Morning Commentary

July corn down 1 ½ at $3.2275

July beans up 4 ¼ at $8.5475

The DOW is up

USD is weaker

Crude oil down $.14 at $36.67

Good morning,

Corn bulls are pointing to a few uncertainties in the U.S. forecast and some companies using high-tech geospatial and remote sensing technology that are forecasting the early U.S. yield at between 172 and 175 bushels per acre vs. the USDA’s current 178.5 yield forecast. Bulls also point to the continued talk of more unplanted acres shifting to soybeans or “prevent planting”. Bottom-line, bulls are thinking the USDA’s May total production forecast will be the largest of the year and the balance sheet should start shrinking a bit from here forward. Unfortunately, with ending stocks forecast at +3.3 billion bushels it is going to take a sizeable weather worry to put the balance sheet in a forward-looking position to attract larger bullish fund interest. On the demand side of the equation, data is showing ethanol demand improving as the U.S. economy comes back online, but many inside the trade suspect the USDA still has another -50 to -100 million bushels to cut from their demand estimate.

Soybean traders are now caught trying to differentiate what’s real and what’s “fake news”. One minute the Chinese are suspending U.S. purchases, the next minute the USDA is announcing confirmed purchases by the Chinese. In the best volume in nearly a month, open interest was little changed. It could reflect fund shorts shifting to commercial hands. The trend for July beans is neutral. The market closed well above the upper boundary of a 6-month trend channel on Tuesday. The move alerts for a potential improvement in the trend. Closing outside 834.75-864.25 would provide fresh trending targets. Non-passive funds are thought to be short 11,000 beans.

Businesses in agriculture, forestry, hunting and fishing have received nearly $7.6 billion so far in Paycheck Protection Program (PPP) loans, which are forgivable loans to small businesses that keep their workers on the payroll for eight weeks. That’s 1.5% of the $510 billion approved by the agency as of May 30. Other sectors like health care, construction and professional services had each received more than $50 billion in loans. Now, lawmakers are on track to ease the restrictions surrounding how employers use the loans, with the Senate expected to soon take-up House-passed legislation that would give borrowing businesses extra time to spend the money and more flexibility to use it on a variety of expenses. If no senators raise objections, the Senate might quickly pass the legislation by unanimous consent, according to a Republican aide. Farms with fewer than 500 employees also qualify for the program, though it wasn’t designed with agriculture in mind. (Source: Politico)

The Trump administration said this week it will temporarily allow some impurities in alcohol-based hand sanitizer to ensure access to the product during the coronavirus pandemic, reversing course after having tightened restrictions in April. The move will provide clarity on impurity limits for a slew of fuel ethanol companies that had switched to producing hand sanitizer during the outbreak, after regulators discovered some of the impurities several weeks ago. The new FDA guidance allows up to 2 parts per million of benzene and 50 ppm of acetaldehyde, according to the web site. The ethanol industry invested millions of dollars since March to ramp up the output of corn-based alcohol sanitizer at a time when fuel demand has slumped from the pandemic. Twenty-seven plants are currently producing ethanol for sanitizer, the Renewable Fuels Association said.

Farmer sentiment improved slightly in May after falling sharply in both March and April. The Purdue University-CME Group Ag Economy Barometer reading in May was 103, up 7 points from the April reading of 96. The barometer’s small improvement left the gauge of farmer sentiment nearly 40 percent below its February peak of 168. This month’s survey also indicated that farmer sentiment was virtually unchanged from May 2019 when the index reached its lowest reading of 2019 as U.S. farmers were in the midst of struggling through a historically difficult spring planting season. Although overall sentiment improved during May, farmers continue to be concerned about the impact of coronavirus on their farms. Over 70 percent of farmers responding to our May survey said they were either very worried (34 percent) or fairly worried (37 percent) about the impact of coronavirus on their farms’ profitability, up somewhat from a month earlier. Finally, two-thirds of farmers in the May survey said they think it will be necessary for Congress to pass another bill to provide more economic assistance to U.S. farmers

Zoom reported revenue growth of 169% from the previous year in its first-quarter earnings report on Tuesday, and nearly doubled its revenue guidance for the full year, as the coronavirus pandemic drove millions of new customers to the video calling service and turned it into a household name. However, shares rose less than 2% after hours, as investors had already sent the stock up more than 200% this year. The company reported earnings of +20 cents per share on revenue of $328.2 million, which handily topped analyst estimates. The company also significantly increased its guidance for the fiscal year. It now expects $1.21 to $1.29 in adjusted earnings per share on $1.78 billion to $1.80 billion in revenue. In keeping with its previous practices, the company did not disclose active user numbers. However, Bernstein analysts Zane Chrane and Michelle Isaacs, who have the equivalent of a buy rating on Zoom stock, estimated that the Zoom’s mobile app had 173 million monthly active users as of May 27, up from 14 million on March 4.

