Grains ended the day mixed on Tuesday:
Corn + 3 ¾ cents/bu (May @ 3.31 ½ )
Soybeans – ¾ cent/bu (May @ 8.54 ¾ )
Chi Wheat – 6 ½ cents/bu (May @ 5.49 ¼ )
Cdn $ +0.00650 (71.535 cents)
WIT Crude Oil -2.45/barrel (23.63)
Another quiet day for news in grain marketing circles today. Overnight, we saw a nice bump higher in corn and soybean values, with support coming from generally higher outside commodity prices and from world stock markets that were rallying significantly as well. Overnight wheat values traded lower, giving up much of their Monday gains, as the USDA winter wheat condition ratings were deemed to be better than expected (although just two per cent better than they were for the same time last year). The outside market support came from a growing sentiment that the social distancing being employed to combat COVID-19 is having the desired effect, and that we might be on the cusp of the worst Coronavirus news in Europe and the USA, with better times ahead. That type of thinking had some starting to look forward, in terms of when parts of the economy might fire back up again. That seems to be a head scratching projection, given that the USA is reporting another 1,700 plus COVID-19 deaths today, but the Chinese are touting that they expect there economy to be back at full scale by the first of May.
Unfortunately, for market bulls, USA equity markets were not able to hang onto their gains as the afternoon progressed, and rampant American COVID-19 infection levels increased yet again. At time of writing, the USA had 26.0261 new cases today (393.030 overall), with 1,786 new deaths reported (12,657 overall). Those sobering numbers contributed to a sell off, where we saw Dow futures close only 3 points higher (22,491), after having traded as much as 989 points higher earlier in the day.
Corn’s rally was quite impressive early in the session. After 7 straight down days, there is little doubt that corn was oversold, and poised for an up day. Initial buying fed on itself, and brought technical short covering buying to the market. That allowed May futures to trade through initial resistance at 3.31, and ultimately test the next level of resistance at 3.35. Corn futures traded up almost 8 cents per bushel higher on the day before pulling back, as outside markets began to give up much of their earlier market gains. The close for corn has got to be viewed as disappointing for not being stronger. The moral victory of closing higher does little for the technical chart pattern. Hopefully, we see some export buying develop that will allow us to take another step higher.
Soybeans also rallied initially on outside strength, but the bean futures trade was more of a two-sided affair all day on Tuesday. No new export business was reported, and reports from China of decreased month to date receipt of soybean vessels put the bean complex on the defensive. Brazilian bean offers are a good 30 to 35 cents per bushel lower than USA equivalent, and with the White House ramping up Chinese rhetoric over the Coronavirus pandemic, it does not appear to be the environment where China suddenly comes to the plate to buy American beans. One other potential negative for soybeans is the fact that the current production economics for soybeans far outweigh the returns per acre for growing corn in most of the USA Midwest. While big acreage shifts are not yet being forecast, if there are any such moves, it will result in more beans going in the ground.
Wheat values slumped on the perception of good growing conditions for the USA winter wheat crop. Nothing else has really changed from a global wheat perspective. Black Sea production zone remains dry, as does much of Argentina. USA wheat prices are basically equivalent to Russian offers. Many wheat tenders will be filled in the coming days. The USA needs to participate in some of this business, but if it does, wheat should be well supported.
Today, the USDA did advise that it was going to “re-survey” producers from Minnesota, South Dakota, Wisconsin, and Michigan to once again determine yields from unharvested 2019 soybean and corn acres. If there are any significant changes, those will be factored into the May 2020 Crop Report. A “re=survey” of North Dakota will also be done, but since there is still significant standing acres left today in that State, it will happen later this spring than the other States.
The Canadian dollar jumped higher in early trading today, as optimism over COVID-19 and over OPEC’s Thursday meeting regarding production cuts had positive risk sentiment, which generally supports the Loonie. Surprisingly, the late sell off in crude futures did not dampen the strength of our dollar. Will have to watch news overnight regarding the OPEC meeting, to see if oil can recover today’s losses. At any rate, the stronger Loonie is NOT good for grain basis levels, and we might see further basis weakness tomorrow if current Fx levels hold.
ON the day today, funds were thought to have bought 11,000 corn contracts (now short 134,000), while selling 1,000 soybean contracts (now even), and selling an estimated 4,000 Chicago wheat contracts (now long 27,000).