Midwest Marketing Solutions
China’s trade with U.S. sees growth
China has regained its position as the number one trading partner for the United States. Trade between the two countries approached $40 billion in April. That’s up nearly 43 percent from March. The Chinese purchases of U.S. soybeans have ramped up over the past two weeks with another 120,000 metric tons of soybeans purchased Friday. More than half of the recent Chinese purchases have been for the marketing year that begins in September.
Packing plants near average capacity
Packing plants are approaching pre-COVID levels. USDA says beef and poultry processors are operating at 98 percent of their average capacity. Pork plants are running at 95 percent capacity. In making the announcement, Agriculture Secretary Sonny Perdue praised farmers and ranchers, meatpacking workers, the companies and local authorities for getting the plants back up and running.
A Herman, Minn., farmer is charged with federal conspiracy to defraud the CHS Inc. elevator at Herman, Minn. Bryan Dallas Crandall is charged with conspiring with former elevator workers to pay him for more grain than he delivered from 2013 to 2017. Crandall separately is a defendant in a Traverse County, Minn., case of taking advantage of a vulnerable adult in a farmland transaction. The government is seeking up to $355,517.46 in a money judgment and a right to other forfeitures. Crandall is awaiting a July trial in a separate state case where he is accused of cheating a vulnerable adult in a farmland deal in nearby Traverse County.
Corn closed the week $.02 1/2 higher. Last week, private exporters did not announce export sales.
In the weekly export inspections report; U.S. corn exports, for the week ended 6/11/20, were an 8-week low at 35.8 million bushels and coming below the average weekly “needed” pace to reach the USDA’s 1.775 billion bushel export projection, which is thought to be 41.1 million bushels/week. This is the first time in seven weeks in which exports failed to meet/exceed the needed pace. Cumulative export inspections of 1.204 billion bushels (bb) are still down 25% from last year’s 1.609 billion, but continually gaining, with the USDA’s annual export target reflected an expected 14% decline in exports on the year.
In the weekly crop progress and conditions report; U.S. corn crop conditions fell 4% to 71% good/excellent versus 75% expected, 75% last week and 59% last year. Iowa declined 2% to 83% good/excellent with the biggest loss in Nebraska, which fell 12% to 71% good/excellent while other notable states of Illinois down 2% to 63%; South Dakota 5% lower to 77%; North Dakota down 5% to 72% and Minnesota improved 1% at 84% and Missouri up 2% to 63%. 95% of the nation’s corn crop is emerged.
Informa lowered U.S. 2020 corn acres 2.9 million to 94.1 million versus USDA 97.0 million. Crop size of 15.405 billion bushels versus USDA 15.995 billion bushels.
In the weekly EIA report; U.S. ethanol production, for the week ended 6/12/20, only saw a minimal increase to 247 million gallons/week from 246 mil gal/week the week prior, easily the smallest weekly increase since the recovery got underway from the COVID-low week the week of 4/24/20. This week’s ethanol production was still a substantial 22% below last year’s same-week production of 1.081 million bpd (318 mil gal/week) and while it was the lowest year-over-year deficit in 11 weeks, the fact remains the recovery in ethanol production continues to run well short of the USDA’s expectation for 2019/20 corn for ethanol usage to total 4.900 billion bushels. U.S. ethanol stocks continue to move lower, with another 19 million gallon draw-down posted in the latest week, the 8th consecutive weekly decline in stocks, totaling 266 million gallons over the period. From the 4/17/20 peak of 1.163 billion gallons, ethanol stocks have declined 23% to this week’s 897 million gallons (21.346 million barrels) and are now 11 million gallons below last year’s same-week stocks of 908 million gallons.
Strategy and outlook
The COT report remains bullish with commercials holding a large net long position and some short covering has rallied the market and funds have covered some short positions. Seasonal highs are due and producers should look to sell multiple years of production.
Soybeans closed the week $.03 3/4 higher. Last week, private exporters announced sales of 390,000 mts of soybeans to China for 2020/21.
In the weekly export inspections report; U.S. soybean exports last week of 13.8 million bushels, were again below the current average “needed” pace of roughly 21.9 million bushels in order to reach the USDA’s export projection, the 7th consecutive week in which exports failed to reach the “needed” pace. The USDA’s 1.650 billion bushel export projection continues to appear to be in jeopardy as China only has roughly 2.5 million metric tons (MMT) in old crop sales on the books at this time versus 6.3 MMT last year in early June. Cumulative export inspections of 1.327 billion bushels are holding onto a slim 1% gain from last year’s 1.310 billion.
In the weekly crop progress and conditions report; U.S. soybean crop conditions were unchanged at 72% good/excellent versus 72% expected, 72% last week. Last year, the soybean crop was not yet rated. Iowa was unchanged at 82%; Minnesota unchanged at 84% and Missouri improved 2% to 58% good/excellent; meanwhile Illinois lost 3% to 64%; Nebraska lost 4% to 78%; South Dakota lost 6% to 78% and North Dakota lost 1% to 74%. U.S. soybean planting is 93% complete versus 94% expected, 86% last week, 72% last year and 88% average. 81% of the nation’s crop has emerged.
Informa raised U.S. 2020 soybean acres 2.0 million to 85.5 versus USDA 83.5 million with a crop of 4.324 bb vs USDA 4,125 bb.
The monthly NOPA crush report was below expectations but still an all time record for May. The NOPA crush report saw crush at 169.584 mb, below estimates of 173.1 mb and down from last month’s 171.8 mb but well above last year’s 154.8 mb crush. Oil stocks are 1.880 billion pounds vs. 2.068 billion estimated, down from last month’s 2.111 billion pounds but well above a year ago of 1.581.
Strategy and outlook
Soybeans are getting close to weekly chart resistance at a time when seasonal highs normally occur. A rally into resistance must be sold by producers. Producers should rid themselves of old crop and hedge new crop production.
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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