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Morning Commentary

July corn up ¾ at $3.305

July beans up 2 at $8.68

The DOW is up

USD is weaker

Crude oil up $.34 at $36.68

Good morning,

Corn bulls are talking about a much hotter and drier forecast ahead for many portions of the U.S. Bears are a bit more concerned about yesterday’s massive drop in crude oil prices and the fact the USDA probably needs to further reduce its corn used for ethanol forecast. There really wasn’t a lot of change to the overall balance sheet. The USDA lowered last year’s production estimate by -45 million bushels, but at the same time, dropped old-crop corn used for ethanol by -50 million bushels. In total, this bumped ending stocks higher by +5 million bushels to 3.323 billion, the largest since the 1980s.

Soybean bulls are a bit disappointed that prices didn’t push higher after the announcement of more Chinese buying, strong weekly export sales, and hot and dry weather in the forecast. Bears believe the U.S. new-crop balance sheet is going to get more burdensome once the USDA adjusts the planted acreage number higher. The USDA report was mostly a non-event. Last year’s production was lowered by -5 million bushels and domestic crush raised higher by +15 million bushels, but at the same time, old-crop exports were lowered by -25 million bushels, pushing old-crop ending stocks higher by +5 million bushels. New-crop domestic crush was raised higher by +15 million bushels. Net-net, new-crop ending stocks were lowered from 405 down to 395 million bushels. Global numbers show slightly higher production, but ending stocks were actually lowered by -2.1 MMTs compared to last month.

An analysis from the National Corn Growers Association predicts a significant revenue loss for corn growers from the COVID-19 pandemic. John Linder chairs the association’s COVID-19 task force. He tells Brownfield the analysis projects a $59 per acre average revenue decline for the 2019 crop and an $89 per acre decline for the 2020 crop compared to pre-pandemic projections. “Obviously, livestock markets are having their share of problems as well as the ethanol industry and their co-products. So, our two major markets are experiencing devastating impacts that are carrying all the way out to the farm gate.” If those numbers play out, the 2020 crop year revenue would be the lowest since 2006 and Linder says the impacts will likely continue into 2021 and beyond. The analysis was conducted by Dr. Gary Schnitkey with the University of Illinois to help NCGA create recovery solutions for corn farmers.

 

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