Grain markets prepare for yield reports

Published on: 06:58AM Sep 16, 2020

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

Grain Markets were mixed overnight as traders pause to catch their breath from the recent significant rally. US weather will run generally dry over the next two weeks. Harvest activity will pick up during this time. The market is showing no concern for the current path of Hurricane Sally. It’s movement in the Southeast could disrupt their active harvest but perhaps not cause yield impacts. Brazil will see good rains from Saturday through next Thursday. This may ease some dryness concerns. Argentina will remain generally dry over the next two weeks.

China’s corn purchases, including new sales announced Monday and Tuesday, now total 9.3 million tonnes for new crop. There is another 2.2 listed under Unknown, the majority of which are likely China. This brings the “potential” purchases to 11.6 mt. We have not reached Allendale’s internal expectation for Chinese buys.

China’s soybean purchases, including new sales announced through Tuesday, total 17.8 million tonnes. There is another 9.6 listed for Unknown, the vast majority of which are likely China. This brings the “potential” purchases to 27.4 mt. We have not reached Allendale’s internal expectation for Chinese buys.

NOPA crush for August was released on Tuesday. 165.055 million bushels were processed last month, under the 169.468 trade expectation. This wraps up the old crop marketing year with 2.039 billion for NOPA members. We assume 127 million for non-NOPA members which brings the total to 2.167 billion. We will miss USDA’s current 2.170 billion goal by a small 3 million.

Midwest harvest reports will be coming in over the next two weeks. Allendale’s first report, West-Central Iowa, showed 68.8 bpa vs. an APH of 53.6.

The World Trade Organization indicated the US had not met the burden of justification for its tariffs against China applied in 2018. We do not expect this to result in lower levels of Chinese buying of US corn, soybeans or pork. They need these products and we have a two year trade deal that could still be fulfilled.

The Federal Open Market Committee will wrap up its two day meeting today. Markets do not expect a change in monetary policy from the Federal Reserve.

A $1.5 billion COVID-19 aid bill, pitched by 50 members of Congress may not get much traction. Some suggest it could restart the discussion.

Cattle feeders expect this week’s trade to run stable or even higher than last week’s $101/$102 trade. Low placements from February and also March are beginning to finish out.

Wholesale beef fell 9.51 in the prior two weeks. It is currently down another 3.80 after two days of this week. We expect this seasonal break to continue into the end of the month. In the prior two years it did not stop until October 7 and October 10. Beef and cash cattle often diverge at this time of year.

Wholesale pork prices are still strong. Tuesday’s 4.55 increase puts the pork cutout at 84.26, the best since May 29. Futures are currently priced with the belief that the sharp increase in supply into Q4 will be mostly offset by increasing exports. We are not sure about that.

Lean hog futures charts are filled with gaps still open on the downside. For the nearby October the first is at 64.37 – 64.40. The other three are at 61.72 – 62.87, 56.92 – 57.17 and 52.82 – 53.17.

China’s hog herd in August was 31.3% over last year’s level. Last year in October their herd was 41% down from 2018. This does not mean a sharp drop in demand for US pork just yet. Prices in Chengdu are 36.6 yuan per kilogram, near the 2019 peak of 45.0. During the last normal year, 2018, prices ranged from 10 to 21.

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