Morning Commentary

July corn up 2 ¼ at $3.315

July beans up 2 ½ at $8.715

The DOW is up

USD is stronger

Crude oil up $1.29 at $38.41

Good morning,

Corn bulls are pointing to the downgrade in U.S. weekly corn crop conditions. Most were expecting the USDA to leave conditions “unchanged” to perhaps a slight improvement, instead, the GD/EX rating fell from 75% down to 71% rated GD/EX. Illinois, Indiana and Iowa all fell by -2%. Outside of conditions deteriorating, bulls are also pointing to fewer U.S. corn acres planted than the current 97 million the USDA is using in the balance sheet. IEG Vantage tossed out a fresh U.S. corn acreage estimate yesterday of 94.1 million and a total U.S. corn crop of just over 15.4 billion bushels vs. the USDA’s current forecast of just under 16.0 billion.  We also have the funds holding one of their top-5 largest short positions in the past 30-years. Bulls believe if we get a good wide-spread weather story brewing they can catch the fund’s offside and we could get a nice short-covering rally.

Soybean trader see little to any change to the USDA’s weekly crop conditions rating with 72% of the crop still rated GD/EX. The USDA shows 93% of the crop is now “planted” vs. just 72% last year vs. 88% on average. We will learn more about total U.S. acres planted in exactly two weeks when the USDA releases its June Acreage report. The USDA is currently forecasting 83.5 million planted U.S. soybean acres but most inside the trade suspect that number is too conservative. IEG Vantage is thinking the U.S. planted soybean acreage estimates should be more like 85.5 million, +2 million higher than the USDA’s current forecast. Bears are obviously thinking the U.S. planted soybean acreage number could be even higher.

Cattle: As expected, or feared the cash market softened last week on adequate but smaller volumes. The national average cash steer brought 104.67/CWT versus 112.81/CWT last week. Slaughter totals came in firm last week with a robust Saturday kill. Today’s estimated kill is 119,000 head which would be one of the largest single-day kills in quite some time. The industry sentiment coming into a new week is a bit mixed. Many looking for lower cash on willing sellers out of the south, yet others are more current and willing to trade tougher around 100.00/CWT or below. Today we see a few major packers bidding 100.00-105.00/CWT and 159.00-167.00/CWT. These bids brought limited to no activity in the south and tepid movement in the northern regions. As we step back and think about where we are from a broad perspective, the seasonal cash low is potentially near and the basis likely becomes less desirable moving forward. We know that the market is expecting some increased supplies as we work into July and August and to a certain extent through the end of 2020 as we smoothed out numbers backed up due to COVID. Beef markets have pulled back from record-high levels and as of today, the comprehensive beef cutout price is 248.60/CWT, down from over 400.00/CWT. Volumes of beef being moved are ramping back up materially as this week was the largest in 11 weeks and the second largest on record for 2020. A welcomed spike in export sales last week, although we remain down 13% year-to-date on sales and up 4% on shipments. The bull and bear theses have not really changed to any large extent and the overall illiquidity and waning open interest situation remains generally the same. It is apparent to us that we are at or very close to a literal inflection point where it is incredibly important to couple urgency with clarity. When we feel overly compelled to move or act, but have little or no clarity as to the best path or method of action we may create additional issues and challenges. At the same time, having clarity of strategy with no urgency in action can be equally deadly. In short, if we don’t know where we are going, any road will get us there. Trey Warnock – Amarillo Brokerage Company

Smithfield Foods is missing about a third of its employees at a South Dakota pork plant because they are quarantined or afraid to return to work after a severe coronavirus outbreak, according to the workers’ union. Nationwide, 30% to 50% of meatpacking employees were absent last week, said Mark Lauritsen, a vice president at the United Food and Commercial Workers International Union (UFCW). Absenteeism varies by plant, and exact data is not available, but some workers’ unwillingness to return poses a challenge to an industry still struggling to restore normal meat output. Tyson had to halt operations at its pork plant in Storm Lake, Iowa in late May – a month after the president’s order to reopen – partly because of “team member absences related to quarantine and other factors,” the company said in a statement. The plant restarted limited operations on June 3.(Source:Reuters)


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