Trends on the futures markets were mixed last week
Soybeans were higher last week due to improved Chinese demand. The demand came despite the war of words between the US and China. Rice was a little higher in new crop months and much higher in old crop July. However, July collapsed on Friday as the funds initially bought the market and then were forced to sell. World vegetable oils markets were higher last week.
Wheat markets were lower. The Winter Wheat markets hold to bearish trends on the weekly charts and this is especially true for the HRW market. Spring Wheat markets show more mixed trends but the us and Canadian crops are getting planted and are reported to be in mostly good condition. The harvest has started in the central and southern Great Plains with variable yields reported because of freeze damage and then stress from hot ND DRY WEATHER. It remains dry in the western sections of the Great Plains but this will aid harvest progress now. Better rains are reported in Europe and Russia. Australia remains in good condition. Competition for sales is expected to be tough even with less in the US and Europe as Australia is coming back after years of drought and as Russia has better weather and improved production prospects. The harvest is coming and prices usually start to move lower soon and remain down through the harvest. Any rally at this time might not go very far and the weekly charts point to lower prices for Winter Wheat markets.
Corn was higher on what appeared to be fund short covering. There did not appear to be much in the fundamentals to trigger the move, but a seasonal rally is underway with the crops planted and nothing else going on to drive prices lower. This rally can last another week or two as the market waits to see longer range forecasts covering Corn pollination in July. Meats processors are back and are aiming to restore 80% to 85% of capacity kill rates in their plants. The backlog of Cattle and Hogs will slowly disappear under this scenario and meats wholesale and retail prices will fall. This will take some time, but it is starting to come to pass. Ethanol demand is also improving as lockdown orders are lifter in most states and in Europe. Demand for gasoline and ethanol has gotten a little stronger and should continue to improve over time. All this still implies that ending stocks for Corn as projected by USDA can increase, but the increase should not be as great as originally thought. Export demand is becoming more difficult with US prices quoted above those in Argentina and Ukraine. The rally in Oats came to an abrupt end on the release of the employment data in the US. It showed more people are working and less in need of Oatmeal at home, a good sign for the economy but a bad sign for commodities supported by stay at home orders caused by the Coronavirus such as Oats.
Soybeans and Soybean Meal
Soybeans were higher due to improved Chinese demand. The demand came despite the war of words between the US and China. The Chinese moves to clamp down on Hong Kong dissent was going to be a big negative for the market as the political situation between the US and China has deteriorated. China is looking to curb the dissent in Hong Kong over moves to bring the city more under central government control from Beijing. The world has objected and the US has now imposed some additional sanctions on the country. The sanctions were designed to keep trade flowing between the countries so the Chinese kept buying. China has remained a very active buyer in South America even as it has increased Soybeans buying here in the US, so the overall amount taken from the US might not match the hopes of the trade. Brazil prices have been creeping higher for thee rest of the world as it starts to run out of Soybeans to export, so China and the rest of the world will look to the US and Argentina for additional supplies.
Rice was a little higher in new crop months and much higher in old crop July. However, July collapsed on Friday as the funds initially bought the market and then were forced to sell. They found little buying interest and July spent most of Friday at limit down after trading at or near limit up for the previous three days. The Friday move implies that the dramatic rise in old crop Rice futures has ended. New crop months were a little higher in sympathy with the rally in July and held in the face of the limit down activity in July. The funds were buying the old crop futures on ideas of supply tightness. The combination of good export buying in general and the buying inside the US due to the Coronavirus has made the market short Rice. There are ideas that the mills are well covered into new crop, but little Rice is available from producers. Most of the unsold Rice is in Arkansas. The crops are in very good condition in the south and near the Gulf Coast but planting has been problematic in parts of Mississippi, Arkansas, and Missouri. Ideas are that the long grain will get planted and producers will not plant medium grain if some prevent planting is needed. There are still ideas that the US will have a much bigger crop to harvest this Fall.
