- Dull and mixed is the midday Chicago trade with corn and soybean weaker with wheat values trading mostly higher. Trading volume is diminished ahead of the USDA April WADSE report due tomorrow morning at 11:00 CT. The market has a negative feel following the weekly EIA report that was bearish for corn. We look for a mixed Chicago close with the bears needing to see corn/soybean seed in the ground before the next bear leg unfolds. In coming weeks, corn will be the bear leader while wheat will be the bull stalwart with beans caught in between.
- US stock market values soared after it was announced that Bernie Sanders has dropped out as a US Democratic Presidential contender. The news caused a relief rally as Biden is the lone Democratic remaining candidate to challenge US President Trump. It is now a Trump/Biden race to the November Presidential election. The S&P 500 is again testing the 50% retracement level of 2,800.
- Chicago brokers estimate that funds have sold 3,400 contracts of corn, 1,300 contracts of wheat, and 2,200 contracts of soybeans. In the products, funds have sold 1,400 contracts of soymeal and bought 1,800 soyoil. Funds have been modest sellers. Chicago lacks a strong buyer on a scale down basis.
- The ethanol margin problems are not focused only on the US. The EU consumes 6.5-7.0 million mt of corn and 4.5-5.0 million mt of wheat for ethanol each year. The dramatic decline in gasoline and jet fuel demand has caused EU ethanol plants to shut. It is estimated that EU ethanol use of corn will decline 2-2.5 million mt and upwards of 1-1.4 million mt of wheat before the end of the old crop year. This adds to feed availability across the EU which is pressuring values.
- Brazil consumes 6.5-7.0 million mt of corn for ethanol annually. Amid historically strong cash corn prices due to the weakening of the Eeal, Brazilian ethanol plants are closing and selling their stored and future booked supply back into the domestic market. If crude oil prices stay below $30.00, Brazilian domestic corn consumption could decline 3-3.5 million mt with the supply available for export.
- Weekly US ethanol production declined to its lowest level since June of 2010. A deeper decline is forecast as plant storage capacity is strained. US ethanol stocks are record large and rising amid stay at home orders and reduced gasoline consumption.
- US ethanol mandates are based on a percentage of US gasoline consumption with a target/cap at 15.0 billion gallons annually. Most just remember the 15 billion gallon target and assume that Americans will drive the same or more miles each year. The current 43% decline in weekly US unleaded gasoline consumption impacts the mandate. Therefore, it is important to follow unleaded demand weekly and annually.
- The Midday GFS weather forecast is like the overnight run with near normal rain and a cooler temperature trend starting Friday. A deep Low-Pressure Vortex that pushes southward across the Central US during the Easter weekend. Temperatures next week will average 6-18 degrees below normal with frost likely across the C Plains. The 11-15 day forecast is warmer, but below normal temperatures will prevail. The W Midwest looks to seed spring crops during the last half of April.
- Until a large amount Midwest corn/soybean seed enters the soil, Chicago will be choppy. Wheat price direction hinges on Black Sea weather while soybeans await Chinese demand.