse reopening plans.  Confirmed cases worldwide have now exceeded 10 million people. 
  • Macros being affected most by the spike.  Dow futures opened easier but have rebounded to +85 implying an open of roughly +150 this morning.  With tomorrow not only being month end but also quarter end, the markets may see increased volatility as positions are squared up.
  • WTI Crude oil is holding mid-range of the June trade.  For June, the front month futures have traded a low of $34.27 on June 1 to a high of $41.61 on June 23.  After three months of uncertainty, this market appears to have stabilized.
  • Tomorrow, the USDA will release the much-anticipated planting and quarterly stocks report.  The acreage will set at least one of point of uncertainty for the upcoming S&D reports, leaving the yields and demand as the variables.  Below are the trade estimates:

 

Plantings:

                  AVG              High             Low              March 31

Corn          95.21            97.10            93.00            96.99

Soy            84.72            85.60            83.50            83.51

HRS           12.55               12.81               12.15               12.59

 

Stocks:

                  AVG                 High                Low                

Corn          4.951               5.150               4.795

Soy            1.392               1.490               1.275

Wheat       0.980               0.996               0.925

 

 

Corn

  • The average estimates that the trade is expecting in tomorrow’s stock report implies that there was usage of 3.002 billion bushels of usage for the last quarter.  That would be a decrease of 401 million compared to last year.
  • The trade guesses for corn plantings would imply at trend line, production would decline 304 million bushels.  Combined with the demand deterioration that the trade forecasted, there may be minimal effects to what next year’s ending stocks are forecasted to be. 
  • Heavy rains fell overnight in the upper Midwest areas, with over 3 inches in some places.  Forecasts of 1-2 inches are common through the eastern corn belt.  If realized, this will ease some of the concerns that were showing up on the drought monitor.  Heat follows the rains so concerns may rebuild as we enter the pollination period for the crop.
  • The CN-CU narrowed to ½ cent overnight but widened out slightly to 2 cents.  Could see increased volatility as the market squares up their positions going into first notice day.  St Louis basis has firmed up to +27N which is 6 cents higher over the past couple of weeks.

 

Outlook: Calls are 2-3 higher this morning as the market gets ready for tomorrow’s report.

 

Oilseeds   

  • St Louis basis levels continue to show the highest levels since 2016 at +34N.  The SN-SQ inverse reached as high as 5 ¼ cents on the overnight.  Given the continued lack of farmer selling there is a fairly strong risk of a volatile day going into first-notice-day.
  • Rains across the drier regions are just about perfectly timed.  Would expect some improved rating over the next couple of weeks.
  • Board crush continues to plummet with August now just below 68 cents.  Since April 1, it has fallen 30 cents.  New crop margins are not much better at 77 cents so there may be more pressure on the US crush as China builds a strong bean program out of the US

 

Outlook:  Mixed calls for the open with uncertainty about what will happen with the SN-SQ spread.

 

 

Wheat

  • Heavy rains in Kansas over the weekend could cause some harvest problems.  We will see over the next couple of days how large of an impact that will be.
  • Rains forecasted in the eastern corn belt could cause an issue for harvest but likely will be minimal at this point.
  • Dryness in North Dakota and Canada continues so concerns are growing for Spring Wheat.  There still appears to be adequate supplies which will keep the market in check.

 

Outlook: Mixed calls with wheat with more interest in Chicago than the other two markets.