Sept corn down 2 ¾ at $3.255
Nov beans down 6 ¾ at $8.9325
The DOW is up
USD is weaker
Crude oil up $1.11 at $41.92
Corn bulls are disappointed by the USDA leaving weekly crop-conditions unchanged at 69% rated GD/EX vs. 57% last year. Bulls perhaps most surprised by Indiana being left “unchanged” at 59% rated GD/EX as Ohio conditions slide -4% to just 43% rated GD/EX. Others states showing deteriorating conditions include Nebraska down -4% to 66% rated GD/EX vs. 77% last year; and Iowa down -3% to 80% rated GD/.EX vs. 63% last year. The USDA also showed 59% of the U.S. corn crop as “silking” and 9% in “dough” which are both running ahead of schedule. In other words, more than half the U.S. crop was assumed to be in its highly important pollination stage the past few days. The areas that got extreme heat without the rainfall will be seeing some drag. Keep in mind, in 2018 the USDA had U.S. weekly crop-conditions rated at 72% GD/EX, (Iowa was rated 78% GD/EX) and that crop ended up with an average yield estimate of 176.4 bushels per acre vs. the USDA’s current yield forecast of 178.5 bushels per acre. There’s more and more talk circulating inside the trade each day about the Chinese trying to desperately battle “food inflation” and the recent heavy rains that have caused major flooding disasters. Form what I’m understanding, this is the worst flooding in China in over 30-years. As many as 35 rivers have reached record highs, while flood alerts have been issued for a total of 443 rivers, according to a release by China’s Ministry of Water Resources.
Soybean bears are pointing to the USDA’s unexpected improvement in weekly crop-conditions from 68% to 69% rated GD/EX vs. just 54% of the crop rated GD/EX last year. Bears are quick to point to 2018 when 69% of the U.S. crop was rated GD/EX and produced an average yield of 50.6 bushels per acre. Conditions deteriorated in Iowa -4%.
Cattle markets start off on a quiet note this week with limited fresh news and still stale fundamental developments. Several things to keep in mind this week, cattle on feed and cattle inventory reports are due out this Friday after the close. Cattle on feed estimates are a bit choppy as we regionally separated ourselves into a couple of setups regarding on feed numbers and pace of marketing. Thus far, we have put our eyes on a handful of industry estimates ranging from 90-102.2% of last year’s on feed for July 1, 95-109% of last year for placements in June and 100-112% of last year for marketing’s in June. Cattle inventory report estimates are a little harder to come by these days as the report is not covered as well by analysts. Having said that, the inventory report is watched closely by non-commercial traders as a longer-term indicator of market direction. We would expect numbers to continue to tighten as the cattle cycle begins to roll over following a period of expansion. Moving on to some market metrics, total open interest is moving higher but remains very low relative to history. Open interest including options is 318,227 and without options is 274,206. Commercial traders have been fairly inactive over the past few weeks outside of some tepid hedging on the recent rally. Some liquidation out of the non-commercial short has been noted and would expect we begin to see the non-commercial long building in the coming weeks. We are currently in an interesting situation where hedgers find themselves compelled to sell breaks and buy rallies for fear of missing the rally. Similarly, spec buying is met with very little hedge paper thus allowing the market to rise rapidly. Cash was ever so slightly higher last week on lighter volume. The bias is that cash will be higher yet again this week and the north will maintain a premium over the south for reasons discussed in previous writings. Futures are in an uptrend and have now taken out the sideways channel. There remains risk in the markets and many consistent hedgers will and should view the increase in prices as an opportunity. However, just judging by the longer-term technical outlook we have more upside potential. Continue to view the market both logically and strategically. Good business decisions rarely land us in trouble and remember seven days without beef makes one weak. Trey Warnock – Amarillo Brokerage Company
Chevron says it’s buying oil and gas producer Noble Energy for about $5 billion in stock, the first big energy deal since the coronavirus crisis crushed global fuel demand and sent crude prices to historic lows. Chevron ended the first quarter with a cash pile of $8.5 billion after withdrawing a $33 billion bid for Anadarko last year and then being among the first big oil companies to slash spending during the downturn. The purchase boosts Chevron’s investments in U.S. shale, and gives it Noble’s flagship Leviathan field off the shore of Israel, the largest natural gas field in the eastern Mediterranean. Including the company’s debt pile, the deal is worth roughly $13 billion. Chevron is paying a “moderate premium” reflecting a cautious outlook for oil and gas deals, said Andrew Dittmar, senior M&A analyst at data provider Enverus. Noble shareholders will own about 3% of the combined company, after the deal closes, expected in the fourth quarter.
Steve Meyer said the pork industry is in the midst of the largest economic hit he has ever seen in his 30 years as a hog industry analyst, including the terrible slide in prices seen in 1998 and another in 2009. Meyer, an economist with Kerns & Associates, said during a briefing hosted by the National Pork Producers Council (NPPC) on Monday afternoon that the devastating impact of COVID-19 on the market and mass euthanasia of hogs is “not close to over.” Meyer says the backup could reach as many as 2.5 million hogs by the end of the year. According to his analysis, based on lean hog futures prices on March 1 and July 10 and actual hog prices in the interim, potential 2020 revenues from hog sales have been reduced by roughly $4.7 billion. Other losses associated with euthanasia, disposal and donation of pigs with no market outlet and insufficient space to hold them meant that U.S. pork producers have lost nearly $5 billion in actual and potential profits for 2020. He said it appears that those losses will continue into 2021.(Feedstuffs)