Market News- POET: Portland 08/06/20 8:56:24 AM
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New crop corn sales were very large coming in at the high end of expectations while old crop sales were very low. Old crop only needs scattered sales the remainder of the month to be near the USDA’s projection assuming we see steady shipment pace thru August. New crop sales totaled 2.6 mmt or 102.3 mln bushels including 76 mln bushels to China. Total new crop sales are currently 270 mln above last year at this time and the highest in almost a quarter of a century. China accounts for 225 mln bushels of new crop corn sales thus far on the books.
State by state StoneX yield projections for Corn/Soybeans as of August 3:
- Both corn and beans are lower in early trade following StoneX's (Formerly FC Stone) yield estimates late yesterday afternoon. Stone is predicting massive yields for both corn and beans - with corn pegged at 182.4 bpa and beans at 54.2 bpa - both records by a long shot. The prior corn yield record was set back in 17/18 at 176.6 while the prior bean yield record was set in 16/17 at 52 bpa.
- Using Stone's corn yield would boost corn production by 328MM bushels - pushing ending stocks to more than 3B bushels. This of course assumes no demand changes - although I still think demand for both ethanol and feed next year is too high and would expect those numbers to work lower.
- The bean yield estimate from Stone probably provides the largest bearish variable. Using Stone's bean yield estimate would add 365MM bushels to the soybean carryout…which would nearly double the current estimate from the USDA. Similar to the corn scenario, this assumes no demand adjustments. The USDA is already factoring in an additional 400MM bushels of exports to China for new crop, which would put the total just 125MM bushels shy of the prior export record set back in 16/17. Since then, Brazil has added an additional 1B bushels of soybean production, so achieving this export number is no small feat.
- One final comment on the StoneX estimate…AGTT reporting that Stone actually has a historical tendency to come in below the USDA's August estimate. In fact, the last 5 years they've been below the USDA by an average of 1.6%...which would put the USDA estimate next week at 185.3 bpa for corn. Pretty remarkable to think of yield numbers this high!
- The USDA reported corn conditions unchanged at 72% excellent yesterday. The ECB continues to see improvements, with OH up 3% and IL/IN up 2%, respectively. As bad as its been in OH, the current rating of 52% G/E is only 1% behind the 5-year average. IA was the big downside leader in ratings this week, down another 4% vs the prior week as the western part of the state remains parched and in dire need of precipitation.
North Dakota 155/38
South Dakota 165/49
- It's been a fairly quiet overnight session - with both corn and soybeans trading either side of unchanged. With the current benign weather forecast, bulls are hoping for continued Chinese demand to keep this market from continuing it's steady decline.
- Weekend weather featured below normal temps for nearly the entire cornbelt, while much of the ECB received widespread rains. The forecast for the next 15 days is warmer (normal/slightly above normal temps), while meaningful rainfall chances exist in the 6-10 and 8-14 day forecast. Western IA still remains in desperate need of a drink - so that area will continue to be watched very closely.
- Friday's CFTC report showed funds selling just 6k contract of corn (now 143k contracts short) while they were net buyers of 12k contracts of soybeans.
- Not much to get excited about in the Dec corn chart. Prices continue to hold the downtrend support, with $3.22 being a very critical level that needs to hold. The high volume pocket is at $3.35 which should prove solid resistance on any short-covering bounce.
- Weekly EIA ethanol production was up 50k BPD to 958k BPD in yesterday's report. Stocks were also up 471k bbls at 20.3B barrels. At this point, it looks like the USDA's 4.85B bushel estimate for 19/20 corn grind is very close, and probably signals that they will not reduce ethanol demand in the August WASDE - which if realized would be the first time they haven't cut ethanol demand in a WASDE report since March.
- China held another reserve corn auction overnight for 4MMT (157MM bushels) and once again sold 100% of what was offered - at a lofty price of $7.39/bushel. Total reserve auction sales now total 39MMT (1.5B bushels) since late May. There's no doubt that corn stocks are getting tighter in China which boosts speculation that they'll need to continue to import more corn to replenish reserves.
- Export sales released this morning were pretty dismal for corn (at least relative to recent weeks). 19/20 saw net cancellations of 1MM bushels. For soybeans, old crop sales were just 9MM bushels which was on the lower end of estimates, but 20/21 sales were huge - totaling 122MM bushels (nearly all of which was to China as Brazil's supplies are depleted).
- US weather remains favorable overall , however areas north of I80 will see limited rainfall into the first week of August. Areas south of I80 see abundant rainfall and cooler temps during that timeframe. The 10-15 day forecast features better rain chances for nearly the entire cornbelt (specifically north of I80).
- Dec corn is nearing support at the contract low of $3.22, which also happens to be the uptrend support line on the continuous corn contract as well. Resistance lies at Monday's high of $3.36.