This Week in Commodities 7-10-20

Weather overshadows WASDE.

A mammoth corn sale to China and lower than expected ending stocks found no footing in the corn market today, as front month corn futures tumbled 12-1/2 cents. For the week, September futures lost 6-1/4 cents to close at 337-1/4. December futures lost 8-3/4 cents this week to close at 334-3/4. USDA WASDE US corn stock numbers released Friday came in a hair below trade guesses for both old and new crop. Incorporating the revised 92 million acres of corn planted and a slight cut to 2020/21 feed and residual demand brought new crop ending stocks down to 2.65 billion bushels. This was down substantially from USDA’s June estimate of 3.32 billion. After the USDA’s data dump at 11 AM CST, the market returned to watching weather forecasts in anticipation of this weekend’s weather. New forecast maps released at noon today pointed to cooler and wetter conditions for most of the Corn Belt in the week ahead. This was contrary to what weathermen had been predicting given weather models all week long.

China made its largest daily corn purchase from the US in 26 years on Friday morning. The purchase of 1.36 million metric tons was the largest purchase since December 20th of 1997. The Chinese government held yet another auction from its state corn reserves this week. 4 million tons were sold this week making it the seventh straight week that the amount offered has been sold. Since the auctions have started on May 28th 28 million tons of corn have been sold from state reserves. This exceeds the 2019 total of 22 million tons auctioned. In a separate statement, the Chinese government announced it will yet again hold an auction next week of another 4 million tons.


Soybeans close lower this week.

Soybean futures fell late in the day on Friday after President Trump said he is not currently thinking about negotiating a “Phase 2” trade deal with China as relations between the US and China sour over the coronavirus pandemic and other issues. For the week, August soybeans were 4 cents lower to close at 887-1/4. November soybeans were 6 cents lower this week to close at 890-3/4. Along with President Trump’s comments, a wetter weather forecast and larger than anticipated soybean ending stocks also helped push prices lower. Both old and new crop soybean ending stocks came in above what the trade was expecting prior to Friday’s WASDE report. An increase of 2 million tons to Brazil’s 19/20 crop also helped push world soybean ending stocks above pre-report trade estimates.

All in all, price action this week was not awful for the soybean market. With a test and close above the 100-day moving average, the macro trend looks to still be at least somewhat higher. Although President Trumps comments on the surface look non-supportive, the details of the Phase 1 deal cater primarily to the US agricultural markets. The trade will continue to watch for Chinese soybean purchases in the coming week,s but more importantly weather will dictate price action as we head towards August.


Wheat blasts higher.

Wheat futures had a monster week across the board with all three wheat classes finishing at least 15 cents higher. September Chicago wheat futures were 42 cents higher this week to close at 534. September KC wheat futures were 18 cents higher this week to close at 452. September spring wheat futures were 16 cents higher this week to close at 526-1/4. On Friday’s report, US wheat production came in smaller than what the trade was expecting and 3% lower than in June based on lower prospects for winter wheat. At 1.824 billion bushels, the 2020/21 US wheat crop would be the smallest in 3 years. Winter wheat yield reports continue to be mixed across the US. Freeze damage early on in the growing season seems to shoulder much of the blame..


Blocks Continue to Break Higher

The price action in the spot market markets was mixed this week between the various products. But the cheese market continues to run full steam ahead, as it added 8.25 cents to the block/barrel average this week. The spread between the block/barrel average had gotten to a new record of over 50 cents as the block market charges ahead and the barrel market slows down. Whey broke support of $0.30/lb this week finishing at $0.285/lb and looks to be negative for the market. Butter also struggled losing 4.75 cents on the week to finish at $1.69/lb. Powder prices finished the week slightly higher as $1.00/lb continues to provide support for the market.

The July to December average for 2020 made new all-time highs this week finishing above the $20.00 level. The primary push has been from the July and August contract moving higher as spot cheese prices remain elevated. Futures are starting to look overbought to end the week as longer-term technical indicators are near their maximum levels. The spread between class III and IV on the July contract is now over $10.00, an astounding record.


Lisa Heder

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