• NASS/USDA March 1 US Stocks/Seeding Analysis: The reports held something for everyone. actually, some bullish and some bearish for each of the primary US grains and soybeans.

• March 1 US corn stocks were bullish while 2020 US corn seedings were bearish, US 2020 soybean seedings were bullish, while stocks were bearish. And in wheat, stocks and seedings were close to expectations. It is a hodge-podge for the markets that won’t offer a lasting chance of a rally without a dire weather problem. It is back to trading ethanol demand destruction and spring weather for seeding. Dryness in the Black Sea is offering a bid for world wheat futures and will become more important after the Easter Holiday.

• The big surprise for US corn seeding was 2020 estimated seeded acres of 97.0 million, the highest US corn seeding total since 2012. The NASS corn seeding estimate was outside of the highest industry guess. Research notes that North Dakota corn seeding at 3.2 million acres is down 8.6% while Kansas was off 1.6% at 6.3 million acres, and KY off 3.2% at 1.5 million acres. IL corn seeding expanded 8% to 11.3 million acres.

• March US corn stocks at 7,953 million bu were down 660 million from last year, a mildly bullish surprise. However, such stocks are adequate and the industry’s confidence in NASS’s corn stock totals is low. Amid US ethanol plants likely consuming 300-400 million bu less corn through August, the gain of200 million bu of feed demand does not entice a bullish response with 2020 US corn acres so large.

• It is estimated that second quarter corn feed/residual use of 1,379 million bu or a 186 million bu larger than last year. Such a feed/residual use is more in line with the 5-year average compared to last year’s shockingly low use estimate.

• As you would expect, as US farmers seeded a greater number of acres to corn, 2020 US soybean seeding increase were less than expected. NASS indicated that US farmers would seed 83.5 million acres of soybeans, up 8.5 million acres from last year, but down 1.5 million acres from trade expectations. The soybean seeding edges supportive to the market with end stocks tighter. The market will push US farmers to seed more soybeans vs corn. Some are forecasting that 1.0 million acres of corn seeding intentions could be pushed to soybeans. The soybean/corn ratio should push out to 2.6:1 by June.

• Yet, US soybean March 1 stocks were slightly bearish with larger supplies. US March 1 soybean stocks at 2,253 million bu were down 490 million bu from last year, but up 16 million bu from trade estimates. Amid slowing US soybean export demand in an old crop position, the US has more than adequate stocks which looks to cap rallies above $9.00 spot futures. China must return for large US soybean purchases in late summer if there is any chance for the WASDE export estimate to not decline 200-300 million bu.

• US 2020 wheat seeding was down 800,000 acres from last year amid reduced durum seedings of -14%. US durum seeding at 1.29 million acres was down 200,000 acres. We note that US oat seeding intentions were up 9% at 3.01 million acres with barley up 8.7% at 2.69 million acres.

• US 8 crop seeding was up 1.1% from last year’s March Intentions at 253.5 million acres, in line with prior final year plantings (excluding last year’s wet spring and 19.7 million acres of Prevent Plant). This 8-crop seeding estimate is up 3.5 million acres from the WASDE February forecast.

• Research sees the NASS Seeding Report as the most important far long term Chicago price direction. The surprisingly large US corn seeding estimate will push 2020/21 US corn stocks above 3,700 million bu (forecast) and justify a price in December corn futures below $3.00, possibly as low as $2.80/bu at harvest. Of course, this assumes that spring seeding will occur normally, and that summer weather will allow trendline yields.

• November soybean rallies will be capped by the low price of corn and the falling value of the Brazilian Real while the wheat market follows the production potential in the Black Sea and Europe.

• Chicago grain futures are mixed but mostly lower at midday. Overnight strength in beans and wheat failed to carry through in morning trading as energy markets drift lower. Spot WTI crude is down a full $1 per barrel (5%), with ethanol and RBOB gasoline contracts following. It should be noted that weakness in energy markets is more structural that the spread of Covid-19. The ethanol landscape remains in disarray and will continue as such into summer.

• Corn remains the ag market’s laggard. Heavy, and needed, rainfall worth 1.2-2.5″ fell across the drier areas of Mato Grosso do Sul and Western Parana over the weekend. Nearby safrinha corn dryness concerns are being restricted to pockets of eastern Parana and Sao Paulo. Regular rains will be needed throughout the month of April, but we look for vegetation health in Central Brazil to improve markedly this week.

