Morning Commentary

July corn up 2 ¼ at $3.3325

July beans up 5 at $8.78

The DOW is up

USD is stronger

Crude oil up $1.34 at $40.18

Good morning,

Corn traders are debating the extended U.S. forecast as it project above normal temps for many parts of the corn belt but with adequate or slightly above average rainfall. Net-net, there’s still not enough of a weather story to spoke the bears, especially with +3.0 billion bushels forecast for ending stocks. Bulls are starting to talk more about the dry conditions in parts of Colorado, Kansas, Nebraska, and into the Dakota’s. There are some dry pockets also being more closely monitored in parts of Iowa, Indiana, and Minnesota. There’s really not much to talk about on the “demand” side of the equation, weekly export sales for corn as well as corn used for ethanol were a bit of a disappointment. In near average volume Thursday, open interest declined 1,000 lots led by liquidation in July.  The trend for July corn is positive.  Stable action above 334 would support a rally to 340.  A close under 325 cautions for a retrenchment phase.  Non-passive funds are thought to be short 326,000 lots. 

Soybean continue to trade in an extremely tight range. During the past two weeks, the NOV20 contract has traded within a narrow 20 cent range between $8.66 and $8.85, which is highly unusual for this time of year. Historically, bulls will tell you that soybeans tend to gain some upside traction this time of year, but the uncertainty currently surrounding China and the coronavirus may have many players on the sideline. Weekly export sales were good and China still continues to take small bites of U.S. supply. In slightly below average volume Thursday, open interest rose 2,000 lots as liquidation in July was more than offset by gains elsewhere.  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 thought to be long 9,000 lots.  In tonight’s COT report, funds are expected to be shown long 1,000 lots on a futures and options basis versus short 3,000 lots a week prior.

USDA will release its monthly Cattle on Feed report this afternoon. Placements and Marketings have been sharply lower because of corona and meatpacking plant closures. Most are looking for “placements” to rebound aggressively but “marketings” are expected to stay extremely low compared to May of last year at just over 1.5 million head. June 1 cattle on feed are estimated at almost 11.6 million head or 98.7% of last year. 

Gary Schnitkey with the University of Illinois says based on historic data and current USDA yield projections, the price that will be used to set crop insurance guarantees looks to be around $3.10 per bushel. “The last time we saw a harvest price below $3.10 was in 2006, when it turned out to be $3.03. That was when ethanol became the big deal it was, and we saw that rise in corn prices.” He tells Brownfield while the RFS saved the day for corn in the mid-2000’s, ethanol demand probably won’t be a silver bullet in 2020. “I don’t think we’re going to see ethanol demand or ethanol use increase back to pre-COVID levels throughout 2020 and 2021.” Schnitkey says a $3.10 harvest price for corn would trigger crop insurance payments at an 85 percent coverage level with yields roughly equal to the guaranteed yield.  He also expects PLC payments for corn if projections hold.(Brownfield Ag)

Bayer said it has decided to stop construction of a new dicamba plant on its site in Luling, La. This decision has no impact on its farmer customers, the company said, adding that it will simply continue to buy the active ingredient and produce the final product XtendiMax in its plant in Muscatine, Iowa, as it has since launching the technology in 2017. The news comes as the litigation battle heats up over dicamba, with a court recently requiring the end of its use, while the Environmental Protection Agency stated that any supplies farmers had on hand as of June 3 could be used up by July 31. Bayer insists the court’s ruling is coincidental and unfortunate, but not a factor in its decision to scrap the plant. (Source: Feedstuffs)


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