 

Morning Commentary

July corn up ¾ at $3.24

July beans up 4 ½ at $8.45

The DOW is up

USD is weaker

Crude oil up $.58 at $36.02

Good morning,

Corn bears are pointing to 74% of the U.S. crop rated in “Good-to-Excellent” condition, much better than many inside the trade were expecting. The biggest bearish headlines are 85% of Iowa rated GD/EX.  Last year at this time Iowa was only 58% GD/EX. In impressive volume (21,000 lots larger than average), open interest surged over 14,000 lots Monday. The best gains came in Sep and Dec. The trend for July corn is neutral. Stable action above 328.75 would support a rally to channel resistance around 340. A close under 317.25 signals a return to 309.  Non-passive funds are thought to be short 299,000 corn.

Soybean bears are pointing to reports that China is going to reduce some purchases of U.S. ag because of escalating tensions with U.S. leadership. Bulls say this is just more political jockeying by the Chinese and they will ultimately be big buyers of U.S. soybeans and overall demand will remain strong. The USDA showed 75% of the U.S. soybean crop is now planted and rated 70% “Good-to-Excellent”.

Cattle: Cash backed up on average last week from the week prior, but did so on much larger volume in the negotiated cash market and not as much in the negotiated grid trade. National average steer brought 115.90/CWT on a live basis versus 117.20/CWT last week and interestingly 115.80/CWT last year. The sentiment turned decidedly more negative last week in regards to the near-term direction for cash. There is nothing empirical to evidence the topping of cash here but a five-week continuous advance, nearing pre-COVID levels, and closing in on Jun20 LC expiration all have traders a bit nervous. There was some thin 118.00 and 187.00/CWT trade today in both the southern and northern feeding regions, which would be at the upper end of last week’s range of trade. It feels as if this week’s cash trade may be a high’s early and low’s late week with the futures possibly being the opposite. As mentioned in previous writings, the slaughter totals are moving in a positive direction and are expected to continue to do so. The questions surrounding this is at what point will we reach full pace and how large will the carryover be once we do? Our answer is, we don’t know but at this pace reaching near or full capacity will happen sooner rather than later. The much talked about carryover number of cattle is a moving target in our minds. The process of pushing cattle back and pulling cattle forward in a response to logistical, fundamental or economic market signals is nothing new for the industry. There is no doubt that our current situation is seemingly unprecedented and the challenge of being both robust and resilient has challenged us all. However, the market will function efficiently to smooth the supply chain and work through inventory. The beef price continues to erode but is still extremely high. Some beef traders are thinking the lows are near as retailers and the like will jump after falling prices for fear of renewed strength. Because of the factors previously discussed we are seeing the spreads collapse as traders’ price more risk into the nearby futures versus the deferred futures. Some of the logic here is it takes a long time to create a supply issue and it also takes a long time to clean one up. Futures are cheap relative to cash, but there are operators that would gladly sell cattle at or near the current Jun20 LC price. The first notice of delivery is next week and the possibility of having some but likely not a lot of deliveries is legitimate. Keeping a healthy perspective based on reality remains vitally important. Many have opinions but you cannot go wrong making good business decisions for you and your operation. Trey Warnock – Amarillo Brokerage Company

 

Morning Commentary

July corn down 6 at $3.1975

July beans down 5 ½ at $8.3525

The DOW is down

USD is weaker

Crude oil down $.17 at $35.32

Good morning,

Corn bears are thinking the USDA will show a slight improvement in today’s weekly crop condition report, last week 70% of the U.S. crop was rated GD/EX. Michigan, Ohio, and Illinois reported the worst overall conditions, but still, +49% of their crops were rated GD/EX. As a total, only 5% of the U.S. crop is rated “Poor-to-Very Poor”. Bulls are thinking the USDA is over-estimating the U.S. corn crop, rather than the 97.0 million planted acres they currently have forecast it’s actually somewhere between 92 to 95 million planted corn acres, just depending on how many soybeans get planted and how much “preventive plant” is taken? Last year we planted 89.7 million corn acres and the year before that we planted 88.9 million. The trend for July corn is neutral. Stable action above 328.75 would support a rally to channel resistance around 340. A close under 317.25 signals a return to 309.