• Meal futures remain supported following Sunday night’s sharp rally in China and as the trade further digests the coming shortfall in US DDG production. Work suggests that DDG production in 2019/20 could fall 2 million mt from USDA’s forecast.

• Otherwise, it is tough to find new bullish input. The slowing of Russian wheat exports will be a political decision, which is impossible to forecast, while it is premature to be overly concerned about Black Sea dryness as high temperatures in E Ukraine and Southern Russia will be capped in the upper 50s/low 60s. Black Sea dryness will be more closely monitored in the second half of April.

• Kazakhstan this morning has lifted its ban on flour exports and instead will move to a quota system for the duration of the 2019/20 crop year. Millers there insist wheat stocks are more than adequate.

• US export inspections through the week ending March 26 included 50 million bu of corn, vs. 34 million the prior week, 15 million bu of soybeans, vs. 22 million the prior week, and 13 million bu of wheat, unchanged on the prior week. Only 75,000 bushels of soybeans were inspected for shipment to mainland China.

• For their respective marketing years to date, the US has shipped 711 million bu of corn, down 39% from this week a year ago, 1,161 million bu of soybeans, up 8% on last year, and 752 million bu of wheat, up 9%. The pace of corn sales and shipments is in better alignment with the USDA’s 1,725 million bu forecast. US exporters sold 285,000 mt of soybeans to Mexico for old crop delivery this morning. Yet, a robust soybean shipping campaign is needed this summer to prevent a 100 million bu downward revision to 2019/20 US soy exports.

• NASS will release crop progress/condition reports from select states today.

• This will include corn harvest progress in ND as well as winter wheat crop ratings across the Plains, Midwest and Delta. Plains winter wheat ratings are pegged steady/higher on the prior week.

• The midday GFS’s US weatherw forecast is consistent with the morning run. An active pattern of rainfall will impact the Delta/Southeast through the first 10 days of April. Midwest precipitation will be more light/scattered in nature, with accumulation in excess of 1.5″ confined to MN. Temperatures will lean normal/above normal. Soil temperatures will be warming.

• We look for a weaker close but conviction will be lacking ahead of Tuesday’s stocks and seedings data. Dec-Feb corn feed/residual use will be a focal point.

• Chicago grain futures are mixed at midday. US wheat futures have rallied on news of the Russian export quota proposal to President Putin by the ag ministry of 7.0 million mt from April through June. Corn/soybean futures have retreated on the potential of reduced world demand due to the dramatic slowing of the US economy. Although there a few countries that are looking to restock or restrict their exports, the bigger question rests with how much of the world’s caloric consumption is now in fast retreat.

• Soybeans are struggling to rise above $9.00 while May corn futures have resistance above $3.55. The corn market is forming a bearish flag on the charts that offers another leg lower if Tuesday’s NASS Stocks/Seeding Report is bearish. We looks for a mixed Chicago close with volume in retreat heading into another Covid-19 weekend.

• Chicago floor brokers estimate that funds have bought 3,400 contracts of wheat while selling 4,100 contracts of corn and 900 contracts of soybeans. In soy products, funds have sold 800 contracts of soymeal while buying 2,100 contracts of soyoil. The volume has been limited this morning.

• The USDA confirmed the sale of 114,000 mt of US corn to an unknown destination and 63,290 mt of US soybeans sold to Mexico. The corn sale was likely the back half of the 250,000 mt of US corn that was rumoured to China by Gulf exporter sources on Wednesday.

• April-June Russian grain export quota for 7 million mt is being yawned at by Russian exporters as it only reduces their potential business by 1-2.5 mt through June. The 7 million mt quota is for all Russian grains. If Russia exports 5.5 million mt of wheat during the April-June timeframe, total annual exports would be 33 million. The question becomes is whether 1-3 million mt of world wheat demand is shifted to new crop or others from Russia. It is worth noting that the Russian embargo is based on rising bread prices is due to the sharp decline in the Russian Ruble as crude oil prices fall to $20/barrel. The Russians are not hoarding wheat/grain, the Government is fighting the heady price rise of flour due to the decline of the Ruble and the economic inflation that it has produced.

