- Chicago futures are weaker at midday in tepid volume. Markets opened mixed and quickly uncovered selling based on improved US/Black Sea weather and the decline in energy values. June crude oil will expire in a few weeks and traders are already discussing whether a negative price calamity could impact June futures. Traders remember the negative price trade of May crude futures days before expiration. With Cushing OK storage tight, such fears persist.
- Chicago values are moving to the orders. End users nor importers are compelled to make large forward purchases amid the ongoing vastness of negative economic news that prevails. We anticipate a lower Chicago close awaiting weekly US exports sales data Thursday morning. It will be key for July KC wheat to close above $3.76, the 50-day moving average.
- Chicago brokers estimate that funds have sold; 2,300 contracts of corn, 2,400 contracts of soybeans, and 3,200 contracts of wheat. In soy products, funds have sold 2,900 contracts of soyoil and 1,400 contracts of soymeal.
- US livestock processing plants are struggling to come back online with employee absenteeism elevated. Workers are fearful for their health amid Covid-19 infections and are just staying home. This is leaving livestock processing plants to slow chain speeds, which produces meat shortfalls. We are hearing that bonuses are being paid to employees, but employee absenteeism will become a structural problem for the US meat industry until health confidence is restored. US cattle and hog slaughter rates are woefully short of domestic needs and shortfalls are likely to persist.
- US ethanol production rebounded slightly to a 42% decline from last year with stocks falling to 1,075 thousand gallons vs 1,106 thousand last week, still a record for the week. The US ethanol industry is seeing margins improve to a negative -$.18/gallon, but it is not enough to spur plants to reopen. That requires plants to see sustained profitability over several months. Research suggests that Chicago ethanol futures are rather flat into mid-autumn amid demand uncertainty; what is the new world of normal driving in Covid-19 times.
- Summer holiday planners lack confidence in booking air travel, hotel stays or even rental cars unsure of the future path or longevity of Covid-19. Most are planning to visit relatives or staying close to home amid the virus. This does not bode well for the summer travel season.
- The weather forecast is slightly wetter for the Plains including some of the driest areas of the HRW wheat belt. Several storm systems look to push eastward along a cold front in the coming 7 days. These systems will produce heavy rain for the S and C Plains and the S Midwest. Cumulative totals range from 0.75-2.50″. The Midwest will see rains of 0.25-1.25″ with a warming temperature pattern after the weekend. Near to above normal rain is forecast in the 10-15 day period along with above normal temperatures. The coming warm/wet weather trend will aid 2020 US summer row crop yields.
- Favourable Midwest, EU and Black Sea weather look to keep pressure on Chicago values. China’s State buyer needs to start securing US soybeans for its reserve before there is any confidence of Phase One adherence. End users are not willing to chase rallies.