RCM Ag Services

Category: Other News

05 Jun 2020
Agriculture, Corn, Cotton, Market Commentary, Market Updates, Other News, Soybeans rcmagserv 0 comment

Ag Markets Update: May 30- June 5

Planting is close to done in most parts of the country with over 90% of corn in the ground. Now the focus will turn to weather as early growing season is an important time. With a tropical depression in the gulf, it makes it difficult to predict future weather patterns as they are constantly changing. One model predicts for a drought type pattern in the southern plains and western corn belt as the tropical storm Cristobal pulls a lot of energy, so we’ll see how that pans out. Corn prices have been steady the past few weeks with few purchases to get excited about and no early problems to the U.S. corn crop. As long as yield estimates for U.S. corn stays high, there does not seem to be many reasons for a rally unless there is a weather event or we start to see large purchases. Ethanol production has remained steady as reserves are starting to go down, which will hopefully lead to more plants opening back up. The chart below is for July corn and you can see the change in the 20 day moving average as it has begun to tick up.

Soybean prices got a boost this week as Chinese buying continued, despite the government telling companies to quit buying many U.S. Ag products in retaliation to Trump’s comments and policies about Hong Kong last week. Despite what people thought would initially hurt Chinese purchases, tensions seem to be cooling between the two countries (for now). A huge week of soybean meal exports helped fund short covering that gave beans a big boost on Thursday. Continued buying from China would be very supportive for beans, but a decline could see a retreat after recent strength. Look for bean planting to continue its good progress over the next week.

Cotton traded above $.60/pound this week for the first time in the July contract since March 16. Rising futures prices with smaller open interest usually leads to a price reversal, which this price move has seemed to follow. With more open interest in the December contract month, look for more volatility moving forward as speculators will look there. We are barely into the start of hurricane season and already on hurricane number 3 forming in the gulf. A long and consistent hurricane season could do a great deal of damage to the southeast Cotton crop. Cotton has always been sensitive to the U.S. dollar, so a weakening dollar the last couple of weeks has been supportive to prices.

DOW Jones

The Dow Jones continues its climb as it topped 26,000 this week. The markets have recovered quicker than many expected to get to this point. As states across the country have opened back up investors have an optimistic outlook for the rest of 2020. Continuing progress on the Covid-19 vaccine and no spikes in positive test results are all good things for the market and overall economy of the US. This will help people get back to work quickly and hopefully minimize the damage of the long shutdowns.

Crude Oil

Crude continues its climb back to normal prices as OPEC is in discussions to continue production cuts for June. Even though the world is opening back up and oil demand will ramp up, drilling needs to happen at the same rate to not create an oversupply. This agreement being extended would be supportive for crude.

29 May 2020
Agriculture, Corn, Crude Oil, Market Commentary, Market Updates, Other News, Soybeans rcmagserv 0 comment

AG MARKETS UPDATE: MAY 23-29

Planting is almost complete across the country as the final reported number was 88% planted this week. The weather outlook into early June is promising for many areas that were delayed in planting to still be able to get their crop in the ground in early June with the exception of parts of North Dakota that will be hard to catch up. With little news in the markets this month, trade has been pretty stagnant. July corn did trade at $3.30 in the July contract for the first time in over a month on Thursday before falling back to $3.27 ½ at the close. If July corn could close above $3.30 for the month of May it would be a very welcome sight after a month of very limited trading range.

(Barchart.com)

 

Soybean planting was estimated to be 65% complete this week, still well ahead of the average for this time of year. Like corn, the weather for the next week is promising for planting progress across most of the country. Purchases from China gave beans a boost early in the week but no follow up purchases have kept the news slow and prices steady. Any purchases from China, as has been the trend, would be helpful to prices along with an easing in political tensions. ASF news has been quiet as Covid-19 has been the big news story, but as China continues to replenish its hog populations that should help purchases in the future. November beans have been trading between $8.30 and $8.55 for most of the last month with $8.50 the current landing spot. While the bulls have been hopeful of size-able Chinese purchases, the reality has been small purchases with much of their purchases coming from Brazil.

(Barchart.com)

Crude Oil prices have had a great rally despite early worries that we would have another bottleneck problem like we did with the May crude contracts for July. As people around the country are going back to their daily lives, in some capacity they are driving again. The rest of this year should see increasing travel by car as people will look to drive to vacations rather than hoping on a plane. See the chart below to see the impressive rebound for the month of May.

(Barchart.com)

DOW Jones
The Dow Jones has continued its surge up as May will post another large gain despite record unemployment numbers. As states have begun reopening, traders are seeing this as promising for the markets as people will hopefully be returning to work. People continue to work from home in many major cities, or have the option to work from home, and will probably continue doing this as the summer goes on until the public feels safe to return to close to normal.