• The Russian Ruble is priced just below 80:1 US$ this morning, a record low. The Brazilian Real is priced 5.10:1 US$, with the Argentine Peso at a record low of 64:1. Farmers in Russia, Brazil, Ukraine and Argentina continue to see their profit margins expand on local currency. Few non-US farmers are looking to curtail future production amid rising profitability.

• The Central US weather forecast looks to improve in the first half of April with seasonal temperatures and drier weather profile.

• The Chinese crush industry has been slow to return from the Covid-19 near shut down. Plants have been slow to return to normal, with cash sources reporting that some 15-25% of the Chinese crush industry is still not back to normal activities. Crushers say that there are plenty of soybeans in China, it is just getting them processed into meal/oil.

• The GFS midday weather forecast is like the overnight run for Brazil/Argentina. The rain favours the winter corn crop in Parana. No extreme heat is indicated for the next 2 weeks. The Brazilian soybean harvest is moving ahead and will be 90% completed by mid-April. The Argentine harvest will gain momentum.

• Crude oil prices are testing $21/barrel and the financial losses on US ethanol plants are acute. We fear additional plant closures/slowdowns to be announced next week with 2019/20 US ethanol production falling to 5,000 million or less. The financial implications on the US biofuel industry is dire. The spot Chicago wheat/corn spread has moved out to $2.33 wheat premium. The upside target is $2.50. Key NASS crop reports loom Tuesday with a sharp gain in corn/soy seedings forecast from 2019.

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Weekend summary 27 March 2020

• Chicago grain futures are mixed at midday with soymeal and back end soybean futures firmer, while the remainder of the board is slightly lower. Chicago open interest is declining each day and trade volume remains restricted by Covid-19 uncertainty and work at home orders in key states. Traders are just not expanding their risk in the commodities. We note that April cattle futures nearly tested limit down levels this morning after their limit-opening higher move yesterday. Our point is that “order holes” exist that can produce a big run in price with any unexpected headline. This is a time to be careful with order placement and try to avoid market or large stop loss orders.

• Chicago brokers estimate that funds have sold 3,100 contracts of wheat, 1,900 contracts of corn, and 1,200 contracts of soybeans. In soy products, funds have bought 1,100 contracts of soymeal and sold 900 contracts of soyoil.

• FAS did not release any new daily sales this morning of US grain/soybeans. US weekly export sales for the week ending March 19 were; 27.2 million bu of wheat, 71.4 million bu of corn, and 33.2 million bu of soybeans. The corn, wheat and soybean sales were all larger than traders had expected.

• For their respective crop years to date, the US has sold 908 million bu of US wheat (up 40 million or 4.6%), 1,214 million bu of corn (down 466 million or 24%), and 1,319 million bu of soybeans (down 209 million or 14%). Research maintains that USDA will reduce their US 2019/20 corn exports by 25-75 million bu and soybeans 50-100 million bu in the April WASDE report.

• US weekly Jobs Claims reach a record 3.3 million, well above the prior record of 700,000 as the US economy has ground to a halt. However, it is worth nothing that with the US 2008 Fed Stimulus Package the DOW did not bottom until March. The point is that the DOW has had a record 3-day rally, but it is unlikely that an all clear will be given to the US economy until COVID-19 is beaten back. Cases and infections over the next few weeks look to worsen, but the DOW is hopeful that the US incidence rate is following the Chinese curve.

• Next Tuesday’s USDA report did not incorporate the widening impact of Covid-19 or the crude oil fight between Russia/Saudis. US farmers responded to NASS questions in late February and the opening days of March. The farmer had no idea what was to come in terms of negative margins for US ethanol producers. Traders argue that farmers are now switching acres from corn to soybeans, however, confirmation of this change will have to wait until the June 30 Final 2020 USDA Seedings report.

• We see the best chance for bullish USDA data on Tuesday to come from US 2nd quarter corn feed/residual use based on record large US livestock numbers.

• A bullish March 31 market response will be quickly sold by US farmers/traders amid the ethanol margin implosion. If the report is neutral or bearish, Chicago corn values will quickly decline to new lows. The job of the corn market it to push Northern Hemisphere farmers to seed more oilseeds.

• The GFS midday weather forecast is slightly wetter for Brazil/Argentina than the overnight run. The odds of better rains in Parana and RGDS will favour the winter corn crop as moisture conditions are parched. No extreme heat is indicated for the next 2 weeks.

