In Monday’s Crop Progress Report, USDA showed that the crop condition declined in quality from the week prior. According to Rick Hollister, senior merchant with The Andersons, the biggest reason conditions fell was deterioration in Nebraska.
“About 10 percent of the crop fell out of the good to excellent rating down to fair, so that was significant for a week-on-week change,” he said. “We also hear about corn stressing a little bit in the central Corn Belt due to lack of moisture this week and wanting another rain as most of the eastern Midwest missed the rain.”
Since the report, corn and soybean traders didn’t have much reaction to the report. Until purchases of corn from China were announced Wednesday, corn was trading flat. Hollister said that purchase announcement was encouraging, and soybean purchases from the U.S. and South America have remained large, supporting soy meal.
“Soybean meal stocks in China have recovered from the low levels they were at in late winter,” he said. “For eight weeks, the inventories of soybean meal in China have grown week-on-week. They’re actually buying and processing more soybeans than they actually need at this moment and are rebuilding their stocks and inventories.”
Earlier in the week, Beijing announced nearly 140 cases of COVID-19, which has causes concerns of a second wave. Hollister said one theory of why China is trying to build their inventories is to prepare for another shutdown.
“[That would] hamper their ability to import and their ability to process,” he said.
Here in the U.S., two of the main weather models are showing conflicting reports: one is showing a continuation of dry, warm weather. The other is showing rain. Hollister said the funds have built up their short position in corn, and have added to the sell position.
“If we scare those guys out of that with some weather over the next few weeks, it could help the corn market quite a bit,” said Hollister. “Farmers need to be prepared to jump on a rally if we get one, but we’re watching the weather forecasts and this time of year, the markets are ultra-sensitive.”
Hollister shares some of the pressures on the wheat market in his full analysis in the player above.