- Chicago ag futures are mixed but mostly lower at midday. Corn has followed crude lower. Wheat continues to struggle amid ongoing declines in Black Sea cash prices. Soybeans are firm on the heels of modest export demand. Spot WTI crude has done little since the overnight session and is down $1.15/barrel. The Dow has extended its overnight loss to 980 points. The US administration has hinted at a deep cut to payroll taxes, but this does not look to have nearly enough bipartisan support in Congress. Governments across the world are proposing a host of stimulus packages.
- FAS’s daily reporting system featured a sale of US soybeans worth 194,000 mt to an unknown destination. 126,000 mt are designated for old crop delivery. This is likely China amid talk that Chinese importers had purchased 2-4 cargoes of US origin off the PNW. Additional sales announcements will be watched for this week and next, but we doubt this is the beginning of a major US soy buying program on behalf of China. China has secured most of its spring/early summer needs from Brazil. Argentine soybean offers for Jun-Jul arrival have become more consistent and are well below US origin.
- US ethanol production through the week ending March 6 totalled 307 million gallons, down 10 million on the previous week but up 10 million on the same week in 2019. Stocks fell slightly as export and blend disappearance stayed intact. But at 1,022 million gallons current US ethanol stocks are still record large for early March and near the all-time high scored the prior week.
- US crude stocks also rose by 7.7 million barrels last week. This is an untimely boost in stocks as the Saudi-Russia battle for market share will be ongoing for some time, Saudi stated this morning it would not back off its production levels. It is also clear Russia aims to reduce the footprint of US shale on the world energy market and indeed US shale production will struggle to make ends meet at current prices. Crude rallies will be laboured as supply rises and demand stays weak until coronavirus is contained.
- The message is that weak energy prices are a bit more structural in nature, while coronavirus could lose its grip on financial markets by summer. Still, the potential return of COVID-19 next autumn will linger in the background throughout the next several months.
- Other news is lacking. A rather wet pattern will continue across the mid-South and Southern Midwest into the final days of March. This will begin to attract attention in April, but ag markets will be dominated by macro conditions in the near term.
- We also mention that Northern Plains snow cover is far below what it was in mid-March a year ago. Recall the Dakotas, MN and WI were blanketed by 10-20″ plus of snow on March 11, 2019.
- The midday forecast remains consistent. Moderate to heavy rainfall will linger across Central Argentina throughout the next 3-4 days, with cumulative totals into Sunday pegged in a range of 0.50-2.00″. The midday GFS forecast has also pulled better rain chances in Southern Brazil into its 10-day forecast. This further boosts ours confidence that a pronounced and favourable pattern shift lies ahead in Brazil.
- Macro market weakness will continue for some time and finding offsetting bullish ag input is difficult. It is tough to be overly bullish ahead of the N Hemisphere growing season, but oversupply will dominate without yield loss.
- Also, it is crucial to recognise “big picture” risks as the 2020 growing season approaches. Lasting rallies have been tough to sustain in recent years as S American planting commences soon after US yields are determined. We expect this to be replicated in 2020.