• Chicago markets are sagging with wheat the downside leader as funds return as modest sellers and Russian export curb rumours have faded. The US ethanol industry struggles are real/sizeable, which will cap corn rallies. Soybeans are waiting on Chinese interest for US new crop sales with many unknowns surrounding S American export execution. Considerable uncertainty exists including world grain demand. We remain hopeful for China led purchase rallies. The downside outweighs upside potential with the EIA estimating that world crude oil demand has fallen 20 million barrels/day during the ongoing crisis.

• Chicago grain futures are mixed at midday in limited volume. Chicago open interest is declining each day and the market has traded just 65,000 contracts of May corn futures at this time. Amid the uncertainty that can show up with Covid-19 and the major USDA Crop Report next Tuesday, traders are backing away from taking new positions. Based on volume shortfalls, we would highlight that Chicago futures can make unexpected price moves based on the ongoing liquidity shrink.

• Chicago brokers estimate that funds have bought 3,100 contracts of corn, 9,900 contracts of Chicago wheat while being flat in soybeans. Funds were early buyers of beans but returned at mid-morning as a net seller. In the products, funds have sold 1,300 contracts of soyoil and 2,100 contracts of soymeal.

• FAS reported that the US sold 138,000 mt of US corn to an unknown buyer. We strongly suspect that it was China booking 250,000 mt of US corn overnight. There is also talk that China has started securing US new crop soybeans for Sept/October. We note that the November soybeans are trading at an unusual 21 cent premium to May ’21 soybean futures. There is no reason for a farmer to store their new 2020 soybean crop. Any sales are best placed at harvest.

• EAI reported that US weekly ethanol production declined to 1,005 thousand barrels/day vs. 1,035 last week. The ethanol production consumed 295 million bu of corn compared vs 304 million the week prior. The decline was as expected with big closures/drops in production coming in the weeks ahead. The Anderson’s which produce 420 million gallons of ethanol annually, announced that they would take an extended maintenance shutdown with production reaching just 50% of capacity during April. US ethanol produces are losing an estimated $.80/bu. Traders should be prepared for new plant closure notices in the days ahead.

• CME cattle futures opened sharply higher to limit up with profit taking forging a correction in back month futures after the higher start. April futures are well under the cash market and should remain firm with first notice day just a few weeks away. Packers report that they have forward sold a considerable amount of beef to retailers through mid-April. We look for this week’s cash cattle trade to be sharply higher.

• We are not hearing any new US wheat export demand interest. Futures are rising on massing fund buying of nearly 10,000 contracts. There is talk that Iraq could secure US wheat, but US landed values are non competitive. It is late in the old crop year (just 2 months left) to start a US demand led market with world grain flows in decline. New Northern Hemisphere buyers are near and based on the discount of new vs. old crop, importers and end users are both waiting for new crop. We are not finding that Covid-19 impacted countries being panicked into purchases. The wheat rally is based on speculative buying.

• China has secured 1.0 million mt of US corn in an old crop position to date. We forecast that China could secure another 1-1.50 million mt that would limit the decline in the 2019/20 US WASDE corn export forecast. If China booked a combined 2.5 million mt (another 1.5 million) of US old crop corn it would amount to 98 million bu. This demand help keep the prevailing WASDE 2019/20 US corn export forecast at 1,725 million bu.

• The news that an unknown buyer secured US corn (likely China) rallied Chicago corn futures. Key resistance lies at $3.55-3.60 May where cash corn value gets back near $3.50 for producer sales. Chicago wheat futures are higher on the massive fund buying of 10-11,000 futures. Funds are pushing back into the long side of wheat as key moving averages are breached. Russia has sold much of its elevations for April, and importers are trying to bridge the gap into new crop. The meal market is breaking as the China restocking rally is unlikely to persist amid the flotilla of soybeans that are afloat from Brazil. We maintain that corn is the most bearish on sliding US ethanol production and slowing world feed grain trade.

• Chicago grain futures are mixed at midday in diminished volume. The DOW is sharply higher on optimism that surrounds Covid-19 (Italian infections peaking and following a curve like S Korea) amid US President Trump’s call for Americans to get back to work in a week. We note that DOW volatility has been acute and often forms an early week low, with a midweek rally, followed by a late week decline. A bottom in the DOW hinges upon the efficacy of a Covid-19 treatment or that US infections reach a peak.

