Wheat Rises as Weather Threatens to Shrink Crop
July 14 2020 - 3:54PM
Dow Jones News
By Kirk Maltais
--Wheat for September delivery rose 0.4% to $5.26 3/4 a bushel
on the Chicago Board of Trade Tuesday, with a decline in crop
quality spearheading the notion among traders that U.S. wheat
supplies may be tighter than those of corn or soybeans.
--Soybeans for November delivery rose 0.3% to $8.77 1/2 a
bushel.
--Corn for December delivery fell 0.8% to $3.33 3/4 a
bushel.
HIGHLIGHTS
Scarcity Scare: Weather factors are dominating trading for
grains futures across the board, but this is most true for
wheat--with the most-active wheat contract leading grains higher
Tuesday. "Wheat is our leader--still: if we are going to see higher
prices in corn and soybeans, I think the wheat fundamentals are
where this begins; and then the weather plays the next major part,"
said Mike Zuzolo of Global Commodity Analytics. Spring wheat
conditions are down from last year, as is production, according to
USDA data.
Lower Quality: The USDA's crop progress report released after
Monday's close showed a 2% decline in corn crop quality, and a 3%
decline in soybean crop quality. Corn in good or excellent
condition totaled 69%, while soybeans totaled 68%. This decline was
expected, since hot weather has been an issue for crops over the
past week. "Even with these declines the crop ratings are still
historically high," said Karl Setzer of AgriVisor. "Given current
weather conditions it would not be surprising to see these ratings
bounce back next week." Even so, the decline in quality is expected
to impact production numbers, providing support for CBOT
futures.
Selling Opportunity: Confirmation of China purchasing over 1.7
million metric tons of U.S. corn exports for delivery in the
2020/21 marketing year Tuesday sparked selling by traders--pushing
the most-active contract down from its overnight starting place.
While the purchase confirmation is a bullish indicator, traders are
opting to lock in profits instead of pushing prices back up. "You
should be using the rally to catch up on sales," John Payne of
Daniels Trading advised clients in a note Tuesday. It is the
biggest one-time corn purchase by China on record.
INSIGHTS
Wrecked Recovery?: An uptick in cases of Covid-19 seen in many
states could halt the recovery seen in ethanol production, said
Tomm Pfitzenmaier of Summit Commodity Brokerage. "There is a lot of
concern that if more states begin to shut back down over Covid
concerns, that could affect gasoline demand and thus the demand for
ethanol," said Pfitzenmaier. Back in late April, ethanol production
hit its lowest level since reporting on this data began in 2010,
totaling 537,000 barrels a day, according to EIA data. Recovery has
since recovered to 914,000 barrels a day, but that may soon hit a
wall if more shutdowns are required to quell a resurgence in the
disease, said Pfitzenmaier. The EIA will report updated ethanol
production data on Wednesday.
Rethinking Reopenings: The Covid-19 resurgence in some states
has leaders pushing back timelines for a full reopening of
businesses like restaurants. This is bad news for meat sellers, as
food service is the biggest consumer of meat. "Production levels
look to remain high in the weeks just ahead and many restaurants
restocked inventory in preparation of reopening but the progress
has been slow with the recent spike in new cases," said RJO
Futures. This is also bad news for farmers, who are relying on
livestock feed usage as a main source of grains consumption.
According to Johns Hopkins, some 3.36 million Americans have been
infected with Covid-19 since the pandemic began.
AHEAD:
--The EIA releases its weekly update on ethanol production and
inventories at 10:30 a.m. ET Wednesday.
--The USDA will release its latest weekly export sales numbers
at 8:30 a.m. ET Thursday.
--Rail transportation provider Kansas City Southern reports its
second-quarter earnings before the market opens on Friday.
--The CFTC releases its weekly commitment of traders report at
3:30 p.m. ET Friday.
(END) Dow Jones Newswires
July 14, 2020 15:39 ET (19:39 GMT)
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