Ag Markets Remain Uncertain As Coronavirus Disrupts Global Demand

Good Morning from Allendale, Inc. with the early morning commentary for May 18, 2020.

Grain Markets were mixed with corn and soybean futures higher on larger than expected rainfall through the central Midwest over the weekend and higher optimism that China will follow through on the ag purchases they committed to buying in the Phase One trade deal.  Wheat futures slid lower for a second consecutive session on higher global stocks and demand issues due to coronavirus.

Last week, July corn futures were up 0.25 cents, July soybeans were down 13.25 cents, July wheat down 22.25 cents, July soymeal was down $3.40 and July soyoil was down 1 point.

USDA Weekly Crop Progress Report will be released this afternoon at 3 p.m. CST.  Trade is expecting corn planting at 82-84% complete (67% last week, 44% last year, 71% average).  Soybean planting expected at 51-54% complete (38% last week, 16% last year, 39% average).  Hard red Spring wheat planting expected at 56–58% complete (42% last week, 70% last year, 81% average).  

CFTC Commitments of Traders showed funds new net position short -214,054 corn contracts, long +32,465 soybean contracts, long +2,982 wheat contracts, short -11,127 soymeal contracts and short -7,865 soyoil contracts.

NOPA crush report showed April soybean crush at 171.754 million bushels (170.483 mb expected, 7.4% over last year).  This is a new record for the month of April.

China’s foreign ministry said the U.S. needed to stop the “unreasonable suppression” of Chinese companies like Huawei.  China will firmly defend its companies’ legal rights, the foreign ministry said.  This was in response to the Trump administration moving to block global chip supplies to blacklisted telecoms equipment company, Huawei Technologies.

U.S.-China “Phase 1” trade deal reached in January is not falling apart and the two countries are still working to implement it, said White House’s top economic adviser, Larry Kudlow, but President Trump added that he was not “thrilled” with the agreement.  The Chinese are working toward holding up their end of the agreement, which calls for China to boost purchases of American farm goods, manufactured products, energy and services by $200 billion over two years, Kudlow said.  “They’re a little slow on the commodity purchases. I think that has a lot to do with market and economic positions,” he added.

Hog slaughter last week jumped to 2.103 million head (11% under last year). This is over the prior two weeks at -24% and -35% under last year.  Last week’s natural supply of hogs offered would have been 2.444 million. This will add about 341,000 head to the 2.581 million head backlog started in mid-March.

Brazilian meat company JBS SA said it is facing “enormous volatility” related to costs and product prices due to the effects of coronavirus.  JBS executives said consumer demand has shifted away from food service, but while there are no significant differences in margins on food service and retail meat sales, it is becoming increasingly difficult to predict costs, prices and consumer behavior.

Dressed beef values were lower with choice down 16.60 and select down 18.34.  The Feeder cattle index is 124.80.  Pork cut-out values were down 3.67.

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