Joe Lardy

Jun 19, 2020

Grains

China plans to accelerate purchases of U.S. farm goods to comply with the Phase 1 trade deal following talks this week in Hawaii between top officials from both sides.  They plan to increase purchases for things like soybeans, corn, and ethanol. In an interview with the Wall Street Journal, President Trump stated that China may have intentionally spread COVID-19 to destabilize competing economies. U.S. Trade Representative Lighthizer said in a testimony to House Ways and Means Committee yesterday that we could see new trade tensions before the election.  Headway with the EU on trade has been limited, phase-two talks with Japan start in a couple months and the relationship with the Chinese is ongoing. Badly needed rain is in the forecast. The latest round of models from the GFS and Euro guidance shows Midwest corn and soybean production areas running 114%-143% of normal precipitation the next two weeks. The Ukraine announced it will no longer publish grain export data for the remainder of the 2019/20 marketing year.  They recently hit their grain export quota and kept shipping the commodity.

Corn

China has sold 150 million bushels of corn out of its state reserves this week, the 4th consecutive week of sales at least that big as domestic demand remains strong there. AgroConsult has updated their second corn crop for Brazil to come in at 72.9 MMT, a 1.2 MMT increase from their previous forecast.

Ethanol production has now seen 7 straight weeks of increased production even if this week was only 4,000 bpd higher at 841,000 bpd. Margins are improving which could incent even better production figures.  The majority of the corn belt is forecasted to get rains in the next week or two.  However, Illinois and Indiana are expected to run below the average amounts.  In the last month, Illinois has had 57% and Indiana 60% of normal precipitation. The latest drought monitor showed a big change in Indiana.  There was no indication of drought the week prior, but the current model has the entire state showing signs of drought marking a huge change in just a week. Export sales were at 357,800 for 2019/10 while estimates were 450,000-850,000, 2020/21 sales were at 114,800 while estimates were 50,000-300,000.

 

Beans

Brazil continues to export at a rapid pace with current lineups at 9.8 MMT compared to 7.4 MMT last year.  Monthly shipments for June are at 6.3 MMT so far, on pace to break a new monthly record. 

Export sales for 2019/20 were at 538,100 while estimates were 500,000-1,200,000 MT, 2020/21 sales were at 1,382,100 while estimates were 600,000-1,300,000 MT. Soymeal sales for 2019/20 were at 124,000 with estimates at 150,000-300,000, for 2020/21 sales were at 58,000 while estimates were at 0-50,000 MT.  Soyoil sales for 2019/20 were at 6,400 while estimates were 5,000-30,000 MT.  2020/21 sales were at 0 while estimates were from 0-5,000 MT. PNW and CIF basis values have been strengthening as the demand for export business grows and lack of farmer movement has the need for beans growing. Lots of rumors that China is looking for beans for Nov/Dec delivery.

 

Wheat

Egypt’s GASC bought 240,000 MT of wheat from Russian, Ukraine, and Romania at over $11.00 per metric ton cheaper than their previous tender. A union of Russian grain exporters project the country’s wheat crop to be at 75 MMT, compared to the USDA’s forecast of 77 MMT and other estimates around 78 MMT.

2020/21 export sales were at 504,800 while estimates were 250,000-500,000 MT. Kansas City wheat is on pace for the largest loss in five weeks and trades at its lowest levels since mid-March. Minneapolis trades at a premium to the winter wheat markets as protein reports from the harvest progress are still low, but the yield reports keep coming in strong. 

Livestock

 

Cash traded lower this week off $4 to $5 around $101.  Boxed beef values have also come off hard as well this week. Packer margins slide from $350/head last week to $265/head currently.  The cattle on feed report showed the cattle inventory of 11.7 million head is the 2nd highest June 1 inventory since data began in 1996. On feed number of 100% were above the average guess of 98.7%.  Placements were 99% compared to expectations of 96.1%. Marketings were 72% versus trade estimates of 73.9%.    

Energies

Brent crude has more than doubled since the lows achieved in April, helped in part by the massive 9.7 million bpd cut from OPEC+. That 9.7 million bpd cut will be in effect through the end of July and will taper off to 7.7 million through the end of December. The US EPA has received 52 new petitions for retroactive biofuel blending waivers. The pending applications are for compliance years 2011 through 2018, and exempt oil refiners from the requirement that they blend biofuels into their fuel pool. Biofuel advocates have called on the Trump administration to reject the waiver requests, according to Reuters.