- Chicago ag futures are widely mixed at midday. US corn values are in decline on the pending loss of ethanol demand while soybeans rally on rising domestic cash basis and new potential export demand. The volume of trade has been active with spreading a big feature. A more mixed trade is evolving with each market reacting to its own fundamentals. There are many moving parts and cash markets are having trouble keeping up with the extremely active futures trade. We look for a mixed Chicago close with corn lower while wheat closes higher on cash basis gains.
- Chicago brokers report that funds have sold 6,700 contracts of corn, while buying 3,400 contacts of soybeans and 5,400 contracts of wheat. In soy products, funds have sold 2,900 contracts of soyoil while buying over 8,000 soymeal.
- There are rumours that China has asked for offers and may have purchased 2-5 cargoes of US HRW wheat from the Gulf. We cannot confirm a sale, but rumours abound on commercial circles. We note that KC wheat basis gained 50-60 cents late Tuesday on talk that millers were short bought on nearby cash wheat.
- The DOW has declined more than 1,500 points at midday with values below 20,000. The drop has been breath taking and as infections rise each day few will want to be long heading into the weekend as there is no indication of Covid-19 infections have reached a peak. The US/world financial markets are in a risk off mode with financial markets seeing massive liquidation.
- The US closed its border with Canada and more countries are closing their borders to each other to keep the virus at bay. Brazil, Argentina and Europe have closed their borders on Tuesday. We expect that many more countries will close their borders with “isolation” is the only way to combat the virus. The big question is as borders close, what will happen to food/fibre/meat demand as “home stay” becomes the only way to be safe.
- Brazilian stevedores are back to work and Brazilian soybean exports are happening normally. Under a new Brazilian law, strikes are no longer against the port, but individual companies. This means that stevedores can be fired and new workers can be hired. However, as the Brazilian Government closes public meetings, there will be struggles for Brazilian exporters which will cause countries like China to diversify suppliers. Buyers are looking at multiple suppliers amid the vast logistical uncertainty created by the virus.
- Midwest ethanol producers are closing at an alarming rate as crude oil values plummet and margins reach record lows. The demand impact on corn is building and we fear that ethanol plants will soon be pulling their cash bids.
- More of American industry is closing on the virus. The big three auto makers are closing and the negative impact on the US economy is growing. US meat packers are an essential part of the American economy and will not close. Yet, the US biofuel industry is strained and seen as non-essential. Longer term, the Central US effort to plant crops this spring is being questioned on the unknown of “parts” delivery if there are any equipment breakages.
- The midday GFS weather forecast offers few changes from the overnight run with little rain for Argentina and S Brazil. Rain is needed across Southern Brazil with the best chance being in the next 24 hours. The rains across Northern and Central Brazil will be abundant.
- Emotion is growing with the markets awaiting news from Washington over a $1 trillion plus aid package that is due later today. US ethanol production losses are growing and the next level of support rests at $3.20 for May corn futures. Cash corn basis is in decline with some elevators totally pulling their bids (ethanol related). Policy and logistics are becoming a big price ingredient.