Grains closed sharply lower on Wednesday:
Corn – 14 ½ cents/bu (Dec @ 4.01 ¾ )
Soybeans – 21 ¾ cents/bu (Jan @ 10.54 ¾ )
Chi Wheat – 7 cents/bu (Dec @ 6.08 ¾ )
Cdn $ -0.00755 (75.215 cents)
WTI Crude Oil +2.18/barrel (37.39)
Wednesday was an ugly day for anyone that was bullish grains, commodities or equities. Negative market sentiment ruled that day, as concerns build over the potential for economic slowdowns due to COVID-19 related restrictions that are being enacted across Europe. With skyrocketing Coronavirus infection levels, steps are being taken in France and Germany to slow the spread of the virus. Germany specifically has decided to close down all restaurants and bars for the next 30 days. Unfortunately, when steps are taken to shutter various industries, we already know that economies suffer. The over riding concern is that lockdowns will spread to North America, and those restrictions will ultimately lower the demand for raw commodities. Of course, the November 3rd USA Presidential election raises questions as to what the eventual winner will do with respect to American lockdowns.
This morning, the USDA announced the following Flash Daily sales:
- 207,000 tonnes of corn to South Korea (optional origin)
- 110,000 tonnes of soybeans to Egypt
- 120,000 tonnes of soybeans to Unknown destination
Weekly ethanol production in the USA rose by 28,000 barrels per day last week to 941,000 barrels/day. Stocks fell to a 4 year low of 19.601 million barrels. Year to date production levels are running 6.6% behind last year and 11% behind normal. The big concern for the ethanol market remains whether lockdowns further reduce driving in the USA, thereby reducing ethanol demand. The current pace of ethanol production is running about 50 million bushels of corn usage behind USDA estimates.
Soybeans broke on COVID-19 shutdown concerns, more rains for Brazil, and a lack of confirmed new Chinese business. Say what you will about rain and new Chinese export business, today’s drop was mostly about weakness in outside markets. The fundamentals for soybeans remain very strong, with the USDA most certainly looking at reducing their projected USA ending soybean stocks in their November Crop Report, strictly based on the pace of year to date export sales. However, when equities and commodities are falling dramatically, soybean values could not show independent strength, despite new sales for 230,000 tonnes (8.45 million bushels) today. The USA Dow Jones Industrial average fell 940 points (3.4%) today
Wheat futures performed the best of all grains today. Weakness was primarily tied to aforementioned concerns about COVID-19 lockdowns, but Chicago wheat futures did manage to pare it’s losses in half compared to earlier in the session, whereas corn and soybean futures closed within a penny of their respective lows for the day. Russia remains dry, with only scattered showers received and forecast. In today’s wheat markets, Russian grain values drive world prices, so until there is some moisture relief in the Black Sea, wheat prices should see underlying support.
On the day today, funds were thought to have been massive sellers, across the board. Funds were credited with selling an estimated 40,000 corn contracts (long 195,000), selling 30,000 soybean contracts (long 215,000), and selling 6,000 Chicago wheat contracts (long 33,000). We will likely need to see some outside market strength, or some unexpected bullish grain news in order to get funds back into the “buying” mode. In the short term, one would expect to see further long liquidation from speculators.