Morning Highlights
Morning Highlights

Joe Lardy

Jul 24, 2020

Grains

US State Department orders China to close their consulate in Houston, TX. Several Chinese companies were slapped with sanctions over human rights violations. In retaliation, the government in China is ordering the US to close its consulate in Chengdu amid ongoing diplomatic tensions. USDA has paid out $6.2 billion under the CFAP [assistance program] for cattle, hog, dairy, sheep producers. Grain and specialty crop producers make up a lesser amount of recipients.

Corn

The International Grains Council lowered world corn production estimates from 1.172 billion to 1.164 billion tons. US corn was cut nearly 12 mil tons to 380.8 mil. This week’s Chinese corn auction price for government reserve stocks equated to $7.32/bushel.

Corn inspections were very solid this week. Inspections were above 1 million tons for the 5th straight week. Inspections are behind the USDA export pace by 95 million bushels, but the gap is narrowing nicely. The corn good/excellent rating held steady at 69%. Weekly ethanol production was down 23,000 bpd to 908,000 bpd.  This was the first decline in 12 weeks.  Stocks were 807,000 barrels lower at 19.8 million barrels.  This is the smallest inventory since December 2016.  Net margins crashed 26 cents to just 6 cents per gallon. Weekly export sales were beneath expectations for old crop and in-line for new crop.  Total combined sales were the largest this year. Old crop sales were 8.7 million bushels, keeping commitments 12% behind last year.  Total commitments are 1.72 billion bushels and are on pace to meet the USDA forecast for 1.775 billion bushels.  New crop sales were a huge 91.6 million bushels which included last week’s China’s largest single-day US corn purchase on record.  Total new crop commitments are 302.7 million bushels compared to 147.5 million bushels last year.  New crop commitments are the biggest in seven years for mid-July and the fourth highest on record.

 

Wheat

The International Grains Council lowered world wheat production estimates 6 mil tons to 762 mil. EU wheat down from 128.4 to 125.6 mil tons. Russia down 1 mil to 78 mil tons. US from 51.1 to 49.6 mil tons. Egypt’s GASC tendered for milling wheat and bought 115,000 tons of Ukraine wheat offered for Aug 21-31 shipment. Russian wheat cargoes are starting to ship for Brazil. Trade sources estimate 3-5 cargoes in total are on the books. China is planning to start auctions for government reserves of wheat and rice. Recent flooding in southern China is a growing concern. 

The US HRS virtual wheat tour begins next Tuesday, July 28th. Weekly export inspections for all wheat totaled 18.4 mil bushels. Three boats of wheat loading for China last week. Wheat harvest was at 74% complete vs the 5 year average of 75%. The national good/excellent rating for spring wheat held steady at 68%.

 

Soybeans

IGC world soybean output is projected marginally higher at 365 mil tons, up from 339 mil last year. Celeres grain consultants projecting Brazil 20/21 bean crop at 130.8 mil tons, in their first estimate for next year. 

Weekly export inspections for beans totaled 16.6 mil bushels.  Current marketing year to date totals are 1.407 mil bushels versus last year at 1.443 mil. The soybean good/excellent rating improved 1% to 69%. Weekly export sales were on the low end of estimates for old crop and exceeded expectations for new crop. Combined sales were the highest of the year and since 2018.  Old crop sales were 13.4 million bushels, bringing total commitments to 1.71 billion bushels.  This is just 4% behind last year. 

Livestock

Cash cattle traded slightly higher this week. The cattle on feed report was slightly friendly as placements at 102% were below estimates of 103.6%.  Packer margins are still very robust at $255/head.

Energy

Support in the market stems from a weaker U.S. dollar, as the dollar is trading at the lowest levels seen in 22 months. The market is currently keeping a close eye on the developments of Tropical Storm Hanna which had recently strengthened into a tropical storm late yesterday. Iraq was seen as the top oil supplier to India in June, replacing Saudi Arabia who used to hold the spot as top supplier. Iraq was seen supplying about 1.1 million barrels per day to India. The CME has announced that they will be lowering margins for NYMEX crude oil futures by 8.8%, which will go into effect after the close today. The current national average price of retail gasoline according to AAA is $2.187. Prices a month ago at this time were $2.131 while prices a year ago were running at $2.767.