Crop Ratings Offer a Surprise

Good Morning from Allendale, Inc. with the early morning commentary for June 16, 2020.

Grain Markets were higher overnight on the lower than expected crop progress numbers issued by the USDA. Traders will continue to monitor weather forecasts for potential July heat, while looking to 8:00 AM export sales for more sales to China.

USDA Weekly Crop Progress had corn good to excellent rating down 4% to now 71%. The trade was expecting no change at 75%. The surprise pushed us away from our four similar rating years of 2014 – 2016 and 2018. Soybean ratings were left unchanged at 72% GTE, just as trade expected. Winter wheat ratings slipped 1% to now 50% GTE. Spring wheat ratings fell 1% this week to 81%. The trade was expecting no change in both wheat products.

May NOPA crush of 169.584 million bushels missed the 173.071 trade expectation. This was still a strong one and was a record for any previous May. It was 9.6% over last year’s low number. USDA expects crush in this old crop year at 2.3% over last year. Year to date we are 3.4% over. If crush falls to only +3.0% year/year in the next three months we’ll beat USDA hopes by 19 million bushels.

Export inspections for the week ending June 11th report corn exports of 910,495 tonnes, soybeans 376,323 tonnes, and wheat 444,031 tonnes. The corn number was a bit under estimates, while the soybean and wheat numbers were within the estimate range.

The European Union’s crop monitoring service MARS, citing dry weather in northeast Europe in the past month, again cut its EU soft wheat yield average for 2020, now seen at 5.60 tonnes per hectare (t/ha), down from 5.72 t/ha in May and 6.6% below last year. (Reuters)

Weather maps offer moderate temperatures and moderate rains for almost all growing areas the next 10 days. So far not the weather story bulls are looking for, but stay tuned.

Private exporters reported sales of 390,000 metric tons of soybeans for delivery to China during the 2020 / 2021 marketing year yesterday morning. Traders are hoping to see the sales continue again today.

Economic traders will look to this morning’s retail sales report at 7:30 AM CDT, Industrial Production and Business Inventories at 8:15, and Fed Chair Powell’s Semiannual Monetary Policy Testimony at 9:00. All this will be weighed against the fear of growing COVID-19 cases in certain parts of the world.

Comprehensive Boxed Beef report showed that end users are changing their tune regarding procurement. During the virus procurement for both short and extended delivery fell sharply. Five weeks ago procurement for 21 – 60 days out was 68% under the prior year. Two weeks ago it was unchanged year/year. Last week’s procurement for 21 – 60 days out was 23% over last year.

Cattle on Feed, covering May feedlot activity, will be out on Friday. Monthly Cold Storage is due on Monday the 22nd. Expect to see analyst estimates later today.

July and August hog futures, with their current light premiums, suggest the cash hog low for the year will be made in the coming days.

Hogs will be able to get to work on their backlog quicker than cattle due to seasonally low numbers in the summer. However, as we get to work on it we’ll simply transition into the seasonally heavy Q4 supply period.

Dressed beef values were lower again with choice down 2.03 and select down 4.92.  The Feeder cattle index is 128.51.  Pork cut-out values were down 4.53.

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