Weekly Market Recap


Grains

The government announced the second round of farmer assistance called Market Facilitation Payment 2. (MFP2).  Payments ranged between $15 to $150 per acre and is based on the county.  Cotton producing counties received a better payment than row crop counties.  The first portion of the payment will be paid to producers in mid to late August.  If market conditions warrant, the 2nd portion will be paid in November and the 3rd in January.  The disruption of trade due to tariff war has caused a couple of the major players in the grain industry to either stop trading with China or rethink their approach to the global market.  China approved several companies to buy US cotton, corn, sorghum, and pork, all with no tariffs. This was done ahead talks that will take place next week in Shanghai.

Corn

The French corn crop is rated at 67% good/excellent, down 8% from the previous week as the severe heat wave takes its toll on crops. Army worms are expected to impact another 3.3 million acres of corn this fall.  So far, the Chinese government has said that 2 million acres of corn are already affected by the pests.

Corn inspections were very weak with the 2nd lowest total of the marketing year at just 438,000 tons. Inspections are currently running 45 million bushels behind the USDA pace.  Export sales were also weak at just over 500,000 tons.  Ethanol production was off this week by 27,000 bpd to 1,039,000 bpd.  Ethanol margins continue to pressure the industry as they currently stand at a negative 7 cents. More talk is surfacing about plants closing or slowing due to the prolonged stretch of negative margins that goes back to last September. 

Wheat

The EU commission is projecting the EU wheat crop at 141.3 mmt for the 19/20 crop, down 0.7% from last year. EU wheat stocks are expected to drop to 13.7 mmt, down 2.8%. Export are projected to climb to 25.5 mmt. China has approved wheat imports from the Kurgan region of Russia according to China’s General Administration of Customs. SovEcon has slashed its estimate of Russian wheat exports from 37.6 to 31.4 million tons. The 6.2 million ton reduction is due to hot weather reducing production. Brazil is facing additional wheat imports this year as frost damage has reduced production in some Brazilian states. Argentina would likely benefit most as they are the top supplier of wheat to Brazil. Egypt is planning to build additional silos at Port Said.  This should increase Egypt’s port storage by 15%. 

The Wheat Quality Council’s Hard Spring Wheat and Durum Tour concluded yesterday with an estimated average crop of 43.1 bushels per acre, two bushels better than last year’s 41.1 bushels per acre. Wheat export sales were the highest of the year so far but we’re only a couple months in. 

 

Soybeans

China has approved soybean imports from Russia according to China’s General Administration of Customs. EU rapeseed production is expected to decline 3.9% to 18 mmt, the smallest crop in nine years.

Export inspections are moving at a pretty slow pace.  This week’s total was 559,000 tons and was the lowest total of the past 8 week.  China continues to be the leading destination right now as they took 57% of this week’s shipments.  Soybean export sales were really poor with the 2nd lowest total of the year of old and new crop combined.  There was a big cancellation to China that brought the total down. 

Livestock

Cash cattle trade was light to end the week in the $114-$115 range which was steady to $1 higher than last week.  Packer margins continue to remain very good at $115/head. The news about African Swine Fever in China has slowed down quite a bit. However, Bulgaria is seeing ASF spread across its country and some countries are banning pork import from them in response.

Energies

Since June 10, US commercial crude inventories have fallen 40 million barrels. On a five year average during that time, crude inventories fall 18 million barrels. Although commercial crude inventories are still 15 million barrels above the five year average, the pace of recent declines suggests we could reach the 5-year average in early August. OPEC+ cuts, Iranian and Venezuelan export reduction, a falling rig count and increased US exports are all bullish points. Yet, demand is a key part of the balance sheet and the outlook for demand has been quite sour. Its tightening balances versus weak demand. The reaction has been a neutral trading environment over the last week as trade is looking for something to give.