Market Commentary 7/31/2020
Jul 31, 2020
Grain/Soy markets continue to focus on the nearly PERFECT weather for most of the US. Call US corn yield 176.5 to 179 (maybe even 181), with beans somewhere between 50 and 52. So the production side looks intact for the time being. Perhaps old Chip Flory can get a modest rally with some nasty #tipback pics on #PFTOUR20 twitter, but I would not hold my breath. As far as a state by state corn yields go: MN is going to be a record, SD should be a record, IA might be close to a record, and we don’t see why God’s Country (ND) can’t get a record yield on the crop that got planted. Outside of these record crops, we do not see any major holes in the corn crop from Kansas to Pennsylvania.
The US has had some BIGDOG corn sales to China in the last 3 weeks and what do we have to show for it? High shuttle freight prices and $3.25 CZ20 futures. The problem is even with a 2.6 -2.8 Billion CORN EXPORT number the balance sheet is still burdensome. The other issue is while we have seen some BIDS for corn to China the simply giant export announcements appear to be COFCO US selling to COFCO China – no one knows if they are going to execute.
Beans should continue to move as we are the cheapest nearby bean until probably Dec/Jan? Processors feel decently covered until Sept – not sure how much of a book they have on but given the increase in Crush margins, we would expect them to be on the hunt for beans. Looking forward to new crop – the yields probably will be too good to get anything resembling a real story, but we will be watching carefully to see if anything develops.
In the wheat complex, you have a variety of issues:
1. Spring Wheat yields seem to be intact from Montana to Minnesota, so we do not see any production surprise out of the north.
2. The increase in shuttle freight means it is going to be tough for any HRW (KC) to be exported given how cheap Black Sea wheat is.
3. Given the extreme spread between CHI wheat and Corn for 2021 expect to see more acres being planted in the eastern belt next year.
Have a good weekend!
Grain Team – Aaron, Connor, Dallas, Hank, James, Jenna, Joel, and Kevin