Weekly Market Recap


Grains

World markets were sent into a panic by a tweet from President Trump yesterday that said he is imposing a 10% tariff on the remaining $300 billion of Chinese imports for a “short-term period.” The Chinese yuan fell sharply vs the U.S. dollar, as Trump accused China of devaluing its currency. U.S. 10-year treasury yields fell to their lowest levels since November 2016, while crude oil futures fell nearly 8%. China has not yet responded with any specific countermeasure. The Federal Reserve did cut its key interest rate by 25 basis points to a range of 2% to 2.25%, the first cut since 2008. Fed Chairman Powell also hinted at the possibility of future cuts but was not a clear as the market had hoped. During his press conference he said, “This isn’t the start of a long series of rate cuts” but also, “I didn’t say it’s just one rate cut.” The forecast is calling for cooler temperatures across the corn belt.  The cooler temps will help limit any stress on a crop that is still pollinating, but is also not providing as many growing degree days as would be desired. 

Corn

FranceAgriMer cut its French maize crop conditions for a 5th consecutive week, down from 67% to 61% good-to-excellent. Datagro Consultoria estimates Brazil’s 2019/20 corn crop at 104.28 MMT, up 4.26 MMT, with exports up 15 MMT to 40 MMT.  Analysts estimate Brazil’s safrinha corn harvest is 76% complete, with Mato Grosso at 94% vs 81% last year.

The USDA Grain Crush report for June showed corn used for ethanol at 456.6 million bushels vs 459.5 million last month and 462.7 million a year ago. Implied ethanol yield is 2.93 gallons/bushel vs 2.91 in May and 2.85 a year ago. Weekly ethanol production was down 8,000 barrels/day from last week to 1.03 million bpd and down 3.1% from last year. Ethanol stocks were up 779,000 barrels to 24.47 million barrels. Ethanol blending was 6.19 million barrels/day vs a 6.05 million 4 week average. The EPA hopes to rule on delayed 2018 small refinery biofuel waivers in the next few weeks. In recent years, the number of waivers granted has more than quadrupled, with current 2018 waivers exempting 2 billion gallons of fuel.  Corn condition rating increased 1pt to 58% good-to-excellent vs expectations of flat to 1 lower. The crop is 58% silking and 13% dough. Weekly corn export inspections totaled 645,367 MT vs 400-700k MT estimates, and the marketing year total is now 54 million bushels behind the USDA’s projected export pace. The President’s decision to add additional tariffs cause a sharp selloff in an already weak market.  For the week December corn futures lost 15 cents. 

Wheat

BAGE says the Argentine wheat crop is 99% planted at 6.55 million hectares. Conditions are rated 52% good-to-excellent, 44% normal, and 4% poor.  A crop tour of the Canadian Prairie Provinces estimates wheat yield of 52.1 bushels/acre or 3.5 tons/hectare, unchanged from last year and above the USDA estimate of 3.35 t/ha. StrategieGrains estimates the French soft wheat crop at 39 MMT vs 33.8 MMT last year and up 0.7 MMT from their previous estimate. This would be the 2nd biggest crop on record.  Analysts believe hot, dry weather in Ukraine will result in more milling quality wheat, up from 55% to as much as 70% of production.

U.S. Wheat Associates estimate SRW protein levels are averaging 9.2% and falling number 285, both the lowest in over 10 years. Test weights are averaging 57.9 pounds/bushel. Spring wheat condition is rated 73% good-to-excellent, down 3 pts from last week, and the crop is 97% headed. Winter wheat harvest is 75% complete vs 69% last week and an 86% five year average. Weekly wheat export inspections totaled 390,730 MT vs 350-550k MT estimates, with HRW accounting for 54% of the total.

Soybeans

Datagro Consultoria pegs Brazil’s 2019/20 soybean crop at 125-126 MMT vs 116.76 MMT this year, and exports up 6.3 MMT to 78 MMT. Argentina is looking to break into the Chinese soymeal export market, as a Chinese delegation will inspect Argentine crush plants in August.

The June Fats and Oils report showed industry crush at 157.6 million bushels vs NOPA at 148.8 million and June 2018 crush a record 169.6 million. Meal production was 3.7 million tons, down 336,000 tons from last year. Soybean condition rating was unchanged at 54% good-to-excellent. The crop is 57% blooming and 21% setting pods. Soybeans had their highest export inspection total in the past 22 weeks, at 1,031,477 MT vs 400-800k MT estimates, with China accounting for 58% of the shipments.

Livestock

African Swine Fever reports continue to surface.  China announced a new case in an area that has already had an outbreak. Bulgaria has also announced more cases.  Cash cattle trade took place at $114-115 which was steady to $1 lower.  Packer margins continue at a high level at $140/head.

Energy

 

Oil was down for the week as demand tensions were reinvigorated after President Trump suggested plans for a 10% tariff on $300 billion in Chinese goods starting September 1. Friday’s oil gains couldn’t quite reach the price level when the President’s tweet occurred. At some point the market should relent on intense demand focus and begin looking at global petroleum supplies which are falling, but it’s difficult to predict when that will happen.