Joe Lardy

Jun 12, 2020

Grains

A US forecaster says there is a 60% chance that a neutral weather pattern will continue during the northern hemisphere summer this year and an even chance that it continues into fall and winter.  US Treasury Secretary Mnuchin is arguing against another shutdown of the economy even if there is another big surge in coronavirus cases. His point is that we would do more damage than good by shutting down the economy for a second time. FOMC minutes reveal the Fed will maintain overnight interest rates near zero through 2022. The Fed also projected @ 6.5 % decline in GDP this year with unemployment around 9.3 % at the end of 2020. In addition, the Fed estimated economic growth @ 5 % in 2021.          

Corn

BAGE estimated the Argentine corn harvest @ 61 % complete vs 56 % last year vs 42 % last year. BAGE held their production estimate steady @ 50 million tons. CONAB pegged Brazil’s 19/20 first-corn crop @ 25.429 million tons vs their May estimate of 25.252 million tons. The second or Safrinha corn crop was estimated at 74.233 million tons vs their May estimate of 75.913 million tons. IMEA reported that farmer selling of corn in Mato Grosso for this crop year has reached 85 % vs 72 % last month vs 69 % last year. New crop selling is at a record high of 35 % vs 15 % last year vs an average of 5 %.

Ethanol production was up 72,000 barrels per day to 837,000 barrels per day in Wednesday’s weekly report. Ethanol stocks fell 674,000 barrels to 21.8 million barrels. Corn export sales for 19/20 came in @ 660,700 MT vs the trade estimate of 500-800 MT. Sales for 20-21 were 25,900 MT vs the trade estimate of 0-300 MT.   The June USDA report on Thursday took corn carryout up only 5 million to 2.103 vs average trade estimates of 2.154. 2019 corn production was lowered by 45 million bushels to 13.617 million bushels while corn used for ethanol was reduced by 50 million bushels to 4.900 billion. 19-20 world corn stocks were down 1.8 million tons to 312.9 million tons. For 20-21 beginning stocks were up 5 million, ending stocks conversely up 5 million to 3.323 million bushels. 20-21 world ending stocks were pegged @ 337.9 million tons, down 1.7 million tons from May.  

Wheat

BAGE estimated Argentine wheat planting @ 41.7 % complete vs 30 % last week vs 36 % last year. The exchange expects 6.8 million hectares of wheat to be sown this campaign. Egypt’s GASC bought 120,000 tons of Russian wheat in a tender that closed on Wednesday. IKAR raised their estimate for Russian wheat exports in 20/21 by 1 million to 35 million tons. This comes after the consultancy raised its estimate for this year’s Russian wheat crop to 78.0 million tons from an earlier estimate of 75.6 million tons. Favorable weather in Russia’s central and Volga regions were the catalyst for the higher production estimates.    

Wheat sales for 20/21 came in @ 270,400 MT vs the trade estimate of 200-500 MT. A total of 2,088,000 in sales were carried over from the 19-20 marketing year. Monthly USDA report Thursday pegged all wheat production @ 1.877 million bushels vs 1.866 million in May. Winter wheat production was estimated @ 1.266 million bushels vs 1.255 million in last month. HRW production was up 10 million from last month @ 743 million bushels, SRW down 1 million from May @ 297 million bushels and White was up 1 million vs last month @ 225 million bushels. 19-20 carryout was up 5 million to 983 million. By class, HRW was unchanged @ 510, HRS up 5 @ 248, SRW up 1 @ 119, White up 1 @ 87 and Durum down 2 @ 19 million. 20-21 carryout was increased by 16 million to 925 million bushels. World stock numbers saw a marginal increase in 19-20 to 295.8 million tons. 20-21 world wheat stocks were up by 6 million tons to 316.1 million tons. Very early reports on the just beginning wheat harvest in Kansas seem to indicate the same theme from a lot of the harvest in Oklahoma. That being above average yields, high test weights and lower proteins.    

Soybeans

BAGE raised their estimate of the Argentine soybean crop ever so slightly to 49.6 million tons on ideas of better late harvest yields. They estimate soybean harvest is 99.4 % complete. The Rosario Exchange reported that Argentina’s soybean harvest is complete with a production estimate of 50.7 million tons. Brazilian consultancy Datagro estimates that as of June 5, farmers in that country had sold 87.5 % of the 19/20 soybean crop, which equaled about 106.5 million tons. Estimated sales of the 20/21 soybean crop had reached 33 % which is about 20 % above the historical average. The primary reasons for the sales are already known, a weakened Brazilian currency and firm premiums for beans.

Soybean export sales for 19/20 totaled 1,003,700 MT vs the trade estimate of 400-900 MT.  20/21 sales came in @ 1,212,500 MT vs the trade estimate of 300-800 MT. Soymeal sales for 19/20 were 207,900 MT vs the trade estimate of 100-400 MT while 20/21 sales came in @ minus 19,000 MT vs the trade estimates of 0-25 MT. Soybean oil sales for 19/20 were 9,500 MT vs the estimate of 10-35 MT. No oil sales for 20/21 were reported. June’s USDA Soybean S&D for 19-20 showed production lowered by 5 to 3.552 million, exports down 25 million to 1.650, crush raised 15 to 2.140 with carryout up 5 @ 585 million. World stocks for 19-20 were down 1.1 million tons to 99.2 million. For 20-21 beginning stocks were up 5 to 585, crush up 15 to 2.145, resulting in ending stocks @ 395 million. World stocks for 20-21 were down 2.05 million tons to 96.34 million tons.                          

Livestock

Six Republicans in the House of Representatives on the Judiciary Committee are pushing the USDA to ease regulations on meat processors. The representatives believe the regulations make it harder for smaller companies to compete in the processing business. Cash traded sharply lower this week by roughly$7/head and are in the $105 range currently. Packer margins have really dropped off due to lower boxed beef values.  Margins are $385 currently when they were $720 a week ago.  

Energies

China is set to import a record amount of U.S. crude oil in July, according to data compiled by Reuters. An estimated 2.68 million tonnes, or nearly 20 million barrels could be imported from the U.S. by China in July. Chinese refineries largely bought the cargoes in April when prices slumped. Beijing began granting tariff exemptions on U.S. imports in early March. Total oil products supplied, a barometer for consumption, has recovered to around 83% of pre-lockdown levels, according to data from Reuters. Gasoline has rebounded the most quickly, while distillates have recovered much more slowly. Jet fuel demand has slowed to around 30% of its pre-lockdown rate and has shown very little sign of recovery at this point in time.