Soybean bulls are happy to see the “Phase 1” trade deal is still intact, but bears say U.S. and Chinese relations are worsening. Most on Wall Street viewed President Trump’s comments on China as less aggressive than expected so the trade deal is still in play. Here at home, many in the soybean market are thinking the USDA could show 80% of U.S. crop now planted. The question remains how many acres? The USDA is currently forecasting a jump in planted acres form 76.1 last year to 83.5 million this year. Many bears are thinking that number is too conservative, pointing to the fact the year before last we planted 89.2 million acres of soybeans. bulls are quick to remind the bears that year we only planted 88.9 million acres of corn vs. this year the USDA thinking we will plant 97.0 million acres of corn. Not only is the U.S. soybean crop getting planted at a very good pace, but most suspect to see 65% to 70% rated “Good-to-Excellent”. The trend for July beans is neutral. Closing outside 834.75-864.25 would provide fresh trending targets.

Some young and beginning farmers feel excluded from the Agriculture Department’s coronavirus assistance efforts, hamstrung by a complicated application process that does not accommodate small, diversified producers. Groups representing this demographic warn that an entire generation of farmers could go bankrupt this year, especially after their request for a portion of funds to be set aside for young and beginning producers has not been granted. Some producers argue the calculation used to determine direct payments is bound to mainly benefit large growers and shuts out many young and beginning farmers with direct sales or CSA business models. The payments are also on a per-crop basis, complicating how diversified farmers could tally losses. (Source: Politico)

 

Morning Commentary

July corn down ½ at $3.27

July beans down 4 ½ at $8.425

The DOW is down

USD is weaker

Crude oil down $.75 at $32.96

Good morning,

Corn bulls are hoping flooded fields and delays in planting here in the U.S. will result in producers choosing “prevent plant”. With prices so low, thoughts are many producers may simply take “preventive plant” rather than battling muddy fields and replanting the acres. This would obviously reduce the supply side of the new-crop U.S. balance sheet and help offset some of the weakness in demand. There’s also some debate about longer-term weather and the fact a much more dry and hot summer might soon start to unfold.  Ethanol demand improved for the fourth consecutive week but is still down over -30% from last year, and stockpiles are still higher and total gasoline demand is still running about -25% less than last year at this time. In the best volume in a month, open interest rose 2,400 lots Thursday. Liquidation of over 11K July was overshadowed by gains elsewhere on the curve. The trend for July corn is neutral. Stable action above 328.75 would support a rally to channel resistance around 340. A close under 317.25 signals a return to 309. Non-index funds are estimated to be short 265,000 corn on a futures and options basis. During May, open interest has risen 77,000 lots while prices added just 7.5 cents.

Soybean traders continue to debate U.S. and Chinese relations. Bears believe President Trump is being pressured to take more aggressive steps towards China not only in regard to the early handling of coronavirus but also the country’s recent move to tighten its hold on Hong Kong. If the U.S. retaliates with increased and tighter sanctions against China, there’s even more questions and speculation regarding the Chinese commitment to the “Phase 1” trade agreement? China this week has been a somewhat unusual buyer of several cargoes of Brazilian beans for Fall delivery, these are generally soybean they would book from the U.S. The trend for July beans is neutral. Closing outside 834.75-864.25 would provide fresh trending targets. Non-index funds are estimated to be short 2,000 beans on a futures and options basis. During May, open interest has risen 71,000 lots while prices have fallen just 8.25 cents.

Coronavirus has swept through a Tyson pork processing plant in Storm Lake, Iowa, with 555 employees, testing positive and fueling renewed concerns over safety measures at meatpacking plants. On Wednesday, with suspicions the plant was the site of a new outbreak, Iowa’s Department of Public Health Deputy Director Sarah Reisetter said the state would only confirm outbreaks at businesses where 10% of employees test positive and only if the news media inquires about them specifically. According to the Des Moines Register, cases in Buena Vista County more than doubled on Tuesday, and Reisetter is now confirming around 22% of the employees at the Storm Lake facility tested positive.

Archer Daniels Midland Co. and Marfrig announced an agreement to create PlantPlus Foods, a joint venture for the sale of plant-based food products across South American and North American markets. The announcement builds on an earlier partnership between ADM and Marfrig to sell plant-based meat in Brazil. Marfrig will own 70% of the new venture while ADM will own 30%. Marfrig will be responsible for production and distribution while ADM will supply technical expertise, application development and plant-based ingredients and flavors.

