- Wheat/soybean futures are bouncing while corn values hold in the red. Corn prices are sagging on the worry over US export and biofuel demand while technical short covering provides lift to wheat/soybeans. A mixed Chicago close is expected with trade rather normal.
- May corn futures have accelerated their decline based on slowing US export and domestic demand. Goldman Sachs indicated that corn is the best grain to short amid its bearish fundamentals. Goldman argues that corn’s use in biofuel and for livestock feed consumption is in decline amid the Covid-19 crisis. We have an initial downside price target of $3.40-3.45. A more bearish outlook would likely require getting past the March 31 March Stocks report and a normal planting window for the 2020 crop. Then, May corn futures could drop to $3.20 longer term support.
- Chicago brokers estimate that funds have sold 8,400 contracts of corn, while being a net buyer of 3,200 contracts of wheat and 4,400 soybeans. In soy products, funds have bought 1,900 contracts of soymeal while selling 900 oil.
- The DOW has rallied more than 1,000 points on a news that the Trump Administration plans provide immediate emergency funds to Americans in need to stem the building economic damage of home stay. The US Central Bank injected funds into the commercial paper market to help the liquify the corporate debt market. The moves were timed to add confidence to consumers and investors. The problem is that a treatment or vaccine for Covid-19 would be much more effective in creating a lasting financial market bottom.
- There is no indication of buyers/importers becoming more interested/aggressive in their food import needs amid the Covid-19 virus spread. In fact, as demand for everything but the basic dry goods is in decline, importers worry about having a capability to offload cargoes and not rack up demurrage charges. The Covid-19 outbreak in China caused port workers to stay off the job, which cost importers millions in demurrage costs as vessels just waited at port.
- April cattle/hog futures have raced to limit gains on the need to restock the retail supply chain after the Covid-19 buying blitz of the weekend and recent days. Packers paid up $1/cwt on cash cattle on Monday and are likely to keep paying up to keep kill lines well supplied with stock. As consumers turn away from food service and to home cooking, the demand for ground beef and a host of other meat products is on the rise. We look for cash cattle and hogs to trade higher for the next several weeks on the demand pull.
- Russian fob wheat prices are weak amid lacklustre export demand at $205/mt. The fob Russian wheat weakness will persist until there is real weather threat for the new crop. It is a few weeks early for Russian weather to be a big factor in 2020 yield determination. That exercise will start in April.
- The midday GFS weather forecast offers few changes from the overnight run with more modest rainfall for Argentina and Southern Brazil of 0.5-1.25″ with totals across Central and Northern Brazil of 3-5.00″. Rain is needed across Southern Brazil with the best chance being in the next 48 hours. The rains across Northern and Central Brazil will be abundant.
- Tuesday rallies following sharp Monday slides have been commonplace in recent weeks. Chicago traders need to see expanding grain demand for them to offset their building net short position. Until Covid-19 demand losses can be qualified, it is hard to pick a Chicago bottom. Yet, research downside price target in corn is fast approaching at $3.40-3.45 May. Soybeans have a target of $7.80-8.10 May with Chicago May wheat having support below $4.80. It is becoming late to be overly bearish.