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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.

 

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