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June 29th - Closing Market Commentary

06/29/2020
June 29th - Closing Market Commentary

Grains closed higher on Monday:

Corn + 9 ½ cents/bu (Sept @ 3.28 ¾ )

Soybeans + 1 ½ cents/bu (Aug @ 8.61 ½ )

Chi Wheat + 10 ¾ cents/bu (Sept @ 4.86 ½ )

Cdn $ -0.00165 (73.07 cents)

WTI Crude Oil +1.21/barrel (39.70)

Grain markets saw some significant short covering in corn and wheat futures today, as weekend rains across the USA Midwest had less coverage and accumulations than forecast, and weather models for the next 15 days are significantly drier and warmer than previous forecasts were.  We are in the time of year when markets are extremely sensitive to Midwest weather conditions, as we are on the cusp of early corn pollination.  While weather allowed grain futures to rally today, the fundamental concerns of big USA/world stocks and big USA 2020 production potential still exist, and tomorrow will see the USDA offer it’s Quarterly Stocks Report and Seeded Acreage Projects at noon EST.  The market will need to see continued weather concerns and/or a resumption of Chinese buying in order to hold onto and add to today’s gains, in light of the trades expectations of big stocks and planted acres.

Grains were also helped by outside strength in commodities and USA equity values.  Monday saw a “risk on” attitude in the marketplace as energies, metals, livestock, and grains all traded higher.  USA stocks were higher all day, with Dow futures closing near their highs, up 547 points on the day (25,497).  For today at least, optimism over continued government stimulus programs, and ongoing re-opening of the USA economy trumped concerns over the rampant spread of COVID-19 throughout the southern USA.

As mentioned earlier, corn saw support from increased Midwest weather concerns.  There was some talk of Chinese buying interest in USA corn, but no substantive confirmations from either the USDA or the trade.  Export inspections from last week were very good for corn, with 1.234 million tonnes loaded (48.5 million bushels).  That was almost five times higher than the same week a year ago, and brought the US to within 45 million bushels of the pace needed to meet the current corn export projection for 2019/20.

Soybean futures were a price follower today, only squeaking out a small gain, after the robust strength seen in corn and wheat.  August is the critical weather month for soybeans, so the dryness and heat in the current forecast is not as threatening for the American soybean crop.  The trade was disappointed not to see more Chinese bean purchase confirmations from the government today.  Weekly export inspections were very disappointing for soybeans as well, with a paltry 324,000 tonnes (11.9 million bushels) loaded, less than half of what was loaded during the same week last year.

Wheat rallied with the strength in corn today, as Friday’s big losses from technical selling due to option expiration appear to be overdone.  The rally in Chicago wheat futures today allowed Ontario harvest bids for soft red winter wheat to get back to 6 dollars per bushel.  World wheat values were also stronger today with EU prices up 10 cents/bu.  Winter wheat harvest in the USA was pegged by the USDA at 41% complete, versus the average trade guess of 44%.

This afternoon, the USDA released it’s Weekly Crop Progress Report, with the trade expecting a 1% improvement in corn and bean ratings, and unchanged ratings for both winter and spring wheat crops.  Actual ratings are listed below, and fell within the ranges of expectations except for spring wheat which fell 6% from last week.  That should be quite supportive to spring wheat values, as their ratings had also fallen 6% the previous week!  Hopefully, any spring wheat strength can spill over to the winter wheat futures!

Actual

Last Week

Last Year

5-Year Average

Corn Conditions

73%

72%

56%

69%

Soybean Conditions

71%

70%

54%

64%

Winter Wheat Conditions

52%

52%

63%

50%

Spring Wheat Conditions

69%

75%

75%

66%

Market direction overnight and tomorrow morning will be a function of weather forecasts with the noon USDA report releases setting the tone for the rest of the week.

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