Closing Market Recap Friday 6-5
The first week of June has come to a close and with it 2020 is almost half way over. This year has been anything, but ordinary and predictable. Friday June 5th though seems to be bringing a change in the wind. All week there has been employment data released and for the most part it has been very friendly to the equities. While being deflationary to the US Dollar. ADP National Employment data out Wednesday showed the US lost 2.76 million jobs in the month of May. That is the second worst reading since the report began, but is a far cry from April’s revised 19.6 million jobs lost. Analysts ahead of the report were also expecting the number of jobless to climb closer to 8.75 million jobs in May. On Friday non farm payrolls grew by 2.5 million in May. Dropping unemployment to 13%. Well above analysts expectations and far away from April’s 19%. This help to put a rocket on the DOW Jones now near striking distance of it’s all time high where it started 2020.
Still in this almost fairy tale recovery from March to June there is still a lot to consider. Including the current civil unrest that is hitting the US. This will further delay some businesses reopening in major urban area’s. It may also be the final blow for others. Then there’s the question of the Federal Reserve’s balance sheet. Part of the reason the current economy has taken off like it has is the near $7.2 trillion up over $3 trillion in the last three months. At some point this has to be unwound and that could quickly reverse the current market sentiment. Make note though this won’t happen overnight and there should be ample discussion leading up to that point. With Friday’s strong gains though Congress looks like it might put the breaks on another round of stimulus some analysts peg at a trillion dollars. John Payne, Daniels Ag Marketing, made mention of the stimulus possibility in his Friday afternoon commentary. He believes that if another round of stimulus is passed and continues to grow the FED’s balance sheet that should put even more pressure to break the dollar.
While there is plenty to be concerned about, the economy looks to be getting back on it’s feet. For the bulls that have been hoping for a positive reopening they seem to be getting most of their wish.
The US Dollar came back a little on Friday, but has been in deflation mode so far in June. Thursday saw the largest single day dip of 0.65%. Making a total drop up to June 4 of 1.75%. The selling comes to the dollar as traders and investors start to thaw money from the safe haven asset and move it back into equities and even commodities. Investment banks even released news that they were allowing traders to take short position in against the US Dollar. With the dollar lower the Brazilian Real has traded to it’s strongest levels against the US Dollar since mid April. That is helping to steer export interest to the US especially in the ag commodities.
The lurking shark in the water to all of this positive sentiment in the market has got to be US China relations. Which still feel fairly cold. China did have to swallow a bitter sweet pill this week, but they did it with a head fake. Early Monday China announced they had told state buyers to not buy US commodities. Only for Reuters to report Chinese state grain buyers buying US soybeans out of the PNW late Monday afternoon. USDA confirmed these buys Tuesday morning with a flash sale of 132,000 MT of soybeans sold to China for the 2020/2021 marketing year. Wednesday brought another round of soybean buying by China. USDA announced a flash sale of 186,000 MT of soybeans sold to China. 66,000 MT in the 2019/2020 marketing year and 120,000 MT for the 2020/2021 marketing year. Thursday USDA announced another 120,000 MT were sold to unknown destinations. Friday finished a strong week of sales announced by USDA with two orders totaling 588,000 MT sold to unknown split between marketing year. Analysts fully expect that China is the buyer.
Arlan Suderman with INTL FC Stone told reporters that China has few options for soy right now. The rising Real has made US supplies much more affordable and China still needs to buy to bridge the gap until the next South American harvest.
Out Thursday morning was the latest exports sales from USDA. China was a notable buyer of wheat (China 74,000 MT sales, shipments 189,000 MT), sorghum ( China 70,100 MT sales, shipments 72,900 MT), and soybeans (China 201,000 MT sales). For proteins Hong Kong and China was a notable buyer of beef (Hong Kong 700 MT sales, shipments 1,000 MT) (China 700 MT sales, shipments 300 MT) and pork (China 3.400 MT decreases of 1,400 MT sales, shipments 13,200 MT).
Other highlights from the USDA export sales report showed wheat shipments were a marketing year high at 752,800 MT. Corn shipments were also over a million metric tons at 1,346,800 MT up 27% from the previous week.
Energy reports out Wednesday were not what the bulls wanted to see. US crude oil stocks did drop 2.1 million barrels, but the strategic petroleum reserve for the US grew 4 million barrels. Gasoline and diesel fuel inventories also climbed a combined 12.7 million barrels. That put added pressure on RBOB unleaded gas futures and crude oil futures. US daily oil production did fall 200,000 barrels per day to 11.2 million barrels per day. The smallest daily US production since October 2018.
