Yesterday we kicked off our Summer 2020 Grain Market Outlook and cmdty Updates Series with a webinar giving attendees the latest on the grain market as well as what’s new with cmdty by Barchart. Didn’t get the memo? No worries, we’ll fill you in now.
This webinar was hosted by Barchart’s Head of Commodities, Michael Browne and our guest host and grain expert, Darin Newsom. Since summertime tends to be the most volatile time for the grain, Darin wanted to make sure we’re up to speed on the current state of the grain market. But first, he needed to touch on how spring was one to remember. Darin explained that with Covid-19, we saw things that we never thought were possible, the most surprising being when we saw crude oil go to -$40 dollars per barrel.
From a spring to remember, Darin states that we’re now transitioning into a summer of unknowns. Soybean exports are currently nowhere near projections, the U.S. is a couple 150-200 million bushels short at least. Darin also explained that winter wheat harvest is just beginning and could also be behind.
As of May 21, export shipments of U.S. soybeans were at 1.3 billion bushels, at a time when a 5-year average of 87% of total shipments has moved. Darin explained that this pace projects marketing year total shipments of 1.5 billion bushels, roughly 220 million bushels below the previous marketing year’s reported shipments of 1.72 billion bushels.
Sales in shipments are also down from last year. On May 21, U.S. 2019-2020 soybean total sales stood at roughly 1.55 billion bushels, down about 9% from the previous marketing year’s 1.70 billion bushels for the same week. The biggest difference is a 43% decrease in outstanding sales heading into Q4, particularly given June 1 headlines regarding China and additional soybean purchases.
Darin also pointed out that the major trend of the National Soybean Price Index still looked to be down at the end of May, with a downside target near $7.45. Darin still sees a down trend, but if we start to see more sales for soybeans, he thinks this could be put to an end.
To better understand real supply and demand, Darin uses cmdty National Price Indexes, an index available through cmdty’s Grain Indexes. He said that at the end of May, the National Corn Price Index was showing a daily average of $3.45, a price that correlates to stocks-to-use of 12.6%. He notes that his monthly calculations have gone up slightly over Q3. However, his calculations remain well below the stocks-to-use arrived at using USDA’s monthly Supply and Demand report numbers, most recently 15.2%.
Darin then showed the regression analysis he uses to show the correlation between the cmdty National Corn Price Index, what he views as the intrinsic value of the market, and ending stocks-to-use back through the 2010-2011 marketing year. He pointed out that the previous three marketing years have seen USDA overstate its final ending stocks and subsequently ending stocks-to-use, in some cases by a substantial margin. According to his analysis of the National Corn Price Index, the U.S. supply of corn is not, nor has it been for many years, as large as what USDA continues to report.
He then switched our focus to the current state of winter wheat. As winter wheat harvest is underway, the cost of carry table on our commodity trading platform, cmdtyView shows the commercial view of HRW wheat fundamentals is more bearish than what we see in SRW wheat. He wanted to note that the HRW July-to-May forward curve is posting a carry of 33 1/2 and covering roughly 57% of calculated full commercial carry, while the SRW forward curve for the same contracts shows a carry of 24% and covering roughly $40 of calculated full commercial carry.
Darin wrapped it up by sharing what we can expect to see throughout the rest of summer. He said in regards to corn, to look for cash/old-crop to stabilize above spring lows with support coming from a round of noncommercial short-covering buying. He still sees a downtrend in soybeans with pressure from a continued slowdown in export demand, and finally he said he could still see winter wheat markets moving higher in June despite harvest, because the seasonal top tends to occur in early July.
After Darin’s in-depth grain market outlook, Michael jumped in to give a live demonstration of the brand new map features now available in cmdtyView. Michael first demonstrated that with these new, interactive maps users are able to view cash grain bids from about 4,000 elevators across the U.S. and Canada. In addition to viewing the elevator's bids and basis, cmdtyView users can also view historical data.
Within cmdtyView, users have many different options to customize their workspaces and be able to view data how they please. Michael showed us how you can view the actual prices for cash bids, making it convenient to get a grain market overview.
With this brand new map technology, users can now also view weather data within cmdtyView. Michael demonstrated how users can view precipitation, and how you can overlay different types of data, such as a drought monitor.
There are numerous USDA reports available in cmdtyStats which are now built into the maps in cmdtyView. Michael showed us how users can view the USDA progress report to see the progress of planting in each state. You can even see week by week how progress has changed throughout the season.
As you can see, the grain market is currently quite volatile, but thanks to all of the brand new technology now available in the cmdtyView platform, you can easily keep up. This webinar was in-depth and very informative, so although this recap holds a good amount of information, if you would like to learn even more, you can view the full webinar here.
If you missed this first webinar, make sure not to miss the two remaining webinars in this series! Darin and Michael will continue to keep you updated on the current state of the grain market throughout the entire summer as well as share the latest and greatest in data and technology from cmdty by Barchart. Register for the next two webinars here.