 

Morning Commentary

July corn up 1 ¼ at $3.2175

July beans down 2 ¼ at $8.4625

The DOW is up

USD is weaker

Crude oil down $.30 at $32.51

Good morning,

Corn bulls are hoping to see continued growth in gasoline demand reported by the EIA today. Export sales data is delayed a day because of the holiday so we will learn a bit more on that front tomorrow. Weather seems to be mostly a non-event with a little bit of the rains reduced in the forecast, which is probably welcomed by many producers. The trade is still heavily debating U.S. planted corn acres with most guesses falling between 94 and 96 million vs. the USDA’s current 97 million forecast. The trend for July corn is neutral. Closing outside 309-328.75 would provide fresh trending targets. Non-index funds are estimated to be short 293,000 corn on a futures and options basis.

Soybean traders continue to debate U.S. and Chinese political relations and longer-term U.S. weather. There are also some talks and concern that China might be front-loading their nearby purchases as they prepare for a standoff with U.S. leaders over Hong Kong autonomy. The trend for July beans is neutral. Closing outside 834.75-864.25 would provide fresh trending targets. Non-index funds are estimated to be long 1,000 beans on a futures and options basis.

The Iowa Department of Agriculture & Land Stewardship is launching a disposal assistance program to help pork producers who are unable to harvest pigs due to COVID-19 supply chain disruptions, Iowa secretary of agriculture Mike Naig announced. Iowa State University estimates that, as of mid-May, approximately 600,000 pigs in Iowa were unable to be harvested. The department is offering producers $40 per approved animal to help cover some of the disposal costs for market-ready hogs (weighing at least 225 lb). The disposal assistance funding will be made available to Iowa producers in at least three rounds. Each approved applicant will receive funding for at least 1,000 animals and up to 30,000 animals per round, depending on the number of applicants.

Chinese commodities trader COFCO International said on Wednesday it will use its 12A terminal in Brazil’s Santos port to move sugar instead of grains beginning in July and through the end of the year. COFCO, which manages four sugar and ethanol facilities in Brazil, said the change was a result of higher sugar production in the country this year. In a statement, it said it plans to keep its Brazilian corn export program by using third party infrastructure. Brazil is sharply ramping up sugar production this year, with some analysts expecting output to grow by as much as 10 million tonnes, as a result of falling prices and demand for ethanol. COFCO said its 12A terminal in Santos, Latin America’s largest port, is currently being used to move soybeans. It would normally be used to move corn in the second half of the year, when Brazil’s largest corn crop is harvested. (Source: Reuters)

 

Morning Commentary

July corn up 1 ½ at $3.205

July beans up 4 at $8.51

The DOW is up

USD is weaker

Crude oil down $.82 at $33.53

Good morning,

Corn bulls are hoping to find improved demand and a few weather hiccups in the forecast ahead. The USDA reported another week of strong export inspections which should keep us on track to beat the current USDA estimate. Ethanol should probably see another uptick this week as the economy fires back up. The USDA showed U.S. corn planting 88% complete vs. 55% last year vs. 82% on average. Iowa was reported at 97% planted vs. 91% on average, with our crop rated 81% Good to Excellent.

Soybean bulls are happy to see China still in the market buying some U.S. supply and still no major political fallout between U.S. and Chinese leadership. Unfortunately, weekly export inspections still disappoint and most inside the trade suspect the USDA could be currently overestimating U.S. export demand by 50 to 75 million bushels. The USDA showed 65% of the U.S. soybean crop as planted vs. 55% on average. Iowa is 92% complete vs. 64% on average.

