- Where to start is probably the first thing on our mind this evening! Two days of what can only be described as a “bloodbath” have left Tuesday opening markets in something of a recovery mode following Thursday’s surprise data, all of which is now today’s fish and chip wrapping. All eyes are now awaiting April’s USDA report, probably in the hope that there will be something to feed the bulls rather than further fattening the bears and their incessant appetite for lower levels.
- If we look back for a few moments, Thursday’s CBOT corn trading volume was the 2nd largest ever recorded at over 655,000 contracts, Monday (which was a working day in Chicago) hit close to 600,000 contracts also. Combined volume over the two days amounted to almost HALF the total annual US corn production; this perhaps illustrates the significance of Thursday’s report!
- One significant follow through effect of the report and its numbers is that the $1.00/bu price drop will, and is, encouraging ethanol producers, export demand and feed usage. Ethanol margins will most likely increase, livestock producers will likely benefit and importers will see an opportunity to lock in better purchase prices. In our opinion, this is not conducive to preserving US stocks at the correct level to see them last until harvest – clearly time will tell.
- The drop in corn has had its knock on effect on both soybean and wheat prices, which have similarly dropped in big style, leaving value to end consumers. Little wonder that we see, and hear, from many who express a desire to progress on a “hand to mouth” basis going forward.
- In other news it seems that planting progress for corn in the US is slowing as Midwest weather sees a return to cold and wet conditions. Spring wheat planting progress in S Dakota, where winterkill is reported to be above average (up to 26% winterkill is reported) , is also marginally behind average for this time of year. One commentator reported the central Plains wheat area as a “disaster zone” with crop condition at an all time low.
- In the UK conditions continue to heap misery upon hard pressed arable farmers. March has seen the coldest conditions in over 50 years, delaying field work and pressuring output forecasts even at this early date. Spring sowings are reported to be at 15% compared with an average of 50% at this time; temperatures over the last week have barely crept above 0℃, when last year the UK was basking in 23℃ and fieldworks were well above the norm. Some are questioning the potential for significant acreages in the UK to be left unplanted, or fallow, if conditions do n to change for the better, and quickly. The upshot of this will be for an even greater “hit” to output, which is already forecast at multi-year lows.
- Finally, we hear that the Ensus bio-ethanol plant on Teeside is to close once again, for an unknown period, citing “adverse market conditions”. The plant has only recently reopened following its latest shutdown. The “on-again, off-again” approach leaves little confidence in wheat consumption as well as DDG availability going forward. Competitive US ethanol imports as a result of subsidies and EU duty anomalies do little to assist the North East based plant.
- Clearly, the return to work following the Easter break has not come as an easy one. Challenges on many fronts continue to rear their heads and the way forward is less than clear right now.