Weekly Market Recap and Tom's Take, June 19, 2020

Corn into Cash Ag Nook money

MARKET UPDATE:

July corn futures gained 1 1/2 Friday, ending at $3.32 1/2, up 2 1/2 from last Friday’s close. December corn gained 2 1/2 ending at $3.45 1/4, which is 2 1/4 higher week-on-week.

July soybeans were up 3 1/2 today, closing at $8.76 1/2, gaining 5 1/4 from last Friday. November beans closed up 4 3/4 at $8.80 3/4, up a penny for the week.

This week had a lot of stories competing for the big story of the week. We started with Monday afternoon’s crop ratings being a little disappointing, but with rain in the forecast for late week and through the weekend, the market really never reacted much. Throughout the week, there were various stories and rumors of Chinese interest in everything from soybeans and wheat to corn and ethanol. A tweet from the U.S. secretary of state Thursday night confirmed that there was a meeting in Hawaii between representatives from both the U.S. and China. And while that was enough to turn the overnight trade from negative to positive, it again failed to really ignite the market. Prior to that post on Twitter, markets were slightly lower due to beneficial rains moving across the Midwest. This morning brought reports of anywhere from 1/4 of an inch to 2 plus inches and more on the way. There were also some reports of straight-line winds in parts of NW Iowa yesterday late afternoon. All in all, optimism prevailed as we closed a little higher today and for the week.

For more items impacting the price of corn and soybeans, check out our free weekly podcast: https://landuscooperativeexperience.podbean.com/

Upcoming Events:

  • June 30th will bring a couple of important USDA reports. We’ll see an update on acreage numbers as well as the quarterly stocks report. 
  • Our next major holiday, July 4th, is only 2 weeks away.
  • July 10th is the next WASDE report from the USDA. 

Tom’s Take:

Last week, I spent some time discussing ending stocks for 2020/21 and how I’ve tried to envision a pile of corn that equals something more than 3.3 billion bushels. The next largest carryover estimates during the past 30 years, was in 2016/17 when we finished with a bit less than 2.3 billion bushels. So, we’ll be creating an extra “billion” bushels of ending stocks in the next year. 

This week, I thought it might be a good idea to explore how the USDA got to that large number. Starting with the production side of the equation, the 97 million acres estimated by the USDA in March isn’t a record, but if accurate, it would be the 2nd largest. They have 89.6 million plugged in as harvested acres, as well as a yield of 178.5 bu./acre. Both of these would be records, as well as total production of 15.995 billion bu. When you combine that with the expected carryover from the current crop year, it’s expected to be just over 18 billion bushels of total supply, which would also be a record, by that same “extra” billion bushels, as both 2016/17 and 2017/18 had a total supply just under 17 billion. 

On the demand side, none of the individual categories would become a record on their own, but the total of all of them would be, both domestically, and in total. U.S. feed usage, as projected, would be just over 6 billion bushels, and slightly behind the record years of 2004/05 and 2005/06. The Food/Industrial/Seed category is projected to be the 5th largest, primarily due to continued issues for ethanol production, at least to start the year. Exports are expected to climb next year, but will only be the 4th largest in the past 15 years. 

It’s when I add up all categories, that I realize how aggressive the total usage number is. At 14.8 billion bushels, it just beats out a couple of previous years (2016/17 and 2017/18). However, this is an “extra” billion more than the current year. 

Another item that really jumps off the page, compares ending stocks to usage. Currently estimated at 22.45% of use, you’d have to go back to 1992/93 to find a larger number. This is the one that really concerns me. What if production is somewhat better than expected? What if usage is somewhat less than expected? We will know more about the acreage numbers on June 30th, but the demand side will be somewhat in flux for a while, especially as we wrap up this crop year at the end of August. 

I’ve been expressing my concern about the current price of corn for a while now, and I continue to believe that it will erode as we get closer to harvest this year. The above information makes me even more confident that, even though prices don’t look great right now, they might be the best we will see for quite some time. I continue to say that June is the time to finalize old crop sales. And if you haven’t already, now is also a good time to get some new crop sales on the books. And while I am at it, look at pricing some corn for harvest of 2021, as the December futures for that year are nearly 30 cents higher than this year.