Joe Lardy

Sep 18, 2020

Grains

President Trump announced another $13 billion in farm aid this week. It appears it will be direct payments based on yield and impact of coronavirus on crop prices, similar to previous aid packages. Producers should be able to start signing up next week. Former Goldman CEO Lloyd Blankfein says now is a good time to invest in commodities, “from an inflation point of view.” The Organization for Economic Co-operation and Development now sees the world economy contracting 4.5% this year, after forecasting a 6% decline in June.

 

Corn

Japan’s use of corn in its feed rations is up 0.4% from July to 49.7%, 0.7% higher than last year, at the expense of milo and wheat. APK Inform says Ukraine’s Oct-Aug corn exports were down 4% from the previous season, at 28.7 MMT. China’s purchases were up 43% at 5.4 MMT, while EU was down 34% to 10.5 MMT. China estimates their corn production could fall by 5-10 MMT due to typhoon damage, with total production estimated at 260.7 MMT. China set their Tariff Rate Quota for corn imports at 7.2 MMT for 2021, unchanged from 2020 despite the recent increase in imports. Reuters sources said there may be special permits. China has well over 8 million tons of purchases on the books from the US already this year. 

A Farm Futures survey showed 2021 U.S. corn planting at 91.8 million acres, down 0.3% from the 2020 USDA estimate. Weekly ethanol production was down 15k barrels/day to 926k bpd. Ethanol stocks were their lowest in years at 19.8 million barrels, down from 23.2 million last year. Weekly corn export sales were 1.61 MMT vs 800k-1.9MMT estimates.

 

Soybeans

South American analysts see more acres switching from soybeans to corn in Argentina, due to late season dryness that comes with La Nina. China’s increased corn buying was also noted. Rosario Grains Exchange estimates soybean planting at 17.3 million hectares, up 100,000 from last year, with most expanded acres going to corn.

November soybean futures had huge volume of 260,000 contracts yesterday, largest front month volume since October 2017. Weekly soybean export sales totaled 2.46 MMT vs 1.5-2.8 MMT estimates. Soymeal sales were -105.4k MT for 2019/20 and 197.3k MT for 2020/21 vs 25-100k and 200-450k MT estimates. Soyoil sales were 100 MT vs 0-10 MT estimates. Soybean open interest was at 951k. This is nearing the April 2018 record of 976k contracts. August NOPA crush was 165.055 million bushels vs a 169.468 million estimate, down from 172.794 million in July. Soyoil stocks totaled 1.519 billion pounds vs a 1.515 billion estimate, down from 1.619 billion.

 

Wheat

BAGE reports that about 12% of Argentina’s wheat crop is experiencing extreme drought and yields could be halved. Egypt’s GASC bought 175k MT of Russian wheat and 60k MT of Polish wheat, their first Polish wheat purchase in nearly 5 years. China left their TRQ for wheat imports unchanged at 9.636 MMT for 2021. ABARES raised their 2020/21 Australian wheat production estimate by 2% to 23.2-30.8 MMT. APK-Inform reports Ukraine is seeing its lowest soil moisture content in the last 10 years, with 60-70% of the winter planting areas at dry or near-dry top soil.

Weekly wheat sales were 335.7k MT for 2020/21 and 300 MT for 2021/22 vs 300-700k MT estimates. Farm Futures survey showed 2021 winter wheat seeding at 31.3 million acres, up 2.3% from 2020. Spring wheat planting was estimated at 11.6 million acres, down 4.8% from 2020.

Livestock

Cash trade was very light this week with only reports in Nebraska being up a couple bucks.  Packer margins have fallen from $360 last week to $286 this week.  These are still ridiculously good profits.

Energy

Crude oil is set for a nearly 10% weekly gain, the best week for crude since early June. Around 30% of production in the Gulf of Mexico being shutdown, and refineries along the Gulf Coast trimming runs due to hurricane activity, has helped buoy crude prices this week. Yesterday fiery rhetoric from the Saudi Energy Minister Prince Abdulaziz, where he said to those that were planning to short the crude market to “make my day” is also providing another layer of support for prices.