Morning Commentary

July corn up 1 ¾ at $3.1725

July beans up 2 ¼ at $8.3875

The DOW is up

USD is stronger

Crude oil up $2.74 at $23.13

Good morning,

Corn bears are thinking +50 million acres of U.S. corn has now been planted as producers are off to a torrid pace. The trade believes crossing the halfway-point with planting is yet another bearish headwind as it reduces the threat of a late-crop i.e. perhaps less extreme heat and lack of moisture at pollination and little chance of an early-frost hitting the plant doing any major wide-spread damage. Keep in mind, several big production states are well ahead of schedule… Iowa is estimated at 78% planted vs. the 5-year average of 46% by this date.

Soybean bears are pointing towards a good start to U.S. planting and ongoing demand uncertainties. Most inside the trade suspect we currently have +20 million soybean acres now planted and running well ahead of pace. Similar to corn, many of the big production states are off to an amazingly fast start… Iowa estimated at 46% planted vs. 9% on average.

Cattle: Cash fed cattle prices moved slightly higher last week on marginally higher volume. There was, as there has been, some 105.00/CWT paid in certain yards. Some talk of cash trades being adjusted to higher prices for those that may have traded below 105.00/CWT, but have nothing concrete on that notion. The markets remain conflicted as to what information is worthy of keying off of. As has been mentioned in previous writings, there are many factors driving the current market situation and as a result, there is a wide swath of implications. Spot Beef prices are above 400.00/CWT for the first time ever with comprehensive beef prices at 304.00/CWT as of today. There are such small volumes of product being moved at the moment and when slaughter facility throughput regains momentum, we could see an aggressive move lower in beef prices. Additionally, at the current levels, demand will be impacted. Cattle on lists to be sold this week are massive. For the first time in a long time, all three major cattle feeding states have show lists above 100,000 HD. The KS list is approximately even with its largest from 2011 and essentially as large as January 2007. Obviously, some of this is the result of cattle not being marketed, reduced kill pace and some du to larger numbers that were intentionally placed into the timeframe. With that being said it is hard to see cash moving substantially higher until we move past some of the current logistical quagmires. If I had to estimate cash trade for this week, I would guess larger volumes around steady. Beef is likely to be supported but today’s move in the choice cutout of +32.60/CWT seems like a blow-off. Futures markets are gaining steam and the front spreads are firming. The technical setup has many hurdles but is moving above key resistance. The basis will be at risk of narrowing going forward. Much talk of government intervention in a variety of ways for cattle producers. We have very little evidence of anything official, but most industry groups are flexing in every way possible to help guide the easing of the packing flow issues and supplement lost revenue through this crisis. There are obviously risks associated with manipulating a biological production cycle and a market. The details, if any, will surely come to the surface sooner rather than later. Overall, markets are beginning to stabilize and market participants have regained some order in how they are moving in and out of the marketplace. We will still see some chop and being sure-footed will be very important going forward. Trey Warnock – Amarillo Brokerage Company

Farmers who have been waiting for the Small Business Administration to open up more loan funding need to take action quickly to get their loans in line. SBA on Monday announced it would open Emergency Economic Injury Disaster Loan (EIDL) programs for farmers. SBA will essentially “reopen” the loan portal for those EIDL loans, the agency stated. Congress approved a new round of small-business funding and specifically detailed that farmers are allowed to apply in late April but up until Monday, SBA was stating there was such a backlog of EIDL loan applications that it was not accepting new applications. EIDL loans go directly through SBA and they provide individual grants to small businesses for up to $10,000. But the EIDL loans can go as high as $2 million for small businesses. The EIDL loans are not forgiven, but EIDL allows low-interest loans (3.75%) for up to 30 years.

Tyson Foods on Monday reported that its fiscal second-quarter net income fell 15% from a year earlier, as production disruptions weighed on its results. Tyson warned Monday that it expects more meat plant closures this year and also said it will continue producing less meat than usual, as workers refrain from coming to work during the coronavirus pandemic. Tyson reported fiscal second-quarter net income of $364 million, or $1 per share, down from $426 million, or $1.17 per share a year earlier. Net sales rose 4.3% to $10.89 billion. Tyson’s total volume grew 2.6% during the quarter. Beef and pork volumes rose, while Tyson’s chicken and prepared foods segments saw volumes shrink. Tyson executives said that U.S. hog processing capacity has been nearly cut in half as the coronavirus closes slaughterhouses, pressuring profits. As consumers shift to eating more meals at home due to restaurant closures, Tyson expects volumes to decline in the second half of fiscal 2020 because of weaker food-service demand.


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