This Week in Commodities 6-26-20

Corn prices fall ahead of Tuesday’s report.

July corn futures were 15-1/4 cents lower this week to close at 317. December futures were 20 cents lower this week to close at 325-1/4. Front month corn futures had their worst day in two months on Thursday, closing 7 cents lower on the day. An avalanche of July basis only contracts being priced looks to shoulder at least some of the blame for Thursday’s washout. Thursday’s new contract low in December corn was on the largest total corn volume since February 27. Corn futures will look for positive news on Tuesday’s USDA report to hold above this Thursday’s low during next week’s holiday shortened trading week. Estimates released for Tuesday’s acreage projections by the USDA are calling for lower corn acres than the March intentions. Traders see corn acres 1.85 million lower than the March USDA estimate of 97 million. Even with this reduction corn acres would be nearly 5.5 million higher than last years number.

Ethanol demand resurgence continues to be a bright spot for the corn market. Ethanol production was up over 6% from last week. This week’s production was still 16.7% below the same week last year but a huge improving from just a month ago. All of this production increase comes as ethanol stocks continue to fall due to good demand. Gasoline demand has also made a nice resurgence in the last few weeks. Demand jumped above the 8 million barrel per day mark last week and is now back near the average range of normal demand within the last 5 years. Hopefully this trend will remain intact as we move into the historical peak summer driving season.


Soybeans close lower this week.

July soybeans traded 11-1/2 cents lower this week to close at 865 after four straight weeks of higher prices. November soybeans backtracked 19-1/4 cents this week, closing at 861-1/4. Traders are estimating soybean acres to increase slightly on Tuesday from March’s planting intention numbers. Acres are estimated to come in at 84.83 million acres up 1.32 million from March’s intentions and 8.73 million more acres than last year. A non-threatening weather forecast continues to favor the bears as we head into July. Chinese import data also added selling pressure this week. During May China imported 8.86 million tons of Brazilian soybeans, up 41% from a year ago. Imports from the US in May totaled 491,697 tons, down nearly 50% from May of 2019. US soybean sales to China in the past few weeks have been heavily centered around the next marketing year which will begin in September.

The soybean market also followed the stock market lower this week. Concerns over surging COVID-19 cases soured the stock market, causing Dow futures to give back all of last week’s gains. Surging cases caused Texas to halt its reopening plans and put an end to dine-in customers at bars and restaurants. While the case resurgence is worrisome, the median age for new infections in “hot spots” such as Florida is in the mid 30s. Many feel this younger median infection age will help to keep hospitals from being overwhelmed by a flood of higher risk patients, such as what happened in New York back in April.


Wheat moves lower again this week.

July Chicago wheat futures were 7-1/4 cents lower this week to close at 474, a contract low close. KC wheat futures on its July contract was 7 cents lower this week to finish at 421-1/4. July Minneapolis Spring wheat futures were 25-3/4 cents lower this week to close at 498-1/4, also a contract low close. The wheat market continued to face more harvest pressure this week. Many regions are reporting lower than usual protein content in this year’s wheat crop, which may play a role impacting demand in the global market. Reports of lower protein are especially prevalent among some of the US largest competitors, mainly Russia and Australia. Wheat acres on Tuesday’s USDA report are expected to come in at 44.72 million, 70,000 fewer than the March figure and 430,000 less than last year. Wheat stocks are estimated at 987 million bushels, down 93 million from a year ago. Bottom line is that wheat stocks around the world remain ample.


Cheese Stays Flat To End Week

The price action in the spot market this week was negative in every product other than the cheese market. The biggest loser on the week was butter, dropping 8.5 cents to $1.765/lb. Poor price action in the butter markets is keeping Class IV price action negative. Non-fat prices finished 1.25 cents lower at $1.02/lb. Right now support for the market comes in near $1.00/lb and as long as the market continues to hold this level it looks like it could make another move higher. Whey continues to be the slow mover and finished the week at $0.3125/lb as it can’t get more than a couple cents away from $0.30/lb. Cheese prices went through violent swings this week with the block price getting over $2.80/lb before finishing the week at $2.58/lb. Cheese was still able to finish 2 cents higher on the week. This was in part to the fact that barrels head steady to trade higher while blocks traded lower. Spot cheese prices still remain at 2014 high levels.

The July to December average finished at $18.28 last week and has fell around 40 cents to  $17.80 to end the week. Quarter four of 2020 futures continues to be the weak links, as they traded lower to finish the week. With the fall back in block prices this week, it looks like the market has gotten even more nervous on the sustainability of this rally. On the other side of the coin, if cheese prices remain unchanged, futures will be forced to come up higher to the spot markets. Class IV continues to be stuck in the mud as Class III presses higher. The spread between Class III and Class IV is near a record level at $7.19.


Lisa Heder

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