CFAP Relief Package
Enrollment for the CFAP Relief Package began this week on the 26th. If you have not already, reach out to your local FSA office to begin this process to make sure you do not miss out on any opportunity. The CFAP had scheduled payment of 32 cents per bushel from the original CARES Act and a CCC payment of 35 cents per bushel on the lower of 50% of last year’s production or 50% of your unpriced corn on January 15th. That works out to potentially receiving 67 cents on half of last year’s corn crop. The soybeans payment works the same with payments of 45 cents and 50 cents for a potential payment of 95 cents per bushel on 50% of last year’s bean crop. The math is not clear nor why January 15th was chosen, but those are the guidelines. Livestock is also covered in the payment and information on that from the USDA website can be found here. For more information on how to sign up for the CFAP Relief Package, check out this video.

30 Apr 2020
Corn, Crude Oil, Market Commentary, Market Updates, Meats, Other News, Soybeans rcmagserv 0 comment

Ag Markets Update: April 22-30

Corn planting has accelerated in the last week with planted acres now at 27% complete. This is 7% ahead of the normal pace and well ahead of where we were at this time in 2019. Still ahead of last year’s pace, the acres planted in the Eastern Corn Belt is lagging behind the rest of the country as they are stuck in a wet and cool weather pattern slowing their efforts to get in the field. As you can see from RJO’Brien’s U.S. Corn Planting Progress, the leading corn planted states are:

      • MN at 40%
      • IA at 39%
      • IL at 37%
      • NE at 20%

 

With parts of the country set to reopen this week, it will be important to keep your eye on what happens in the oil markets. If consumers start buying more gas and getting back to normal travel, look for ethanol demand to crawl back. There is no quick fix to these markets, any positive COVID-19 news remains the biggest boosts for these markets.

 

The biggest news in beans is that there is little to no news. Outside of some sales to China and Mexico, beans have been at the mercy of COVID-19 and Brazil. Soybean planting progress came in at 8% this week (average is 4%) as weather in a lot of areas was good over the weekend. U.S. bean prices continue to be competitive with South America, however SA beans are higher quality, leading them to be the preferred option:

U.S. soybean sales last week of 1.078 MMT (39.6 million bushels) fell in line with market expectations of 700k-1.2 MMT, but were the highest in 19 weeks. This comes with the return of Chinese buying with purchases of 618k tonnes for the week giving beans a much welcome price boost.

 

Crude Oil is still feeling the effects of last week’s historic day. While it has rebounded from the lows and is now trading in the $15 range, the outlook is still grim. As U.S. and World stocks are getting close to capacity, there are oil tankers anchored in place around the world’s oceans as they await instructions on where to deliver. The best case for oil prices comes with the world economy opening and consumers reverting back to normal means of consumption and any positive COVID-19 treatment news would be bullish for crude moving forward.

 

The COVID-19 pandemic has wreaked havoc on a number of critical U.S. industries, but none more strategically important than food production. In the livestock industry, the biggest concern is keeping processing plants staffed. Line speeds have slowed considerably, and in some cases, plants shuttered completely. U.S. beef production fell from 565 million pounds the week of March 23rd to 414 million pounds last week, down -27% from a month ago. Pork production is also dropping sharply with hog slaughter down nearly 650,000 head on a weekly basis. The backlog is forcing producers to destroy millions of market ready animals, break eggs, abort sows, and euthanize piglets. Meat supplies are contracting, pushing wholesale beef prices to record highs. Pork bellies that were being rendered a few weeks ago have tripled in price. Shortages in meat cases are imminent unless something changes quickly.

On April 28th, President Trump attempted to address this situation by invoking the Defense Production Act, which will require meat packing plants to remain open. A key component of the ACT releases packing plant owners (Tyson, Cargill, Smithfield, JBS et al) from liability if workers fall ill from COVID-19.  The announcement got immediate pushback from workers and labor unions representing 80% of the packing industry workforce.

 

Relief Package
The $19 Billion farm relief package that was announced a couple of weeks ago will touch most sectors of agriculture. Of the $19 Billion, $3.9 Billion will be direct payments for grain and soy growers, while the largest chunk of the money will be $9.6 Billion ($5.1 Billion for beef, $2.9 Billion for dairy and $1.6 Billion for hogs) to livestock producers that have been undercut by processing plant closures and logistic problems. Distribution of these funds will be made quickly according to various Senate sources.

“This aid will help keep food on Americans’ tables by providing a lifeline to farm families already hit by trade wars and severe weather.” – Zippy Duvall, President of the American Farm Bureau (USA Today)

Dow Jones
The Dow is up again this week on news from the Fed promising support for the economy, while also pledging to keep interest rates near zero and possible treatments for COVID-19. After a miserable February and March, April has been a good month for the market as continued hope of a light at the end of the tunnel along with strong responses by the Fed have pushed markets higher.

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