The grain trade ended mixed on Friday corn and soybeans seemed to find more buyers on the latest export news. Corn is starting to shake some of the net shorts in the market as it holds nearby moving averages. Overall sentiment seems to be changing in the grain complex with the dollar lowering and export demand seemingly growing. Still the overall health of the corn and soybean crop look good. There is also a WASDE report out next Thursday June 11 that could throw a wrench for demand bulls. As for wheat it dropped on Friday, but that could be merely profit taking. Winter wheat has the best weather story so far with hot weather continuing over much of the winter wheat belt. Mid week Mark Gold, Top Third Ag Marketing, made mention in his morning commentary that early yields coming from Texas are all over the place. From as low as 3 bpa to as high as 70 bpa.
The June 1 report showed national corn improving 4% to 74% good to excellent. Nebraska remained unchanged at 82% good to excellent. Kansas corn improved 4% to 67% good to excellent. Soybean condition rating showed nationally 70% good to excellent. Nebraska is better at 82% good to excellent. Kansas is currently 68% good to excellent. Iowa has one of the best soybean crops in the nation at 81% good to excellent.
In an international Egyptian tender Ukraine is coming in with the most affordable wheat at $210/MT. Russian bids ranged from $213-$221/MT on five different bids. French wheat was priced in the tender at $215.69/MT. The US does not appear to have a bid in the tender. Paris milling wheat futures are about 0.1% higher on the news.
Monday export inspection report from the USDA showed weekly increases for corn at 1,128,091 MT, soybeans 396,387 MT, wheat 499,353 MT. Sorghum was the weekly decrease at 125,119 MT. Looking at the year to year comparisons corn still lags almost 11 MMT vs. the previous year (28,484,807 MT vs. 39,327,338 MT). Sorghum see’s the largest year over year gains (3,317,783 MT vs. 7,413,253 MT).
Livestock have been mixed all week. Up to Thursday lean hogs saw strong selling in the front months as traders braced for China to start canceling exports or sales as retaliation to the US. Those fears were quelled with the latest USDA export sales report showing China a major buyer and destination for US pork. Cattle tried to make early gains, but lost them by Friday. Overall though cattle seem to be in a listless sideways trade. Slaughter continues to increase this week and that his helping to ensure plenty of protein in the product pipeline. Now though civil unrest is not helping to get consumers to the stores and restaurants in many urban areas. Plus cash continues in a wide range that is softer than the previous week.
By Friday cash trade trickled in all week between $105-$118 live and $170-$185 dressed.
The Fed Cattle Exchange Auction Wednesday listed a total of 1,736 head, with 199 head actually sold, 1,537 head listed as unsold, and 0 head listed as PO (Passed Offer). The state by state breakdown looks like this: KS 1,104 total head, with no sales; NE 284 total head, with no sales; TX 348 total head, with 199 head sold at $110.50, 149 head were unsold. The delivery date/weighted averages breakdown is as listed: 1-9 day delivery: 739 head total, no sales; 1-17 day delivery 997 head total, 199 head sold, with a weighted average price of $110.50.
For the week ending May 23, 2020, Imported Beef Passed for Entry in the U.S. totaled 40,697, 97.60% of the previous week and 105.90% of the 4-week average.
Expected Slaughter numbers Friday
115,000 hd today 111,000 hd wk ago 119,021 hd yr ago
63,000 hd Sat. 74,000 hd wk ago 63,356 hd yr ago
438,000 hd today 413,000 wk ago 467,895 hd yr ago
332,000 hd Sat. 290,000 wk ago 51,773 hd yr ago
Midday Carcass Value Friday
Choice dn 6.42 265.84
Select dn 5.98 254.43
C/S Spread 11.41
Carcass up 2.90 77.75
Bellies up 2.80 101.23
- Corn up 1 3/4 -2 1/2
- Soybeans up 1 1/4 – 4
- Chicago Wht dn 4 1/4 – 8 1/2
- Kansas City Wht dn 8 – 11
- Live Cattle dn 0.17 – 1.82
- Feeder Cattle dn 0.55 – 1.35
- Lean Hogs dn 0.97 up 1.67
- Class III Milk dn 0.02 – 0.41
Pre-Opening Market Broker Commentary
Mark Gold, Top Third Ag Marketing, discusses overnight grains and what the trade may see today. Friday could see some short covering in corn. Funds appear to be long wheat and soybeans now.
Jerry Stowell, Country Futures, looks at what may impact the livestock futures today. The jobs report looks to support cattle. Weaker cash looks to go against cattle.
Mike Zuzolo, Global Commodity Analytics, takes a look at the midday trade. Zuzolo believes profit taking is happening on Friday.
John Payne, Daniels Ag Marketing, looks at the grain settlements. The dollar continues to break. Currencies are a huge driver on Friday.
Jack Fenske, York Commodities, looks at the closing market numbers. cycle. Report from Thursday 6-4. No report for Friday 6-5