Morning Commentary

July corn down 3 ½ at $3.2475

July beans down 2 ¼ at $8.74

The DOW is up

USD is weaker

Crude oil up $.53 at $41.26

Corn bears continue to point to burdensome supply, no major weather threat, no big demand story, and lack of overall bullish interest from the funds. The USDA showed overall crop conditions improving slightly from 70% to 72% rated GD/EX vs. 56% rated GD/EX last year at this time. Conditions where the corn crop improved the most…Nebraska +3% to 74% GD/EX vs. 77% last year; Iowa +2% to 85% GD/EX vs 62% last year. We are definitely into a weather-driven portion of the market. Unfortunately, with +3.3 billion ending stocks forecast we have to have massive wide-spread weather worry to gain even a second thought from the funds who are holding a large bearish position.

Soybean traders see little fresh or new to influence price. The U.S. weather is mostly a non-event and Chinese buying continues but at a fairly limited pace. The USDA reported 89% of soybeans are “blooming” vs. 85% on average. And U.S. “planting” is now thought to be 96% complete vs. 93% on average. The USDA also lowered crop conditions slightly from 72% down to 70% rated GD/EX vs 54% last year. Iowa is +2% to 84% GD/EX vs 63% last year.

Cattle on feed released Friday was essentially as expected. Sharp upticks in numbers on feed were noted in the south and particular Texas. Marketing’s bounced back in most all areas with exception to Texas. Placements were quite large in the south as many yearlings were coming off grass late and heavy. As we begin to put the pieces together between market ready numbers, projected out-front supplies, and current kill on a weekly basis; it has become apparent that the supply of cattle is not necessarily insurmountable. Most analyst are projecting that the carryover numbers from COVID could be comfortably attenuated by the fall or years end. This will continue to pressure the nearby futures relative to the deferred contracts as the market works to grasp the timing component. Last week’s cash trade was large in volume and lower in price. The negative sentiment seems to have carried over to the current week, however, show lists were down sharply for the first time this year and many yards are increasingly current. Deliveries have been noted basis the Jun20 LC contract. Many have wondered about why the deliveries have occurred when cash is on average premium to the futures, kills are increasing and cash trade volumes are building. We would suggest although the last few months have certainly been unique in almost every aspect, the contract is functioning well as both a risk tool and delivery mechanism. Some feeders have not been able to obtain a bid on all cattle or even some cattle in certain circumstances. There have been fed steer and heifer supplies sold well below average cash prices and even via cull markets. In this sense, the CME delivery avenue has not become a dumping ground because contract specifications protect against that. It has become an outlet for cattle that do not have, but need a home. Lastly, the deliveries noted so far were either taken willingly or demanded. This would indicate that there is value at the levels tendered and hopefully will rightly be a win for both parties. Futures markets have obviously been choppy and sideways. The price ranges traded are spent and stale, the amount of commercial interest at current levels is small and as mentioned in the past the speculative trader lacks a directional desire to participate longer term. As a result of this, the futures stay choppy this week and are looking for any signs of cash strength. The cash market can hold at these levels and we expect feeders to trade tougher going forward. As always, look to sound business strategies for your operation when forming a path forward. Step carefully when executing the plan and wear sunscreen. Trey Warnock  – Amarillo Brokerage Company

Total red meat supplies in freezers on May 31, 2020 were down -18% from the previous month and down -13% from last year. Total pounds of beef in freezers were down -13% from the previous month but up +2% from last year. Frozen pork supplies were down -24% from the previous month and down -26% from last year. Stocks of pork bellies were down -27% from last month and down -8% from last year. Total frozen poultry supplies on May 31, 2020 were down -5% from the previous month and down -4% from a year ago. Total stocks of chicken were down -8% from the previous month but up +3% from last year. Total pounds of turkey in freezers were up +1% from last month but down -15% from May 31, 2019


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