Markets Wait for the Coming Heat

Good Morning from Allendale, Inc. with the early morning commentary for July 15, 2020.

Grain Markets stabilized overnight after falling from improved weather forecasts. So far, the change in the weather has more than offset increased buying interest from Chinese importers.

Temperatures will still warm into the weekend. Des Moines, Iowa will see 95 on Saturday. However, expectations for next week have been reduced. The main area we are monitoring for rains ahead will be Central and Western Iowa.

Traders note gaps on charts still suggest some minor upside targets. From Sunday night’s gap lower opening December corn has a gap from 342 – 343 3/4. For November soybeans it runs from 886 3/4 – 887 1/2. There are no immediate upside gaps on the wheat charts.

Allendale’s corn yield model indicated last week’s forecast change, which continues today, has resulted in a minimum of a 5% production change in potential yield. In recent days, we estimate a minimum of 750 million bushels has been added back in to the market’s perception of supply.

Chinese buyers purchased 1,762,000 metric tonnes of US corn for new crop delivery. That was the fourth largest one-day purchase of all time. Purchases up until July 2 have been relatively minor at 1,761,769 tonnes of old crop and 819,000 tonnes of new. Three separate overnight sales announced after that period totaled 765,000 tonnes of old and 2,566,000 new. Every one million metric tonne equals 39.4 million bushels.

EIA weekly Petroleum Status Report will be released today at 9:30 Central. The previous week’s report showed ethanol production at only 12.7% under last year and gasoline demand (product supplied at 10.1% under).

NOPA crush will be released today at 11 am Central. The trade expects still-raging levels of domestic processing at 162.168 million bushels. This would be 9.0% over last year, and a new record for any previous June. USDA’s most recent old crop Sep ’19 – Aug ’20 estimate calls for 2.155 billion bushels of domestic crushing, 3.0% over last year. Many analysts suggests this remains too low. This new June estimate would put Sep – Jun usage at 3.9% over last year. Allendale sees USDA too low by 14 million bushels.

The president’s Tuesday afternoon press conference won’t be seen as improving relations with China. He noted Hong Kong would no longer be receiving special status under US law. Speaking to CBS news, he also noted he did not want to discus a phase 2 trade deal due to their COVID-19 handling problems.

July grain futures expired Tuesday with only passing interest from the trade. During the entire delivery process there were 0 notices issued for corn, 0 for soybeans, 490 for soymeal, 3,415 for soyoil, 751 for Chicago wheat and 288 for KC wheat futures.

July lean hog futures expire today at noon. They will be the cash-settled to the Lean Hog Index, a two-day weighted average of cash hog prices through today. The LHI through Monday’s cash hog trading will come to 46.08. Cash hogs in the past three days have been on an upswing. Futures imply it will be 46.80 after two more cash hog trading days.

US protein exports show differing importance of Hong Kong. 2019 US pork exports to mainland China ran 1.013 billion lbs. compared with only 54 million lbs. for HK. US beef exports to mainland China last year totaled 32,098 lbs. vs. 231 million for HK using the ERS converted dataset.

Sale barn action has been especially strong of late. Monday’s Oklahoma City trade found cash feeders only 1% under last year. Calves were running 2% over.

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