Cattle slaughter totals have rebounded back significantly from the lows from four weeks ago, as has beef production. The combined fed and non-fed slaughter as well as domestic beef production is very near a five-year average level for this time period. As we begin this Memorial Day week, slaughter pace is slower as a result of most packers allowing team members off for the holiday. However, today’s estimated totals are the largest one-day number in quite some time at 106,000 head. Year-to-date the non-fed kill pace remains dramatically behind last year, keeping in mind we pulled a tremendous amount of cattle forward and with fewer cattle on feed. Cash trade finished up last week in a range of 110-120.00/CWT live and 180-190.00/CWT on a dressed basis which is 3-4.00/CWT higher. Volumes traded in the negotiated cash as well as the negotiated grid were slightly smaller than last week but remain materially larger than other weeks in the recent past. All of this to say, the market is functioning. Kills are growing, negotiated volumes are growing, and prices are increasing for now. The basis is seasonally strong and many isolated operations are growing more current after aggressive marketings. Formula numbers are certainly building but do appear to be slowing the decreases in movements and should begin to see upticks in the coming weeks of those numbers moving more fluidly. To start this week, we have seen isolated sales of 110-119.00/CWT and 180-190.00/CWT. The beef was down yesterday with the comprehensive report printing a 394.70/CWT versus 421.80/CWT last week and 215.40/CWT last year. The general idea is that the beef has some additional downside near term but the continued demand from retailers and building restaurant sales should support the market broadly. In this setup, the beef is supported as are processing margins, thus we may continue to garner robust packer demand and generally supported fed cattle prices. As mentioned, the risk going forward is likely more basis oriented. Futures are looking better technically but lack the clarity and attraction of a building macro story to draw in large scale, non-commercial interest. Additionally, the current prices remain well below levels that commercial hedgers are interested. So for now, we watch…right, wrong, or indifferent. Trey Warnock – Amarillo Brokerage Company

USDA officials and federal prosecutors are probing the wide gap between what consumers pay for beef at the grocery store (the highest in decades) and the painfully low prices that livestock producers are paid for their cattle. According to meatpackers, beef prices are up during the pandemic because processing plants have scaled back operations as workers fall ill, meaning less meat is making its way to grocery store shelves. The reduced capacity also means less demand for live cattle, pushing livestock prices lower. But farmers and lawmakers think there’s more afoot than simple supply-and-demand shifts. One hundred years ago, the five largest meatpackers accounted for 82% of the beef market, before agreeing to antitrust measures. Today, four companies control about 85% of the market. “It’s evidence that something isn’t right in the industry,” said Sen. Chuck Grassley (R-Iowa). He’s one of 20 senators and nearly a dozen state attorneys general who have asked the Trump administration to take a closer look at the beef market. USDA has been investigating potential price-fixing since last August, and the Justice Department is now reviewing the so-called Big Four beef processors, according to a person with knowledge of the probe. A group of ranchers is also suing the four companies for allegedly colluding to depress cattle prices since 2015, a case that is pending in Minneapolis federal court. (Source:Politico)

The U.S. Food & Drug Administration released the findings of an investigation into three outbreaks of Escherichia coli O157:H7 (E.coli) illnesses in the fall of 2019 that were all tied to romaine lettuce and suggests that the proximity of cattle to produce fields may have been a contributing factor.  Some clusters (but not all) within each of these outbreaks were traced back to a common grower with multiple ranches/fields located in the Salinas, Cal., growing region. Together, the outbreaks made 188 people ill. In reaction to the findings, FDA is calling on growers of leafy greens to redouble their efforts and accelerate prevention and has provided mitigation strategies to do so.

 

Morning Commentary

July corn down 1 at $3.2025

July beans up 3 ¾ at $8.4625

The DOW is up

USD is weaker

Crude oil up $.78 at $32.74

Good morning,

Corn bulls continue to wonder if most all of the bad news is priced in? In simple terms, if we’ve seen the USDA’s highest production number of the year i.e. 97 million planted acres with an average yield of 178.5 per acre, and we start to work lower, while at the same time having seen the worst of the demand headlines, meaning ethanol, exports and feed demand all start to improve, then yes perhaps most of the worst news is already priced in and prices theoretically could start to work higher.  Bears aren’t really wanting to make big bets or add aggressively to their position if we are near the bottom of the barrel. At the same time, bulls have been badly beaten up and still licking their wounds on the sideline and not in a hurry to place big bullish bets with ending stocks forecast +3.0 billion bushels.

Soybean bears continue to point to record exports out of South America, a massive jump in U.S. acres compared to last year, and ongoing demand uncertainty. Brazil blew its previous soybean export record away during the month of April and all indications are they will do the same in the month of May. Yes, it appears the Chinese are buying a few more bushels form the U.S. but the trade obviously needs to see confirmation of more interest before prices move much higher. The other big headwind remains the strength of the U.S. dollar vs. the Brazilian real, it has eased a bit this week, but is still making it very difficult for U.S. exporters to compete.