Palm Oil and Vegetable Oils
World vegetable oils markets were higher last week. Palm Oil closed higher after news of renewed demand interest from India and China and on reports of less production from southern Malaysia. Palm Oil has been hoping for better demand from importers as world economies slowly open after being closed by the Coronavirus epidemic. A government change in Malaysia helped open the Indian market to Malaysian imports again. Southern Malaysia producers reported a sharp drop in production and there are ideas that all of Malaysia will come in below previous months. Indonesia continues to focus its Palm Oil on internal demand for bio fuels. Soybean Oil was higher last week and Canola was lower. Canola fell on improved growing conditions in the Canadian Prairies. Canola has found support from the recent recovery in Soybeans and Soybean Oil along with a weaker Canadian Dollar. Canola is more of a food oil than the others, although it also has bio fuels uses. China has recently allowed Canadian Canola imports to resume, so demand could soon improve. However, a BC judge ruled against the release of the Huiwai executive last week and this renewed trade tensions between Canada and China. The weather has been warmer the past couple of weeks after weeks of cold and wet weather.
Cotton closed higher on the back of unexpectedly good employment data released by the US government on Friday. Signs of an improving economy in the US and around the world really helped ideas of better Cotton demand despite a negative export sales report that was released on Thursday. Export sales were negative last week for old crop and were only slightly positive for new crop. There is concern that China will stop fulfilling its obligations in the Phase One trade deal due to ramped up US rhetoric on the Chinese response to the Coronavirus epidemic and now the unrest in Hong Kong. The world is starting to slowly recover from the Coronavirus scare and some stores are starting to open again after being closed for weeks. The retail demand has been slow to develop as many consumers got hurt economically due to stay at home orders during the height of the pandemic and have little disposable funds to spend on clothes. Demand will slowly improve but the industry should have plenty of supplies to work with in the short term.
Frozen Concentrated Orange Juice and Citrus
FCOJ was higher and chart patterns remain positive, especially for the weekly charts. Support is coming from the continued effects from the Coronavirus that are keeping people at home and drinking Orange Juice. Demand from grocery stores has remained strong in response to the increased consumer demand. Oranges production was estimated as less in the latest USDA reports at below 70 million boxes, so supplies available to the market are somewhat reduced. Inventories in cold storage remain solid so there will be FCOJ to meet the demand. There is increasing concern about the food service demand not improving even with the partial opening of the states. The weather in Florida is currently good for the crops. Southern areas are cooler and have seen more frequent showers. The tree condition is called good. The Valencia harvest is in full swing. Brazil has been dry and irrigation has been used.
Futures were higher in New York and in London. The demand from coffee shops and other food service operations is improving but is still at very low levels. Consumers are still drinking Coffee at home, but many smaller roasters are actively trying to unload green coffee already bought a there are only a few outlets for sales at this time. The logistics of moving Coffee from Central and South America remain difficult. Producers have had trouble getting workers to pick the cherries and mills and processors have had trouble getting workers to staff the plants. Shipping logistics have improved somewhat, but many are still having trouble getting the Coffee to ports to move to consumer nations. Vietnamese producers are not selling due to the weaker prices paid currently. Indonesian producers are more active sellers.
New York and London closed higher in part on stronger petroleum prices. The market acts as if there is a short supply of White Sugar available. The Brazil mills are trying to cover the lack of White Sugar in the market but might switch back to producing ethanol soon if prices continue to improve for the ethanol. Reports indicate that little is on offer from India in part due to logistical and harvest problems caused by the Coronavirus. India is thought to have a very big crop of Sugarcane this year but getting it into Sugar and into export position has become extremely difficult. Thailand might also have less this year due to reduced planted area and erratic rains during the monsoon season. There are reduced flows from rivers from China as well.
New York and London closed lower. Some of the trading was related to changes in currency relationships between the US Dollar and British Pound. Ideas are that deliveries can be slower on any contracted Cocoa and that the next crop could suffer as workers stay away. The Coronavirus helps keep demand away and helps keep workers from grinding facilities and chocolate manufacturers. The removal of the lockdowns should improve demand in the short term. Harvest is now over for the main crop in West Africa and the results so far are very good. The reports from West Africa imply that a big harvest in the region. Ideas are that Southeast Asia also has good crops.
(Featured image by Pete Linforth from Pixabay)
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