• We doubt that Covid-19 infections will reach a peak until April. However, the US needs to be stern in stamping out the virus. Without eradication, the virus will “dog” the economy and the markets for months. A mixed Chicago close is forecast, with a “reduction of risk” the theme from stay-at-home traders. It is the activity from Index Fund managers that must be closely followed heading into the end of a rough 1st quarter on redemptions.

• Chicago brokers estimate that funds have sold 3,200 contracts of corn, 1,900 contracts of soybeans, and 1,400 contracts of Chicago wheat. They have bought 3,100 contracts of soyoil and sold 900 contracts of soymeal.

• CME cattle futures are locked with the expanded $4.50/cwt limit with April priced at $106.15. Cash bids are unavailable with feedlot asking prices said to be $124-126.00. CME cattle futures became too cheap on the fear that a Covid-19 infection would close a kill plant for 2 weeks.

• There was a reported employee infection at a Sanderson’s Farm Kill facility. The area where the employee was stationed was scrubbed/disinfected which allowed the plant to reopen. This is likely to become a “blueprint” for other processor outbreaks which suggests that long plant closures are unlikely (in meat kill facilities, wheat millers and soybean processing plants).

• The Argentine Government has declared that its ports will remain open for business by amending last week’s order saying that “transport of cargo to ports will be exempt” from the nationwide quarantine. Local Government can no longer block transit of trucks, trains or ocean vessels at berth. However, exporters report that keeping employees on the job is proving difficult.

• The Senate is finally making progress on the massive US Coronavirus Assistance Bill which was struck down late Monday. The size of the Bill will be more than the entire proposed US budget for 2020 at over $2.0 trillion. The financial assistance for a married couple is expected to be $1,200 and $500 for a child with an income cap. It is expected that the CCC refunding will be included (not in the Democrat proposal) to offer additional MFP aid to the ailing US farm economy. A vote is expected this afternoon with Senator Schumer saying the Bill is now on the 2-yard line.

• USDA/USTR stated that China and the US are moving in the right direction in implementing the Phase One Trade agreement signed on Jan 1. USDA Secretary Perdue stated that US cattlemen could export as much as $1 billion dollars of beef products, US poultry produces $1 billion of poultry products and changes in China’s anti-dumping regulations could help US exporters recapture a share of China’s feed marketplace in DDGs. Since March 2, Chinese importers are receiving tariff relief for US ag good purchases.

• The USDA/USTR comments were made to offer support that China is making the right overtures for US ag goods following its Covid-19 fight of recent months. No new purchases of US grain or other ag goods can be confirmed this morning. The announcement caused a rally in Chicago corn, wheat and soy futures at midday.

• The news that the US/China are making fresh progress on Phase One US ag purchases lifted Chicago futures heading into midday. However, the losses for US ethanol demand will be substantial, unless Russia/Saudi Arabia end their crude oil fight for world market share. We would see any rally to $3.70-3.75 Dec corn as new sales opportunity. Wheat is become political on the Russian debate over export restrictions.

• Chicago grain futures are mixed at midday. Following an anxious opening due to the news of the US Central Bank offering “unlimited liquidity”, Chicago market volatility has come down as trade volume slows.

• Few traders want to take on additional risk amid the widening health threat of Covid-19. Most traders are at home and having to price markets with less powerful trading tools. We look  for a mixed Chicago close following the existing price trends of morning.

• Chicago corn futures are weak while wheat/soybeans hold deeply in the green. Chicago is trading what is happening to demand amid COVID-19. US ethanol demand is in sharp decline amid Americans driving fewer miles along with the price of ethanol being above the price of unleaded gasoline. We are hearing additional reports of US ethanol plants either closing or reducing their daily runs. Some plants are struggling as they reach on site storage capacity.

• Wheat/soymeal futures have been higher on the fear of production dislocations due to at plant Covid-19 disruptions which is causing some spot purchases of supply to keep mills/crushers running at capacity.

• Research notes that if a human is somehow involved in the processing of a flour, a soy product, or a meat, the market has been pricing in the potential of plant disruptions (due to the virus). Cattle futures sold off sharply on the potential for plant closers last week while Chicago wheat/soymeal markets are rising in recent days on the prospect of problems/shortages. The question is one of will there be any closures that produce a real worry for US food security. Neither research nor the market knows for sure, there could be some localised issues, but since food has been prioritised by the US Government, we do not expect any major lasting delays or disruptions. To the point is US packers holding an unusual Sunday kill to restock grocery meat shelves.

