Dry Weather, Larger Crop Damage Prop Up Grain Markets

Good Morning from Allendale, Inc. with the early morning commentary for August 17, 2020.

Grain Markets climbed higher in overnight trading.  Corn futures jumped to a 1-month peak while prices rose the last five out of six sessions.  Soybean futures were also higher as crop damage expectations from last week’s storms in Iowa were increased to 14 million acres (previously 10 million acres).  Wheat futures also pushed higher on dry weekend weather as well.  

The U.S.-China phase 1 trade deal’s 6-month review, which was tentatively scheduled for this past Saturday, was indefinitely postponed.  The reason given for the delay was scheduling conflicts.  However, there could be a back-story for the delay after last week’s reports that China at the meeting wanted to discuss U.S.-Chinese tensions more generally, such as the U.S. order to close TikTok and WeChat.  The markets will now have to wait for any further media reports on why the meeting was postponed, or a new date for the meeting.

USDA Weekly Crop Progress Report will be released this afternoon at 3 p.m. CDT.  Trade is expecting corn crop conditions to decline 2% to 69% GTE (71% last week, 65% average).  Soybean crop conditions expected to decline 2% to 72% GTE (74% last week, 63% average).  Hard red spring wheat is expected to be 1% higher to 70% GTE (69% GTE last week).

CFTC Commitments of Traders report showed funds new net position short -172,361 corn contracts, long +26,864 soybean contracts, short -15,532 wheat contracts, long +45,612 live cattle contracts and long +18,286 lean hog contracts.

Private exporters reported export sales on Friday to the USDA of 126,000 metric tons of soybeans to China during this marketing year.

Commodity trade financing by the world’s banks is dropping to rates not seen in more than 20 years, leaving small and medium sized firms most exposed, banking and trading sources said.  Last week, ABN Amro, one of the biggest commodity trade financiers, quit the business after it was among the banks worst hit by the $3.8 billion default of Hin Leong, one of Asia’s biggest oil traders.

Chinese state-owned oil firms have booked tankers to carry at least 20 million barrels of U.S. crude for August and September, the Chinese media said, moves that may ease U.S. concerns that China’s purchases are trending well short of purchase commitments under the Phase 1 of the trade deal.

Cattle processing last week was estimated at 640,000 head. That was within the 633,000 to 665,000 range posted over the past eight weeks. Last week’s run was estimated at 2.0% under last year.

Pork processing last week was seen at 2.565 million head.  This is with the assumption a good Saturday run will make up for the storm shortfalls on Monday and Tuesday.  The current peak weeks of post-virus numbers were 2.596 and 2.626 from late June/early July.  Pork production is noted at 4.5% over last year last week.

Dressed beef values were higher with choice up 3.29 and select up 142.25.  The Feeder cattle index is 141.92.  Pork cut-out values were up 1.17.

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