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Most Commodities Lower on Increased US China Tensions

by Steve Freed, VP of Grain Research

Grains are lower. SN is down 4 cents and near 8.30. CN is down 1 cent and near 3.16. WN is down 6 cents and near 5.10. US Stocks are lower. US Dollar is higher. Crude is lower. Gold is higher. Mondays trade will be closed due to holiday.

Concern about the impact on the global economies the virus may have offers resistance to stocks and commodities. NOAA 90 day US Midwest forecast suggest normal US summer weather and at least trend corn and soybean yields or better. Increase tension between US and China could trigger some liquidation of positions.

This week soybean prices trended lower on concern that tension between US and China could reduce the amount of US Ag goods including soybeans China will buy from US. Current old crop pace suggest that USDA estimate of US 201/20 soybean exports may be high. US soybean planting pace should be near 65 pct. Good gains were made in the west. But rains may have delayed east plantings. Warmer and drier weather in the east over the next few days could help dry soils for planting. South America soybean and soymeal prices are still a discount to buyers versus US.

Corn futures are still on the defensive due to drop in domestic fuel and ethanol demand. US animal numbers could be dropping with today’s cattle on feed report showing placements down 23-25 pct. South America corn prices are a discount to US. US export pace is also below levels to reach USDA goal. Talk of higher US 2020 supplies and record World 2020/21 supplies also limits gains. Corn futures are oversold and funds are record short. Rally in Crude has helped support corn prices. US corn plantings are near 90 pct.

Wheat futures rallied recently in part due to dry weather in parts of Europe and Black Sea suggesting lower crops there. Some rains in these areas and rains across parts of US South plains has also offered resistance to prices. Kansas Crop tour estimated Kansas 2020 wheat crop near 284 mil bu versus USDA 305. N Africa wheat crops are down and virus is dropping economies. World Bank offered a loan to help.

Managed funds were net buyers of 2,000 contracts of SRW Wheat; net sold 8,000 Corn; net sold 10,000 Soybeans; net sold 2,000 lots of Soymeal, and; net sold 2,000 Soyoil. We estimate Managed Money net long 3,000 contracts of SRW Wheat; net short 238,000 Corn; net long 20,000 Soybeans; net short 120,000 lots of Soymeal, and; net short 3,000 Soyoil.

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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