Grain markets closed mixed on Monday:
Corn – 3 cents/bu (May @ 3.27 ¾ )
Soybeans + 1 ¼ cents/bu (May @ 8.55 ½ )
Chi Wheat + 6 ½ cents/bu (May @ 5.55 ¾ )
Cdn $ +0.00180 (70.885 cents)
WTI Crude Oil -2.26/barrel (26.08)
Outside markets were mostly higher today, as optimism returns that the fight against the COVID-19 pandemic may be showing some positive signs. USA equities had their best day since the 3rd week of March, with the Dow Jones Industrial Average closing up 7.7% or 1,627 points higher. New cases in the European hot spots of Spain, Italy, and France fell off today, and with New York City suggesting that the incidence of new cases are flattening out, markets were able to inject some enthusiasm that an economic recovery might be able to happen sooner than was projected last week. Of course, we are weeks, if not months away from being able to project when major economic engines will start to turn again, but today’s slowing infection rates gave some hope that social distancing is having a positive impact.
While most commodities were able to close higher today, crude oil suffered from the postponement of today’s OPEC production cut meeting to this Thursday. Oil markets had rallied sharply on Thursday and Friday of last week on hopes of a 10 to 15 million barrel production cut. The Russian Oil Minister confirmed today that talks were going very well with the Saudi’s, and that he expected to arrive at an agreement, but even those words could not quell the selling.
Weakness in oil futures did not help the corn, or soybean markets today, but it was the continued discussion of collapsing ethanol demand that really told the story for corn today. The pessimists won out, in terms of trying to predict when USA domestic gasoline demand will recover. No one can say for sure when that might be, but whereas other markets were able to bounce higher today on the improving Coronavirus perceptions, corn simply could not. I have a tough time getting overly bearish at today’s price levels, but I do believe that the next 2 to 3 weeks (at least) will continue to be weak for corn, until such a time as some shelter in place edicts start to soften. Right now, the average trade guess suggests that Thursday’s USDA Corn Supply and Demand tables will show 2019/20 corn stock growing by a couple hundred million bushels to 2.1 billion, but the range of estimates for the 2020/21 USA corn carryout range from 2.8 to 4 billion bushels!! A 4 billion bushels corn carryout does not provide much in the way of price recovery potential.
Wheat futures were strong all day for a couple of good reasons. First and foremost, world wheat values rallied today, as large tenders were made for wheat, and the recent Russian wheat export quotas increase the likelihood of some wheat business coming to the USA. Secondly, dry conditions continue to persist in the Black Sea production zone, where March precipitation proved to be lacking – allowing March to be the 4th driest in the last 40 years. There are some rains forecast this week for northern zones of the region, but overall, we are looking at dryness for the next couple of weeks in vast swaths of Russia and the Ukraine. If that materializes, it will be very friendly for wheat values, and will also take a big bite out of world corn production numbers.
Soybeans were initially lower based on the lower crude oil prices, and resultant negative impact on biodiesel values. Soybeans started to get support in the day trading session, as dryness in southern Brazil and Argentina is causing local analysts to make further downward revisions to South American bean production. Argentina’s bean crop can get significantly smaller, but the Brazilian bean crop is said to be 83% harvested, so losses there will not be as significant. Dryness in Brazil will impact 2nd crop safrihna, as will dryness in Argentina impact their corn crop as well. No talk today about port disruptions in either country, so it would appear that the governments have gotten their act together on allowing trucks to roll to crushers and port terminals.
After the close of the market this afternoon, the USDA released it’s first Crop Progress Report of 2020. Today’s report only referenced cotton, rice, and sorghum planting progress, and winter wheat conditions. Hopefully, next week will start to show corn planting numbers. With respect to winter wheat ratings, the USDA pegged the 2020 winter wheat crop at 62% good/excellent this week, which compares to 60% good/excellent for the same period last year. Kansas (49% good/excellent), Colorado (48% g/e), and Missouri (41% g/e) were the only major wheat producing States to lag behind the average national ratings, with most other States having good/excellent ratings in the 60’s to high 70’s. The trade was expecting to see decent crop ratings in today’s numbers, so today’s crop ratings should be market neutral.
On the day today, funds were thought to have be sellers of 10,000 corn contracts (now short 144,000), buyers of 1,000 soybean contracts (now short 1,000), and buyers of 5,000 Chicago wheat contracts (now long 31,000).
Floyd Howard | Grain Merchandising Manager | Wanstead Farmers Co-operative Company Ltd. |
PH: 519-845-3301 | Cell: 519-328-8481 | e-mail floydh@wansteadfarmerscoop.com
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