ADVICE: Livestock producers: Order hit for long corn hedges… December corn futures pushed above our buy-stop order at $4.58 to cover remaining corn-for-feed needs through August with long futures hedges. Combined with cash coverage earlier this week, you are now 67% covered on third-quarter corn needs.
Corn: Up 4 to 6 cents
Soybeans: Up 4 to 6 cents
Wheat: Up 1 to 2 cents
General Comment: Corn futures pushed to new contract highs overnight with wheat and soybeans are following higher. A stormy period over the next two weeks produces at least near-normal rainfall in all areas, and a moderate to high probability for above-normal rainfall in and adjacent the Corn Belt. Temperatures average slightly to moderately below normal over the next 10 days, likely followed by a sharply warmer period during June 25-30. Scattered storms accompany warmth, but the exact setup will take time to determine. Weather beyond then in July is unknowable at this time and that uncertainty will remain a positive factor for grain and soybean prices.
Corn basis in the Eastern Midwest has been rising sharply as end users scramble for forward coverage. Spreads and flat price are taking on the chore of prying supply from the producer, and there’s talk that ethanol plants are willing buyers at current prices.
Investors are showing caution as the week comes to an end with stocks slightly lower, bonds rallying and gold moving higher. The U.S. is blaming Iran for two oil tanker attacks in the Persian Gulf this week. American officials released images of wheat they say is an Islamic Revolutionary Guard patrol boat removing an unexploded mine from one of the vessels. Crude is slightly weaker after jumping on the attacks yesterday and remains lower for the week.
On the trade front, President Donald Trump could take further action against China if President Xi Jinping doesn’t agree to a meeting at the Group of 20 summit in Japan late this month, the White House’s top economic adviser, Larry Kudlow, said. Trump recently made similar comments. Trump may not feel like easing the pressure on China as the man on the other side of the table is facing more economic headwinds. China’s industrial output in May slowed to 5%, a 17-year low. The weaker numbers could prompt Beijing to ramp up stimulus measures, as the U.S./China trade spat continues to weigh on the world’s second-largest economy. China raised anti-dumping duties on some U.S. and European steel pipes and tubes on Friday. The government also launched an investigation into FedEx Corp. over parcels delivered to the wrong addresses last month.
USDA daily export reporting service announced several overnight sales and one cancellation this morning.
Private exporters reported 125,613 metric tons (MT) of corn for delivery to unknown destinations during the 2019-20 marketing year.
Export sales of 130,000 MT of soybeans for delivery to China during the 2018-19 marketing year and cancellations of 136,000 (MT) of soybeans for delivery to China during the 2018-19 marketing year.
USDA also reported sales of 130,000 MT of soybeans for delivery to unknown destinations during the 2018-19 marketing year.
Corn: Cash corn prices are the highest since June 2014 in parts of the Midwest, a strong sign increasing concern about falling U.S. production outlook. China is also getting worried about tightening domestic supplies. The government will likely cut the amount of corn stockpiles it auctions off roughly in half versus year-ago to 50 MMT and raised the prices it will sell the supply, according to an estimate by China National Grain and Oils Information Center. Supplies in September before the harvest are projected to be the smallest since at least 2012. With stockpiles now at more manageable levels, Bloomberg reports that Chinese authorities will likely be more open to imports of corn and corn substitutes.
Soybeans: July soybeans are just below last week’s high. A close above $8.94 ½ would form a bullish weekly reversal up and likely trigger more fund short covering into next week. Soybeans joined the corn rally this week on speculation fewer corn acres will be switch to soybeans and farmers will opt for taking prevent-plant crop insurance. Chinese soybean buyers have reportedly asked U.S. exporters to delay cargoes set to be loaded for export in July until August due to a lack of storage space, two sources familiar with the matter told Bloomberg. The request is reportedly for as much as 2 MMT of soybeans. A large number of vessels carrying South American supplies are due to arrive at the same time.
Wheat: SRW futures extended the rally to the highest since December, heading for a fifth straight weekly gain. Mexican bread and flour tortilla makers will likely use significantly more wheat sourced from the United States this year despite growing unease with President Donald Trump, according to Mexico's main wheat chamber. Wheat shipments to Mexico from Russia are also expected to repeat last year's big jump in volume, while Argentine wheat is seen gaining a new foothold as the Mexican industry continues to diversify its suppliers. Mexico relies on wheat imports to supply about two-thirds of domestic demand. Argentine wheat production could hit a record-high 22 million metric tons (MMT) in 2019-20, the Rosario Grain Exchange forecasts, topping last year’s 19.5 MMT record.
Cattle: Live cattle seen weaker on lower beef prices Thursday when Choice fell 5 cents and Select dropped $2.02. Sales were moderate active as the Choice/Select spread narrowed. Cash cattle were slightly lower Thursday in a light test as feedlots are holding out for higher prices after weights fell sharply last week, signaling current marketings. Still, packers had inventory bought ahead last week with slaughter up 20,000 from a year ago and 4,000 head higher than a week ago the first four days of this week. Beef export sales for the week ending June 6th were disappointing at 16,400 MT compared to the previous four-week average of 19,925 MT. Brazils ag ministry announced that an embargo on beef exports to China has been lifted, which may increase export competition for U.S. supplies. Shipments of beef to China have been on hold since June 3 when a case of atypical bovine spongiform encephalopathy was reported in a 17-year-old cow in Mato Grosso.
Hogs: Futures seen opening steady to mixed. The national average hog prices fell 32 cents on Thursday, paring this week week’s gain to 12 cents. Steady to higher cash prices today would be a sign the cash market is finding is footing, providing a stronger floor under futures next weeks. Pork cutout values rose 50 cents, paring this week’s decline to 7 cents. Sales were light to moderate and need to show more activity to keep a floor under futures. And cash bids as slaughter the first four days of this week is up 121,000 head from a year ago. Pork export sales for the week ending June 6th 23,100 MT were down from the previous four-week average of 36,300 MT. China purchased just 2,365 MT, down sharply from the previous three weeks. However, 2019 cumulative pork sales to China represent nearly 30% of all pork export sales. Last year, China purchases accounted for just 3%.