Free Commentary

While there were certainly no surprises in the September crop releases, it did appear to hammer home the reality that domestic supplies for beans in the US are going to be contracting this coming year, and corn will be a far cry from what the trade had prepped for just a couple of months ago. Theoretically, when that is the case, prices should move higher, not lower, and that is precisely what occurred.  Actually, with the exception of wheat, which will set a new record, and incidentally closed lower, global ending stocks for corn and beans are projected to shrink, for the fourth year in a row for corn, and the second for beans.  Note as well that the world bean ending stocks are expected to slip to the lowest level since the 2015/16 crop year, and this even after the USDA increased the forecast for the next Brazilian crop by another 2 MMT to a record and bin-busting 133 MMT.  Uncle Sam released one other figure on Friday that was somewhat overshadowed by the other reports, and that was the fact that prevented plant acreage was increased by another 703,000 acres in corn and 228,000 in beans.

Leading up to the report’s release, large speculators had extended their buying spree in everything but Chicago wheat.  For the week ending the 8th, large specs bought over 25,000 corn contracts and 5,000 beans.  Looking just at the managed money crowd, we find they were purchasers of nearly 15,000 contracts of corn and over 11,000 beans and are now long over 33,000 and 173,000 contracts in those markets, respectively.

We have begun this new week by keeping the streak of daily export sales alive.  The USDA reported this morning, sales of 350,000 MT of corn and 129,000 MT of beans China, as well as 106,000 MT of corn to Japan and 318,000 MT of beans to unknown destinations.

While most all of this sounds encouraging, this is not time to sit back and assume prices will just continue to chug higher.  Both December corn and November beans have now advanced around 16% during the last month or so and have pressed into what should be levels of significant resistance.  Add to this the fact that we are knocking on the door of harvest, and it may be difficult to justify much more strength from here.

Kein Schweinefleisch mehr von dir.  Whoops, sorry.  Some of my German heritage was sneaking through.  What I meant to say was, No more pork from you.  That was the message sent by Beijing to the German pork industry over the weekend in response to the confirmed African Swine Fever case in a wild boar.  As evidenced by the limit higher moves in the futures prices at the CME late last week, this ban was widely anticipated and came on the heels of a ban by South Korea.  Without a doubt, this has been a significant concern for the pork industry in Germany for the past couple of years as a number of cases of ASF have been confirmed in eastern Europe. Previously, infected wild boars have been found close to the border with Poland, but obviously, this one thought it had a visa to cross over.  Germany has been the third-largest supplier of pork into China, around 14%, and during the first four months of 2020, the exports had doubled over the previous year.  We shall see if this turns out to be a one-off, or in this case, one-boar event, but in the meantime, it could prove to be a bonus of other pork export nations.

Last week we reported that the President came down on the side of the ethanol industry by disallowing the blending waivers, which of course, risked losing votes from the petroleum group, but it would appear there is now a plan to try and bolster them as well.  Reportedly the administration is now looking at options to provide financial aid to those refiners denied waivers.  As I mentioned last week, the oil lobby seems to find a way, no matter how dark the path.