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Morning Commentary

July corn up 2 at $3.20

July beans up 7 ¼ at $8.515

The DOW is up

USD is weaker

Crude oil up $.48 at $24.03

Good morning,

Corn bulls are pointing to weather complications in parts of Brazil’s second crop and a sizeable U.S. purchase from the Chinese, which is hopefully a sign of more to come. Bulls are also keeping an eye on the latest forecast for U.S. cold weather which could cause some complications for early emerged crops. On the flip side, bears are pointing to the very real possibility of a +3.2 billion bushel USDA ending stock estimate, just depending on how they want to play the “demand” card.

Soybean bulls are happy to hear of more Chinese buying and perhaps improved political tensions. Headlines are circulating that U.S. and Chinese leaders will be talking in more detail early next week. There’s some talk circulating inside the trade that the Chinese have only fulfilled about 10% of their “Phase 1” commitment with over 1/3rd of the year already gone. This gives President Trump real data and real facts to pressure the Chinese, meaning perhaps they now feel some heat and are going to turn up the buying.

Pesticides and seeds producer Corteva on Thursday raised concerns about global corn demand in the latter half of the year, adding to fears that prices could take a further hit from a slump in demand for grain-based ethanol. Corteva, which gets more than half of its seed sales from corn, said on a post-earnings conference call there was significant uncertainty around how much corn would be planted for next year’s season. “Our assumptions right now is that we could see a 5 to 7 million acre decline in corn,” Chief Executive Officer James Collins said. Collins, however, added there were “strong indications by China” to purchase corn. The company reported a first-quarter profit on Wednesday that beat analysts’ estimates, but pulled its full-year forecasts citing uncertainties due to the coronavirus outbreak. (Source: Reuters)

Low market prices on this year’s corn and soybean crops due to the coronavirus could trigger up to $7.2 billion in USDA subsidies to corn and soybean growers, according to five university economists in a paper published on the farmdoc Daily blog. As they explain, in estimating the damage that U.S. crop agriculture has suffered, it is important to take into account the payments made by existing farm safety net programs. “Deepening concern exists over the demand destruction caused by the Covid-19 pandemic,” said the economists, so they compared corn and soybean futures prices before and after the coronavirus became widespread. The crops would have generated some $101 billion in revenue before the coronavirus. At present, the two most widely grown U.S. crops would fetch $83 billion to $88 billion. Subsidies would range from $3.9 billion to $7.2 billion, the economists estimated, depending on the correlation between futures prices in May and cash prices when growers sell their crops. They cautioned that their estimates were tentative because the harvest is still months away.

 

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