- Sharp declines are noted in Chicago futures in the morning with spot corn testing the 2016 low at $3.02 and then bouncing on modest short covering. May soybeans fell just below the $8.10 support from 2019 while wheat has been pulled lower in sympathy. The deflationary feel is another day of declining energy valuations. However, Chicago values are recovering at midday.
- June crude oil has fallen to $11/barrel as traders understand that today’s oversupply will be corrected in the next 30 days. There may be States that reopen that will increase miles driven/gasoline consumption, but airlines and the full or partial closure of most other States will maintain the abundance of supply amid a lack of storage. A deflationary marketplace exists with few willing to make a longer-term purchase until they are confident that the global fight against the virus has been won. A lower Chicago close is expected as funds continue to press the short side of the market. The volume on the bounce has been about a third of what the decline was this morning.
- Chicago brokers estimate that funds have bought 6,700 contracts of wheat, while selling 8,100 contracts of corn and 3,200 contracts of soybeans. Funds have sold 2,100 contract of soymeal and 1,200 contracts of soyoil.
- Crude oil prices have slid to $7.90/barrel on the soon to expire May futures contract with cash trade said to be as low as $4-6/barrel (if storage can be found). The spot futures price is the lowest since crude oil has been trading in the mid 1980′s and reflects the worsening landscape for producers when demand falls more than 50%. June WTI crude oil is trading at $22/barrel which reflects the massive oversupply, even when world production was reduced nearly 10 million barrels/day last week. The energy market shows the prospect for deflation.
- Weekly US export inspections for the week ending April 16 were; 26.9 million bu of corn, 19.8 million bu of soybeans, and 17.3 million bu of wheat. For their respective crop years to date, the US has exported 835 million bu of corn (down 475 million or 36%), 1,209 million bu of soybeans (up 69 million or 6%), and 897 million bu of wheat (up 45 million or 6%). The USDA is likely to further reduce its estimate of US 2019/20 corn and soybean annual export estimates in the May WASDE. China shipped out one cargo of US soybeans off the PWN.
- The midday GFS weather forecast is wet across the E Midwest with rain totals of 0.75-2.50″. Research argues that the GFS is too wet and too far north with the Midwest rain. The EU model has the rain further south (Delta) and is likely more correct. Both forecast models offer warming temperatures for the Midwest and the Plains with highs ranging from the 60′s to the mid 70′s. The E Midwest will be cooler under cloudy skies and a NW upper air flow with highs in the 50’s and 60′s. Planters are rolling across the Midwest, a trend that should persist through the weekend.
- Chicago futures reached downside price targets which produced the short covering bounce. We cannot find any new US export demand to confirm a larger rally. We doubt that the rally signals an improvement in livestock feed margins or US ethanol demand. The bounce is via oversold chart conditions. The wheat market will closely follow Black Sea weather (still dry) while the soybean market awaits China interest for new crop supply.