- 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.