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Midwest Market Solutions

By Staff | Jun 22, 2020

Antitrust violation investigations

The Justice Department is investigating the major beef packers for possible antitrust violations. Civil subpoenas have been issued to JBS, Tyson Foods, Cargill and National Beef Packing. Earlier this year, Agriculture Secretary Sonny Perdue said the Agriculture Department would extend its oversight into price disparities between live cattle and box beef.

AgSurion Risk Consulting

The Russell Consulting Group has been fully integrated into CHS Hedging and renamed AgSurion Risk Consulting. The new name is part of the scheduled transaction agreement between Russell Consulting Group founder Moe Russell and CHS Hedging. CHS Hedging’s predecessor Country Hedging acquired partial ownership of Russell Consulting in 2007 and CHS Hedging assumed full ownership two years ago.

Corn analysis

Corn closed the week $.02 1/4 lower. Last week, private exporters did not announce export sales.

In the weekly export inspections report; U.S. corn exports, for the week ended 6/4/20, were 43.3 million bushels. While corn exports will need to continue at a rather solid pace of roughly 40.8 million bushels/week through the end of August to reach the USDA’s annual projection, notably stronger than last year’s 22.9 million/week average from the point forward. Cumulative export inspections of 1.166 billion bushels are down 26% from last year’s 1.582 billion, but continually gaining after being down more than 50% at the start of 2020. The USDA’s annual export estimate reflects an expected 14% decline on the year.

In the weekly crop progress and conditions report, U.S. corn crop conditions rose to 75% good/excellent versus 75% expected, 74% last week and are well above the 59% last year. Iowa remained at 85% good/excellent, Minnesota stayed at 83%, while Nebraska increased 1% to 83% and Illinois jumped 9% to 65% g/e. U.S. corn planting is virtually done at 97% complete versus 97% expected, 93% last week, 78% last year and 94% average. Roughly 3.2 million acres of corn remains to be planted based on the USDA’s March 31 Prospective Plantings report estimate vs 6.0 million which would have been left to plant based on an average planting pace. Corn emergence is 89% nationwide versus 84% on average.

In the weekly EIA report; U.S. ethanol production, for the week ended 6/05/20, rose for the sixth consecutive week to 246 million gallons/week from 225 million gallons/week the week prior and represents a 56% increase from low production week in late April. This week’s ethanol production was still nearly 24% below last year’s same-week production of 322 mil gal/week. Corn used for ethanol was 84.3 mb vs. 77 mb last week and 109.3 mb last year.

A mostly benign supply/demand report was last week. One year ago, the USDA lowered corn yields by a whopping 10 bpa; this year, yields were unchanged. The USDA raised 2019/20 ending stocks by 5 mb to 2.103 bb and increased the 2020/21 carryout to 3.323 bb. Ethanol use for 2019/20 was lowered 50 mb and exports were left unchanged while production was reduced as yield was lowered by .4 bpa to 167.4 bpa resulting in 46 mb less production. The USDA did not make any changes to the new crop corn balance sheets.

Strategy and outlook

The COT report remains bullish with commercials holding a large net long position and the large speculative funds the largest net short position in history. Short covering remains the most bullish prospect for a rally with June and July weather possibly turning hot and dry, giving the market a reason to rally and funds to cover short positions. If this happens this month, sell multiple years of production.

Soybeans analysis

Soybeans closed the week $.03 3/4 higher. Last week, private exporters announced sales of 720,000 mts of soybeans to China and 120,000 mts of soybeans to an unknown destination.

In the weekly export inspections report; U.S. soybean exports were disappointing at only 7.8 million bushels, well below last year’s 27.0 million bushels and were a new marketing year low. This is well below the roughly 23.6 million bushels/week estimated soybean exports need to average through the end of August in order to reach the USDA’s 1.675 billion bushel export target. Cumulative export inspections of 1.309 billion bushels are up only 2% from last year’s 1.285 billion after being up 12% in early March.

In the weekly crop progress and conditions report; U.S. soybean crop conditions improved 2% to 72% good/excellent versus 71% expected and 70% last week. Iowa improved 1% to 82%, Minnesota was unchanged at 84%, Nebraska unchanged at 82% and Illinois jumped 11% to 67% g/e. U.S. soybean planting 86% complete versus 87% expected, 75% last week, 54% last year and 79% average. Roughly 12.3 million acres of soybeans remain to be planted based on the USDA’s March 31 Prospective Plantings report estimate vs 18.0 million which would have been left to plant based on an average planting pace. National emergence is 67% versus 61% on average.

In the monthly supply/demand report; the USDA report saw 2019/20 soybean production lowered by 5 million bushels and exports lowered by 25 million bushels with crush increased by 15 million bushels. This resulted in 5 million bushel increase in old crop stocks. For 2020/21 soybeans, crush increased 15 million bushels. 2020/21 ending stocks were lowered 10 million bushels from an increase in the crush. Exports were left unchanged for 2020/21.

Strategy and outlook

Soybeans have rallied off technical resistance as soybean sales improved over the last week. Part of the sales were for old crop marketing year and the majority for the new crop marketing year. A rally into resistance must be sold by producers.

This material has been prepared by a sales or trading employee or agent of Midwest Market Solutions and is, or is in the nature of, a solicitation. This material is not a research report prepared by Midwest Market Solution’s Research Department. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Midwest Market Solutions believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such.

Brian Hoops can be reached at (605) 660-1155.

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