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


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