This Week in Commodities 5-1-20

Corn planting ahead of 5-year pace.

For the week, July corn was 4-1/2 cents lower to close at 318-1/2. December futures were unchanged this week, closing at 336-3/4. There continues to be mostly dry conditions in the western Midwest that are helping with this year’s corn plantings. As of Sunday, corn planting was seen as 27% complete, 7% above the 5-year average of 20%. With another relatively dry week this week, some reports out of the western Corn Belt suggested farmers were nearing the finish line of planting. Dryness in the west has been welcomed for spring field work but may become an issue as we move into May. Two-week outlooks continue to point to dryness in the west as well as cooler temps in much of the northern and eastern Midwest.

With lower prices has come more export business for corn. One hindrance to US corn exports at the present time, however, is quality, especially out of the Pacific Northwest. A reported 94% of the corn being loaded out of the region is #3 grade, while most buyers are shopping for #2 quality. The main issue is test weight, with many terminals struggling to reach 50 pounds per bushel. To be categorized as #2, corn needs to have a bushel weight of 56 pounds. This is a result of last year’s harvest conditions in the Dakotas and Minnesota from where much of the PNW corn is sourced. As a result, corn importers are being forced to source needs from the Gulf, which is more expensive into the Asian market. This is deterring some of our current corn export business, especially with China.


Soybeans find Chinese interest.

July soybeans posted a nice week, improving 10 cents to close at 849-1/2. November soybeans also joined the party higher, gaining 13-1/2 cents to close at 855. Much of the gains this week came from Chinese soybean purchases out of the US gulf. Chinese traders bought at least 300,000 tons for shipment in August and September. Rumors also circulated that Chinese traders were inquiring about 8-10 cargoes out of the US Pacific Northwest. Although no sales flashes came from the PNW, there remains hope China is willing to live up to the Phase-1 trade deal commitments.

This week’s soybean sales to China look promising on the surface but pale in comparison to the amount of beans Brazil has exported in the last few weeks. Thus far in 2020, Brazil has exported 31.4 million tons of soybeans, compared to 24 million during the same period in 2019. Last week alone Brazil averaged an export pace of 826,000 tons per day. Much of the increased business in Brazil is due to the weak Brazilian Real. At one-point last week, the Real was trading at more than 5.7 Reals per US dollar. The principal destination for Brazilian soybeans is China. The Brazilian consulting firm, Agrosecurity Consultoria, indicated that China purchased 26 cargoes of Brazilian soybeans just last week. The weaker currency allows Brazilian soybeans to be very competitive in the international market, while at the same time offering high prices for Brazilian farmers.


Wheat sets back this week.

July Chicago wheat was 14 cents lower this week to close at 516-1/2. July Kansas City wheat was 1/4 cent lower to close at 483 this week. Minneapolis spring wheat was 6-1/4 cents lower this week to close at 506-3/4 on the July contract. While extended models are dry for most of the Plains, there is a good chance Kansas could be picking up beneficial rains in the next week. KC and Minneapolis wheats showed signs of life early this week before closing lower to finish the week. Rainfall over the Black Sea region was a source of pressure this week that provided relief to some dry areas. A weaker US dollar this week also was seen as supportive to wheat exports moving forward.


Spot Prices Finish Higher on the Week

Cheese prices in the CME spot trade came back to life this week with the block/barrel average gaining just shy of 14 cents on the week to settle at $1.1975lb vs. the recent low of $1.00/lb. The recovery from the lowest prices we’ve seen in over a decade looks supportive from a technical perspective. Whey prices moved slightly higher as it attempts to hit topside resistance of $0.40/lb. Butter prices traded 4.75 cents higher this week, but prices for butter are still dragging toward the recent lows. Non-fat powder was the only product to finish lower on the week as it traded to new lows of the year at $0.7925/lb.

The Class III 2020 average has traded up 20 cents from a week ago, finishing at $14.79. Class III price advancement has been outpacing Class IV prices recovery with cheese prices moving substantially higher this week. As non-fat powder continues to move lower it will be difficult for Class IV futures to show strength. With Cheese prices over 20% off the lows already, a continuation of higher cheese prices could spring dairy markets back to life. Global Dairy Trade cheese prices have been able to maintain $2.00/lb prices throughout the recent virus situation.


Lisa Heder

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