U.S. farmers that grow crops including corn and soybeans will receive coronavirus assistance payments based on either half of their 2019 production or the supplies they had on hand as of Jan. 15, the government said on Tuesday. The payments were set at 45 cents per bushel for soybeans, 32 cents per bushel for corn and 18 cents per bushel for hard red spring wheat, the U.S. Agriculture Department said. Other crops such as barley, canola, cotton and oats also were eligible for payment under the plan. Farmers can start enrolling next week on May 26 for $16 billion in coronavirus relief payments, but the Agriculture Department has decided to prorate the aid to ensure there is enough money to go around, according to Agri-Pulse. (Sources: Reuters, Agri-Pulse)

The latest beef production estimates from the USDA show a decline in the third and fourth quarter of this year and a decline in overall beef production as a result of the COVID-19 outbreak. University of Missouri’s Scott Brown says if production does decline that much there could be some pretty good price strength late in the year. “USDA would say that’s about 1.5 or 2-pounds less,” he says. However, Oklahoma State University’s Derrell Peel says he’s not revised his beef production outlook for 2020 — yet.  “It’s really more a matter of timing,” he says.  “Those animals are still out there somewhere and they’re still going to come to town. I think a lot of what we’ve done is dramatically revise the timing of things between Q2, Q3, and Q4.” Peel says there are concerns if the economy and domestic demand can’t recover quickly. “That’s where the potential is, I think, to see some real pressure in the market,” (Source: Brownfield Ag)

 

Morning Commentary

July corn up 1 ¾ at $3.21

July beans up 6 ¼ at $8.4475

The DOW is up

USD is weaker

Crude oil up $2.73 at $32.16

Good morning,

Corn bulls are pointing to flooded fields and cold temperatures in some key production areas here in the U.S.. There are also dry weather concerns continuing for parts of southern Brazil’s second-crop corn. Bears are saying there’s plenty of time here in the U.S. to replant if need and suspect to see the USDA report the crop now over +80% planted and running well ahead of schedule vs. sub-45% planted this time last year. Bears are also pointing to warmer weather in the U.S. forecast which could prove to be perfect timing for early planted corn development. Outside of weather, the biggest wild-cards are obviously exports, ethanol, and feed demand.

Soybean prices have tumbled aggressively during the first quarter of 2020. The JUL20 contract has fallen from a high of $9.84^2 on the first trading day of the new year to around $8.40 per bushel this morning. The South American weather has mostly cooperated and the Chinese have yet to be aggressive U.S buyers. The USDA was forced to raise the U.S. balance sheet to more burdensome levels at 580 million bushels. And the fund trading world is now massively uncertain about global growth and overall political relations between the world’s top two economic powerhouses.

The CEO of R-CALF USA says he worked closely with U.S. Senators Chuck Grassley (R-Iowa) and Jon Tester (D-Montana) on their recently introduced bill to increase transparency in cattle pricing. Bill Bullard tells Brownfield Ag News, “One of the first things we need to do is restore the integrity of our price discovery market and that’s what this bill does by requiring the packers to purchase at least 50% of their procurement needs in the competitive cash market.” Bullard calls the cash market the holy grail for the cattle industry because it helps formulate the base price of all livestock regardless of weight, “So this is a very important piece of legislation. It’s the first step towards restoring competition in a broken marketplace.” Bullard says the second step is to reinstate the tool producers need to compete in the marketplace – mandatory Country of Origin Labeling.

The U.S. ethanol industry is showing some signs of recovery. As restrictions ease and gasoline demand inches higher, about 140 facilities are idled or running at reduced rates, Renewable Fuels Association President Geoff Cooper said on Friday. “It seems the worst may be behind us,” Cooper said in a call with reporters. “But make no mistake, we still have a very long way to go to climb out of the hole that COVID-19 put us in.” U.S. production of ethanol has increased since the start of May but is still down more than -40% from year-ago levels. (Source: Reuters)

 

Morning Commentary

July corn up ½ at $3.185

July beans up 2 at $8.39

The DOW is

USD is weaker

Crude oil up $1.11 at $28.67

Good morning,

Corn bulls are hoping to see improved “demand”. Bears, however, question just how much improvement in “demand” can be made anytime soon? Ethanol can only rebound so much as gasoline demand is certain to be hampered for many months, especially if more workers stay-at-home and commutes and business travel are limited. At the same time, bears are asking just how much corn will China really buy? Yes, they could purchase a sizeable amount of U.S. soybeans but corn purchases seem to have a more defined and limited scale.  IEG Vantage, known previously as Informa, is now forecast U.S. corn plantings at just over +94 million acres, which is well below the current  USDA estimate and not an unreasonable guess. If that were to play itself out, the acreage cut alone would trim production by -450 million to -500 million bushels depending on how you want to argue trend-line yield and percentage harvested. Still, however, ending stocks could be around 3.0 billion bushels which do not equal higher prices.  The trend for July corn is negative.  Dropping below 309 signals a test of 300. Sustained action over 328.75 is the minimum needed to improve the outlook.