• Chicago brokers estimate that funds have bought; 5,400 contracts of soybeans, 4,900 contracts of wheat while being flat in corn. In soy products, funds have sold bought 5,400 contracts of soymeal and 1,300 contracts of soyoil.

• US weekly inspections for the week ending March 19 were; 32.1 million bu of corn, 21.0 million bu of soybeans, and 12.8 million bu of wheat. China showed up and shipped out 5.7 million bu of US soybeans.

• We note that US soybean and wheat exports are in seasonal retreat. The number of vessels waiting for Brazilian soybeans is growing each day with tonnages waiting now in excess of 13 million mt.

• Brazilian stevedores in the port of Santos, decided against calling for an export strike after Government prodding against it based on Covid-19. We a told that vessels are loading normally, and no further problems are expected.

• US stock prices bounced on the news that the US Senate is close to approving the $1 trillion dollar plus US Virus Stimulus Package. The Bill is expected to have new funding for the US MFP program should the USDA Secretary decided it is needed for US farmers. The details of a new MFP package must be worked out but having the CCC funding available for an MPF payment is an important step forward in US 2020 farm income stabilisation.

• CME cattle futures are limit bid and expected to open sharply higher to an expanded $4.50 limit on Tuesday. CME futures are trading well below the weekend cash cattle price at $121.00. Cattle futures might be playing catch up for a few days to narrow the spread between the cash and futures market.

• Funds are closing out short soybean positions and adding to their length in soymeal. We understand the need to add premium in price for plant closures/supply chain disruptions in meal/wheat. The peak in US virus infections will not come until April. Research argues against chasing the meal/wheat rally. Corn acts poorly and lower lows are expected.

• Chicago grain futures are mixed at midday. “Sell the fact” trading is noted with China confirmed as a buyer of US wheat/corn and old crop soybeans. Corn has been the downside leader as the US ethanol industry continues to shutter facilities amid deeply red margins. Soybean and wheat futures has been able to hold on the green with May soybeans testing key resistance at $8.60 and May Chicago wheat at $5.50. We look for a mixed Chicago close. There could be an increase in closing hedge pressure at the close. The S American harvest is at full tilt and cash sales are said to be sizeable.

• Chicago brokers estimate that funds have bought 3,500 contracts of soybeans and 3,600 contracts of wheat, while selling 8,500 contracts of corn. In soy products, funds have bought 3,200 contracts of soymeal while being flat in soyoil. Funds have been exiting risk and taking off net short positions.

• The US food industry has been deemed essential for the US economy and it has been functioning at an extremely high level. Several packers are planning a highly unusual Sunday kill. US beef prices have rallied a record $45.00 plus in a week with cash cattle prices expected to be higher next week.

• Traders are not willing to take on new risk ahead of an uncertain weekend. We understand that traders are moving their computer trading platforms to their homes as they fear closure of their urban offices. New York mayor De Blasio has ordered that all non-essential employees to stay-home order for an unspecified period. This is on top of the state of California “stay-home” notice. We fear further expansion of US Covid-19 infections as US testing is becoming robust. A peak in US/world infections is weeks away. Getting beyond April 10 will be important for the US and world economy.

• France is on the verge of becoming the next Italy with new infections soaring. The risk is that the next few weeks could offer rising Covid-19 case counts will further depress US/world economic activity. Goldman Sachs estimated that the 02 US GDP rate could fall a whopping 24%.

• FAS confirmed that China purchased 12.5 million bu of US wheat and 30.0 million bu of US corn. Both are the largest purchases of grain by China in years. Our hope is that this starts a more active program of Chinese purchases of US grain based on Phase One. The grain bears have been put on notice to be careful in selling a market that reaches 17-year lows (Chicago corn prices on Tuesday).

• Exporters report that China is not bidding for additional US corn, wheat or soybeans today. China could return Monday morning, but selling has been noted in corn since the Chinese purchase does not change the old crop balance sheet. It is the domestic ethanol loss that is more important to corn’s outlook.

