Markets Unnerved as Trade Tensions Continue
Jul 02, 2018
Good Morning! From Allendale, Inc. with the early morning commentary for July 2, 2018.
Grain markets are cautious as the latest USDA numbers continue to be digested among ongoing trade fears. The United States continues to demand concessions by the rest of the world in trade which is disrupting markets across the globe. The holiday shortened week will likely add to the volatility.
USDA counted 5.306 billion bushels of old crop stocks reported Friday, just over the 5.268 billion trade estimate. Corn acreage is now estimated at 89.128. That was over the trade guess of 88.562. 1.222 billion in old crop soybeans were estimated as of June 1, right on the 1.225 trade guess. Acreage for soybean is estimated by USDA at 89.557 million; 575,000 over the March estimate. The averaged trade estimate was 89.691.
World Weather Inc., who will headline our Summer Outlook series in a few weeks says, "The bottom line remains that soil conditions in much of the Midwest are favorable and it may take a couple of weeks to dry the region out enough to cause serious stress. In the meantime, the forecast still looks mixed enough to provide some precipitation and temperature variations that might stave off the most stressful conditions until later in the summer." Get registered for the complete Summer into harvest forecast here.
Supply and Demand numbers could be adjusted on next week's USDA WASDE report if the planned US tariffs against China take effect as schedule this week according to USDA's Chief Economist, Rob Johansson.
CFTC's Commitments of Traders report showed that managed money funds were sellers of 46,281 corn contracts to be net-short 60,319 contracts through Tuesday June 26th. They were also sellers of 31,184 soybeans and were short a total of 43,985. The selling continued in wheat where they sold 11,725 increasing their short position to 12,477.
The EIA reported U.S. biodiesel production fell to 140 million gallons in April from the 147 million gallons produced in March.They further stated that soybean oil remained the largest biodiesel component with 520 million lbs used in April, representing 48% of the total.
AgRural estimates that Brazilian farmers have harvested 9.5% of the second corn crop acreage, behind last year's pace of 16.2% and the five year average of 13.3%. At this time last year, producers had collected 16.2 percent of the second corn crop. The average pace for the last five seasons was 13.3 percent of the area.
Managed money funds were estimated buyers of 20,000 corn contracts, 15,000 wheat, and 1,000 soyoil in Friday's trade. They were sellers of 2,500 soybeans, and 1,500 soymeal.
The weekly hog kill was reported at 2.239 million head on USDA's weekly survey on Friday. The number is quite a bit higher than last week's 2.168 million head kill. The year's low in offered supply was likely the previous week. Supplies should build now into November.
Cattle traders are noting concerns about feeder prices and are questioning their economic feasibility. Where should feeders be priced at based on likely live cattle and feed prices, and what will cattle feeders pay for feeders? Those question remain to be answered.
Fund selling was seen in hogs through June 26th with managed money selling 3,654 contracts bringing them net-short 5,457. In cattle they were buyers of 2,882 contracts and remain long 29,796.
Dressed beef values were lower with choice down 1.28 and select down 2.09. The CME Feeder Index is 142.00. Pork cutout value is down .21.