Morning Commentary

July corn down 2 at $3.255

July beans up 4 at $8.6725

The DOW is up

USD is weaker

Crude oil down $.80 at $38.14

Good morning,

Corn bears are thinking the USDA could bump ending stocks higher in tomorrow’s June report on another sizeable reduction to ethanol demand. The question is how much?  In massive volume (180K cax above average), open interest rose better than 13,000 lots. The gains in OI were result of a 32,000 lots increase in Sep. The trend for July corn is positive. Stable action above 333.5 would support a rally to 340. A close under 325 cautions for a retrenchment phase. Non-passive funds are estimated to be short 307,000 corn on a futures and options basis.

Soybean bulls are talking about continued buying from the Chinese with rumors of both Cofco and Sinograin booking bushels off the PNW. The weaker U.S, dollar vs. the Brazilian real has also been supporting the Chinese buying headlines. There’s also the deepening coronavirus problems spreading across Brazil. Brazil has the world’s second-highest number of cases – and has now more daily deaths than any other nation. But because of insufficient testing and inaccurate reporting, their numbers are thought to be even higher. There’s also now a ton of uncertainty surrounding Argentina and its government’s bid to take over Vicentin, the countries largest crusher who filed bankruptcy back in February. Remember, last year Vicentin handled just under 20% of all sales of soybean meal and over 20% of all soybean oil shipments. In other words, the market is very eager to know if or how much the Argentine government will be changing things? Inflated by index fund rolling, volume was upwards of 60,000 lots better than average Tuesday. Open interest rose 1,000 lots. The trend for July beans is positive. Stable action over 855.25 will fuel a drive to 895-900, perhaps 920. Closing under 846.25 undermines the outlook. Non-passive funds are estimated to be short 4,000 beans on a futures and options basis.

U.S. oil production will continue to decline until bottoming out at 10.63 million barrels per day (b/d) in March 2021, or 2.2 million b/d below the record high set in November 2019, the U.S. Energy Information Administration (EIA) said yesterday. EIA now predicts U.S. oil output to average 11.56 million b/d in 2020, a downward revision of -130,000 b/d from last month’s forecast, with 2021 output averaging 10.84 million b/d, down -60,000 b/d from last month, according to the Short-Term Energy Outlook for June. This year will mark the first decline in US oil production since 2016. Global oil demand is on track to shrink -8.3 million b/d year on year to average 92.53 million b/d in 2020 while 2021 global oil demand is predicted to average 99.71 million b/d, recovering more than 7 million b/d from 2020, but still -1.2 million b/d below 2019 levels. The report predicts WTI crude prices will average $35.14/b in 2020, up about $5 from last month’s outlook, and $43.88/b in 2021, up 57 cents. (Source: EIA)


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