Weekly Market Recap
7/14/2017 3:55:27 PM
Extended forecasts are showing above average temperatures across the entire corn belt. The market was trading the weather earlier this week but the WASDE report put a temporary detour in place. The market should get back to trading weather next week.
Brazil is expected to export near record amounts of corn this year. Last year they set the current record and with another huge crop, exports are expected to remain robust. The market’s focus this week has been on the weather and the WASDE report. The weather has been warm and mostly dry and pollination in the key areas should start next week. Carryouts were larger than expected in both the old crop and new crop. The USDA chose not to adjust yields in the July report which kept production levels high. World stocks were also on the high end of estimates adding additional pressure on the market.
There is still major concerns about the spring wheat crop. The main growing areas are North Dakota, Montana, and Minnesota. MT and ND have the biggest areas of extreme drought on the latest drought monitor data. Many spring wheat producers are bailing up the wheat or turning cattle out to graze it as that is the only way to get anything out of it. Temperatures are expected to be around 100 degrees this weekend in the hardest hit areas. The latest WASDE report was a bit bearish. Large world stocks and weakness in the row crops weighed on wheat. Even though acreage and yield forecasts were lowered, domestic ending stocks still grew with a reduction in demand.
China imported 7.7 million tons of soybeans in June. This number was well below expectations and has the market very nervous that a slowdown in China could have a big negative impact on prices. Villagers along Brazil’s key grain artery highway 163, have been staging protests by blocking traffic on the road. They are trying to protect the forests in the area. This has greatly reduced the flow of soybeans to northern ports.
Cash cattle was trading around $120/head this week which was up from the $117-$119 level from last week. Cutout value were off sharply from $219 last week to $209 today. This weakness in boxed beef has cut packer margins down from $207 to $175 this week.
Oil prices traded higher this week even though OPEC data showed that production had increased in June. Prices were also boosted by big draws in crude oil stocks. Commerzbank says oversupply is on the horizon if OPEC countries boost production when cuts expire next spring. Without deeper cuts global stocks will remain robust as we move into 2018.