On The Money Grain Commentary 8-13-20

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Corn Outlook:

A good sign for grains? According to Citigroup, commodity assets under fund management rose to $570 billion in July, up 13 percent from June and 27 percent higher than a year ago. Their interest has been for energy, raw materials, and industrial metals. However, large institutional investors are beginning to show interest in grains as well. Since March, their long position has risen 18 percent in corn, 38 percent for soybeans, and 23 percent in wheat. This is a good omen down the road. In the meantime, corn must continue to wrestle with surplus stocks. Ending stocks for 2020-21 are forecast at 2.756 BB and world stocks at 317.5 million tons, up 2.0 percent over a year ago. Meanwhile, global usage is projected to increase 3.8 percent which is a move in the right direction.

Bean Outlook:

China has been consistent the past several weeks in making 1-3 purchases of U.S. soybeans each week. That may continue a few more weeks, but as harvest approaches, their interest will likely switch to South America. This week, the USDA increased their 2020-21 ending stocks estimate to 610 MB from 425 MB in July. While this was higher than expected, domestic usage is forecast to rise 2.3 percent. In addition, China’s imports are projected to be up 3.0 million tons from last month with Brazil’s exports increasing 1.0 million. This indicates that China may be taking a harder look at the U.S. for filling the gap.

Wheat Outlook:

Wheat continues to be pressured from Egypt passing on U.S. offers in favor of Russia. Although the dollar has declined, Russia is still the cheapest source. In the latest USDA report, it showed Russia’s exports rising 1.5 million tons from the July report. Meanwhile, global stocks are 5.1 percent above a year ago and will offer resistance. In other developments, winter wheat harvest is winding down at 90 percent complete while harvest of the spring crop lags at 15 percent done versus the average of 25 percent.

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