At a glance:
- Physical sales increased due to a Chicago Board of Trade (CBOT) board price rally that was itself driven by speculators exiting short positions
- Significantly behind on corn planting; heavy rains moved into Midwest, further delaying planting
- $16 billion in farm aid announced
- Markets are closed Sunday night to Monday in observation of the Memorial Day holiday
- Technical: The market opened this week with a strong corn price rally, driven by speculative short covering of positions. The expected loss of corn acres due to preventative plantings is finally being noticed by the financial players at the Chicago Board of Trade. While the fund community bought back a minimal 9,424 contracts of corn, they remain short an estimated 285,000 contracts. This is part of their over-arching market basket of agricultural commodity position that has stayed put near 11-year lows at -913,605 contracts. Funds are estimated to only be 80,000 contracts short corn at this point.
- Weather: The Plains and Midwest have not had a break from the wet weather as heavy rains and tornadic storms moved into the areas this week. More rain is expected to pummel an already soggy Midwest. Flooding dangers increase as well, making river logistics more difficult. Two loose barges slammed into a dam on the flooded Arkansas River north of Webber Falls, Oklahoma, as flooding threats continue in the region.
- Crop progress: The U.S. planting progress is significantly behind the five-year average. The insurance final planting dates in the mid-central U.S. is coming up with the Midwest dates right on the doorstep. The USDA’s planting progress report has Indiana at 14% complete (normal 73%), Illinois at 24% (normal 89%), Ohio at 9% (normal 62%) and South Dakota at 19% (normal 76%). With the excessive rains, some analysts believe there will be some serious acreage declines from the March intention levels with about 2-5 million or 340-850 million bushels off the carryover.
- Trade: The Trump administration on Thursday announced a $16 billion farm aid package, amid the prolonged China trade war. Reuters reports payment rates to farmers would be determined by where they farm rather than what crops they grow. USDA officials said they will roll out $14.5 billion in direct payments in three separate tranches with the first one planned for late July.
- News: The 2019 crop year has faced significant economic impacts to the supply and demand balance from outside-the-system stimulus. The U.S.-China trade war continues to permeate into all financial markets with no visible resolution in sight. Years of above trendline production in the U.S. and South America have produced ample stockpiles of corn and soybean stocks that redefined the limits for how high analysts’ supply charts could go. Animal consuming units also took a large chunk out of the demand picture as African swine fever (ASF) destroyed more pork production in China than is produced in the entire U.S. pork industry annually.
- The markets are closed Sunday night to Monday in observation of the Memorial Day holiday; markets will reopen Monday night. Some analysts are looking for a volatile session after the three-day weekend. Most years, this is a key point for trade action in the grain markets, both up and down. The weekly USDA Crop Progress report will also be pushed to Tuesday, May 28, 3 p.m. CT.
DISCLAIMER: Commodity markets have inherent risk and Tyson Foods, Inc. assumes no liability for the use of any information contained herein. Information contained herein was obtained from sources believed to be reliable but is not guaranteed as to its accuracy. Any examples given are strictly hypothetical and no representation is being made that any person or entity will or is likely to achieve profits or losses similar to those examples. Neither the information, nor any opinion expressed, constitutes a solicitation to buy or sell futures or options on futures contracts. Every effort has been made to ensure the accuracy of the information and market data which is provided herein. Information has been obtained by Tyson Foods, Inc. from sources believed to be reliable. However, because of the possibility of human or mechanical error, Tyson does not guarantee the accuracy, adequacy of content or any information and is not responsible.