• US crude oil futures have fallen to sharp losses following Thursday’s record percentage gain. On average, the US uses 455 million bu of corn each month with some industry sources expecting a 15-20% in the monthly grind shutdowns amid reduced gasoline consumption and that crude oil prices stay depressed. Research notes that history shows that once a crude oil market share fight starts, it takes a year to resolve. US ethanol producers are facing record losses, which will keep monthly ethanol run rates depressed into autumn.

• The midday GFS weather forecast has added rain for S Brazil and Argentina with totals of 0.5-1.25″. The GFS has been going wetter in recent runs with the jet stream shifting southward. This should help water S Brazil with time. The US Central US forecast looks drier beyond April 4.

• The Chicago sharp rally of the past two days has corrected a deeply oversold technical condition. We fear a deepening flow of bearish of virus/energy/GDP news next week. Amid China’s return as a US grain buyer, a range trade is forecast until the market is beyond the Mar 31 Seeding and Stocks Report. Please stay safe!

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Weekend summary 20 March 2020

• Chicago futures are sharply higher at midday, led by spot contracts. Reasons behind the rally, or justifying it, are many. Logistical issues now plague exporters in S America, the need to restock grocery stores continues to support wheat, and we estimate that funds’ net short in corn was massive as of Wednesday evening. We hear of Chinese interest for 4-6 cargoes of US corn, 3-5 cargoes of HRW wheat and perhaps 1-3 cargoes of beans off the PNW. This corn/wheat buying is likely being done using existing TRQs rather than a concerted government sponsored buying program. FAS sales announcement confirmation is awaited.

• There is also concern that Argentine port activity will slow further in the days ahead, which has lent ample support to Chicago meal futures. Recall Argentina is by far the world’s largest exporter of soy products. We also note that funds last week nearly covered the entirety of their net short position and new longs are being added currently. The recent boost in meal prices has rallied the spot futures-based soybean crush margin to $1.20/bu and an enlarged pace of soybean crushing is anticipated through the balance of March and into April.

• Volatility will persist. Demand issues are rather clear. But now supply is grabbing attention as borders shut and logistical issues will persist during Northern Hemisphere seeding. We also mention that EU wheat futures have been resilient to weakness in financial markets throughout the week, and so ag markets continue to disconnect themselves from broader market negativity.

• We estimate that managed money on Wednesday was short a net 200,000 contracts of corn. This compares to a managed fund position last Tuesday worth just 60,000 contracts, and funds’ current short is the largest since mid-May of 2019. Funds’ short in beans on Wed evening likely reached 65,000 contracts, vs. 26,000 the previous week. Funds were near even in Chicago wheat. Floor brokers estimates that funds today have bought a net 12,000 contracts of corn, 7,500 contracts of soybeans and 7,400 contracts of Chicago wheat.

• Export sales through the week ending March 12 included 36 million bu of corn vs. 58 million the prior week, 23 million bu of soybeans, vs. 11 million the prior week, and 12 million bu of wheat, vs. 17 million the week before. Corn sales were a bit better than expected. US wheat export demand continues to erode, albeit slightly, as the old crop marketing year winds down. Soybean sales continue to disappoint, and work suggests that a major downward revision (100 plus million bu) is warranted without large and immediate Chinese interest. China instead continues to be very active in buying beans from Brazil and reportedly is securing Brazilian origin beans for delivery well into summer.

• For their respective crop years to date, US exporters have sold 1,142 million bu of corn, down 31% from a year ago, 1,286 million bu of soybeans, down 16%, and 881 million bu of wheat, up 1% from this week a year ago.

• The EU and GFS weather models remain in broad agreement with respect to an active pattern of Central US precipitation being sustained into the opening days of April. The Delta/Southeast will be hardest hit. 10-day accumulation of 2-3″ will favour LA, AR, KY, southern IL and southern IN.

• The midday GFS forecast in S America is consistent with prior runs. Parana will be short-changed in the next 10 days, but some 80% of the safrinha corn belt will be generously watered. The GFS forecast maintains the return of rainfall to Southern Brazil in the 11-15 day period, but the EU and Canadian models do not agree.

• Markets have bounced from chart-based support and the question is whether follow-through buying will be found. Work continues to suggest that major adjustments are needed to old crop and implied new crop supply and demand to sustain rallies. Wet Central US weather will be more closely followed in April.

• 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.