Soybean bulls are desperately trying to convince the trade that Chinese demand is improving and more will soon come our direction. Yesterday, the headlines showed of one of the largest bean oil sales in almost a decade yet the trade simply discounted it as no big deal. The bears have a very strong hold on the market right now. The trend for July beans is neutral.  Stable action outside 834.75-864.25 will provide fresh trending targets. Consistent trade below 834.75 signals a return to the April swing low at 818.5.

USDA still doesn’t have a sign-up date for a new aid package dubbed the Coronavirus Food Assistance Program, but Farm Service Agency offices will start training for enrollment next week, according to a notice sent to state and county offices. The department cannot provide full details on the $16 billion Coronavirus Food Assistance Program (CFAP) until the final rule is approved by the White House Office of Management and Budget. The rule was sent to OMB on May 5 and is still listed as pending review. Still, USDA officials held a webinar on Thursday, providing some bare-minimum details of the program. Much of the 15-minute webinar was focused on forms that producers must fill out to be eligible for direct aid, especially if those farmers or livestock producers have never enrolled in aid programs through the Farm Service Agency. Sonia Jimenez, deputy director of the Agricultural Marketing Service for Specialty Crops, said on Thursday’s webinar the CFAP package will provide aid to farmers who suffered market losses from January through April 2020, regardless of size, if they suffered an eligible loss. Adjusted gross income for producers is expected to be capped at $900,000 unless at least 75% of a producer’s income is derived from agricultural production. For farmers or livestock producers who have not traditionally received USDA aid, they will need to fill out a bevy of USDA forms. (Source:Progressive Farmer)

Tyson Foods will be discounting prices on certain products for the remainder of this week. The price reductions will vary, but Tyson told CNN some beef items sold to grocery stores, restaurants and other customers could be discounted by 20% to 30% through Saturday. “We’re doing this because we want to help keep beef on family tables across our nation, especially as our beef plants return from reduced levels of production,” said Gary Mickelson, the company’s senior director of public relations. Tyson’s announcement comes as American grocery store price tags are soaring. Tyson said the discounts will be on items such as chuck and round roasts, as well as some other ground beef products. (Source: CNN)

Agricultural credit conditions in the Kansas City Fed’s Tenth District deteriorated at a slightly faster pace at the onset of developments related to COVID-19. The survey for the first quarter of 2020, distributed in mid-March, indicated a larger decline in farm income and loan repayment rates than in recent quarters. Looking ahead, bankers indicated their expectations were much more pessimistic. Beyond the survey period, further disruptions at meatpacking and food processing facilities and a substantial slowdown in ethanol production put heavy downward pressure on cattle and corn prices. Persistent weaknesses in the agricultural economy in recent years have weighed on many farm households. Only 15% of responding banks reported that overall financial conditions for farm households were stronger than non-farm households. After showing some signs of stabilizing in previous survey periods, credit conditions also deteriorated more quickly in the first quarter. Farm loan repayments declined at a faster rate than recent quarters. The pace of increase in loan renewals or extensions, as well as collateral requirements, also ticked up. In addition, these credit conditions were expected to turn more negative in the second quarter as banks assessed the likely economic difficulties surrounding COVID-19. The percent of respondents reporting lower rates of repayment also increased. Over half of all banks continued to report no change in repayment patterns, but about 40% reported a decline, the largest share since early 2017. The outlook also was more pessimistic in every state except the Mountain States. Demand for farm loans remained high, but the scale of the increase was similar to recent quarters. The reduction in farm income and revenue also continued to put steady, but modest pressure on liquidity. About 15% of all originated or renewed farm loans throughout the region involved restructuring to meet short-term funding needs, comparable with the past two years. Respondents indicated trade relief payments have provided notable support to their borrowers’ finances.

 

Morning Commentary

July corn down 1 ½ at $3.2075

July beans down ½ at $8.515

The DOW is up

USD is weaker

Crude oil up $.16 at $25.94

Good morning,

Stanley Druckenmiller, he of the Michael Jordan of trading, said the risk-reward environment in the stock market is the worst he has ever seen.  He also said to trade the FED, not earnings.

