Weekly Market Recap and Tom's Take July 10, 2020

Grain Cornfield Wlandus Cooperative 2016

September corn futures lost 11 1/2 Friday, ending at $3.37 1/4, down 6 1/4 from last Friday’s close. December corn was down 12 1/4 to end at $3.44 3/4, losing 8 3/4 week-on-week.

August soybeans were off 9 1/4 today, closing at $8.87 1/4, losing 4 for the week. November beans lost 10 3/4, ending at $8.90 3/4, down 6 for the week. 

The big story this week was mostly about the WASDE report issued Friday at 11 AM. While the Ending Stocks for the 2020/21 corn crop dropped significantly, they were pretty much in line with expectations. They knocked off 675 million bushels, while the average expectation was closer to a reduction of 640 million. The problem was that they increased Ending Stocks for 2019/20 by reducing feed demand by 100 million and reducing ethanol usage by 50 million. So, we’re now looking at a carryout to use ratio for the current year of 16.5%, and then 18.1% next year. These numbers aren’t records, but back to back, they will keep a damper on corn prices without some major damage to the crop due to weather the balance of the growing season. That’s the other big story that we’ve been watching this week, and it will take on even more importance over the next week to 10 days. 

For soybeans, the changes were not as dramatic, but they are significant, none the less. Ending Stocks for 2019/20 grew by 35 million, which at first glance seems odd since they increased crush by 15 million and left exports unchanged. However, they reduced “residual” demand by 50 million. This is their “catch-all” category. For new crop, they increased Ending Stocks by 30 million, by increasing supply, mostly because of bushels carried in from this year. Production was only up 10 million, and crush is also increased another 15 million next year.

For more items impacting the market this week, tune into our free weekly Bull Bear Banter podcast: https://landuscooperativeexperience.podbean.com/.

Tom’s Take:

Friday’s WASDE report brought the market down at the end of the week. Obviously, the adjustments made were more bearish for corn than soybeans. But, neither produced much, if any, good news. However, I’d like to take a little wider view of the entire situation at the end of today, instead of just focusing on today’s report and subsequent market reaction. 

Let’s go back to the day before the USDA’s June 30th report, just last week. We’re still higher now than where we were then. December corn is right at a dime higher, and November soybeans are almost 30 cents higher since then. On July 1st, corn was up almost 30 cents from June 29th and soybeans hit their most recent high this past Monday, when they were more than 50 cents higher than the 29th, exactly one week earlier. I’m not suggesting we’re going back there any time soon. But, I do hope you made some sales during this time period. I know that many of you did, just from seeing the offers that were triggered in our system over the past week. To me, it just feels like these spikes and pricing opportunities are getting shorter all the time, which is another great reason to use an offer. 

So, where do we go from here? The main focus the of rest of the growing season is going to be more about the weather than anything else. If we see another spike in prices over the next couple of weeks, get some more New Crop sales on the books, whether for Harvest or after the first of the year. 

There are already some people talking about the next growing season and citing La Nina. A quote I read today from Reuters says, “Traders may want to be on alert earlier than usual over the forecast for a possible La Nina later in the year because although drought does not accompany every episode, some crop-growing regions that are more likely to be negatively affected by La Nina are already dry.” It specifically mentions Argentina and Kansas. This may give us an opportunity or two to price some bushels for Harvest of 2021. I realize that today’s WASDE reduced Ending Stocks for corn, but they are still talking about almost 2.65 BILLION bushels for the 2020/21 crop. That is not going to send us back to $4 corn anytime soon. Just stay on your toes and make some sales when the opportunity presents itself. 

Agree? Disagree? Let me know your thoughts: Tom.Guinan@LandusCooperative.com