Good Morning from Allendale, Inc. with the early morning commentary for August 26, 2020.
Grain Markets were mixed to higher as recent weather has raised production concerns beyond the 8/10 Midwest storm. Traders may want to pause the rally mid-week as heat and dryness is forecast to ease in the coming days. Renewed hopes over exports to China may also hold the market in the very short term.
Allendale’s Nationwide Producer Survey ends Friday afternoon! This two-week long survey will include over 25 states. All producers are encouraged to make sure your local area is represented at https://arena.allendale-inc.com/ParticipateSurvey/YieldSurvey/. Results will be announced on September 2.
On the charts December corn gapped higher Tuesday. Some would suggest it represents a Bull Flag formation with a potential for 361 1/2. On the other hand, the 345 1/2 – 348 downside gap will be an obvious target given any negative news ahead. Soybeans on Tuesday pushed to new highs for the uptrend in place since August. November soybeans have a small gap from 899 1/2 – 901.
Last week, December corn futures were up 4.00 cents, November soybeans were up 5.00 cents, December wheat up 25.00 cents, December soymeal was down $1.40 and December soyoil was up 59 points.
Chinese grain buyers have procured 1.0 million tonnes of US corn over the past week. Since the 18th unknown buyers have also added another 130,000 tonnes during this time. Soybean procurement over the past week comes to 806,000 tonnes for China and 832,500 for unknown.
Chinese officials on Monday affirmed their commitment to filling the trade deal. Allendale estimates that would result in another 4.5 million tonnes in purchases for corn and another 14.0 mt of soybeans. We estimate new crop corn exports at 50 million bushels over 8/12 USDA and new crop soybean exports at 75 mt over 8/12 USDA.
Brazil’s government agency, Conab, announced new crop corn and soybean estimates over USDA and Allendale. They suggest the spring 2021 corn harvest at a record 112.9 million tonnes. That is over the 107.0 from USDA and 107.6 from Allendale. They see a record soybean harvest of 132.1 million tonnes. USDA is currently at 131.0 and Allendale is at 132.1.
Jerome Powell, the Federal Reserve chairman, will speak on Thursday at an annual conference put on by the Kansas City Fed. Markets suggest he will use the meeting to indicate further liquidity measures to support the economy. At the end of July the nation’s money supply, M2, was noted at $18.327 trillion. That is 23.3% over one year ago. At this time the impacts of this move have helped devalue the US dollar and support specific market products. Though many in grain markets expect it to eventually support our pricing, we cannot identify specific price moves and suggest they were artificial.
Wholesale beef is still higher so far this week. Choice product is up 3.74 over the past two days. The industry expects peak to peak out anytime now as procurement for Labor Day features ends.
Hog processing is slowly picking up. We estimate this week’s run at 2.676 million head. That would surpass the post-virus peak of 2.626 from June. Though considered positive news it still does not answer the question of whether processing will be able to deal with the big seasonal supply increase that starts mid-September through.
Sow slaughter, the main measurement of breeding herd expansion/liquidation, is up 11.9% over last year since June 1. Pork supplies in 2021 from early-summer on out may tighten.