Corn bears are pointing to the USDA’s forecast for the largest ending stocks in over 30-years at a massive 3.318 billion bushels, the highest since 1987/88. There’s also some fear and worry that the USDA is overly optimistic about some of their forward-looking demand estimates. Meaning, if the weather doesn’t start to create some larger concern, the market could backpedal on fears of rising yields and small trimming and negative adjustments to demand. U.S. new-crop corn production is forecast record large at nearly 16.0 billion bushels. New crop “demand” was fairly strong with food, seed, and industrial (FSI) use projected to rise +245 million bushels to 6.6 billion. Corn used for ethanol is projected to increase +250 million bushels from the 2019/20 COVID-19 reduced levels, based on expectations of a rebound in U.S. motor gasoline consumption. U.S. 2020/21 corn exports are forecast to rise +375 million bushels to 2.150 billion, driven by growth in world corn trade. Corn feed and residual use is projected higher by +350 million bushels mostly reflecting a larger crop and lower expected prices. With larger stocks relative to use, the season-average farm price is projected at $3.20 per bushel, down -40 cents from 2019/20 and the lowest since 2006/07. The trend for July corn is negative but futures posted an outside day higher on Tuesday. Dropping below 309 signals a test of 300.  Sustained action over 328.75 is the minimum needed to improve the outlook.

Soybean bears are pointing to higher than expected old-crop ending stocks as the USDA lowers exports by -100 million bushels and a sizeable jump in ending stocks to 580 million. Unfortunately, many bears believe that number will work even higher as the USDA is eventually forced to further reduce old-crop exports. On the flip side, bulls are happy to see a tighter than expected new-crop balance sheet, but many, including myself, were hoping to see an even tighter scenario. The USDA has U.S. new-crop production projected at 4.125 billion bushels, up a whopping +568 million from last year on the increased harvested acres and trend yields. The good news is new-crop exports are expected to rise by +375 million bushels. With higher global soybean import demand for 2020/21 led by expected gains for China. The U.S. soybean crush for 2020/21 is projected at 2.130 billion bushels, up +5 million from the 2019/20 forecast with higher soybean meal disappearance partly offset by lower soybean meal exports. U.S. ending stocks for 2020/21 are projected at 405 million bushels, down -175 million from the revised 2019/20 forecast. The 2020/21 U.S. season-average soybean price is projected at $8.20 per bushel, down -30 cents from 2019/20. The trend for July beans is neutral. Stable action outside 834.75-864.25 will provide fresh trending targets.

As of Tuesday, all of the nation’s processing plants were back online and are running at about 70% capacity. Ag economist Steve Meyer with Kerns & Associates says this is the type of recovery to processing capacity the pork industry needs to see.  “If we can maintain it this week, it puts us on a little faster recovery pattern than I thought we might achieve,” he says. While this does help to alleviate some of the pressure on the supply chain, Meyer tells Brownfield he doesn’t think it will ever be able to fully catch up.  “We’ve probably got the better part of 2-million hogs backed up,” he says.  “I don’t think there’s any way to get out of this without euthanizing any market hogs.  Hopefully, we can minimize that by getting (capacity) back up there pretty quick.” The industry is still unsure what slaughter capacity looks like following changes to facilities to implement social distancing measures.  Meyer says his first guess was somewhere around 90 percent of original slaughter capacity.  Tyson’s Columbus Junction, Iowa plant started the week running at around 94 percent of its daily capacity, which Meyer says is right around the facility’s normal run rate.

Beef and pork have been pricey and, at times, scarce in the U.S. this spring amid outbreaks of the corona­virus at slaughterhouses around the country. Chicken has remained widely available and cheap. Why the difference? One reason is that most slaughtering of chickens, unlike that of cattle and hogs, is automated. Deboning and cutting chicken into pieces is often done by hand, which is why there have been some shortages of boneless chicken. But machines are now available to do that work, too, and processors will surely buy more of them in the coming years. Chicken farming has long been the most industrialized of American agricultural operations, and it keeps getting more so. The birds are bred for maximum meat production and raised in a matter of weeks in controlled indoor environments. Interestingly, poultry costs U.S. consumers -62% less in inflation-adjusted terms than it did in 1935, which is how far back the Bureau of Labor Statistics’ price data go. Pork, now also raised mostly at factory scale indoors, is -12% cheaper. Beef, which isn’t, costs +63% more. (Bloomberg)

 

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