- Chicago ag futures are lower at midday in thinning volume as traders see the bounce in the US stock market as a reason to take partial profits on net short corn, soybean and wheat positions. New Chicago buying is limited and the price pattern of down early in the week, with a rally in the middle and down again late week shows merit.
- We look for this price pattern to be followed again with the next 2-3 weeks critical for containing the coronavirus spread in the US. If worsening clusters of US Covid-19 develop, there will be a deeper decline in US and world asset prices.
- The panic selling of overnight appears to be calming, but it is premature to think that a bottom has been scored. It is just that the grains/soybean and equity markets are trying to fill open chart gaps left from Friday. The acute weakness in energy prices will have a long-term depressing impact on oil values. Putin has told the Saudi’s that he is willing to seek market share for the next 6-10 years. We believe this to be too long, but we fear it will be months before both sides can get together on any crude production cuts. The sharp fall in crude oil is bearish to the US bio-crops of corn and soybeans.
- Chicago traders estimate that funds have sold 4,100 contracts of soybeans, 3,200 contracts of soymeal and 3,000 contracts of soyoil. In corn, funds are flat while being buyers of 5,700 contracts of Chicago wheat. Someone bought 6,000 contracts of Chicago wheat in a few minutes that rallied the market 6-7 cents.
- The grains bounced along with crude oil as it came off $28.59 June futures lows to rally nearly $7.00/barrel to $35.50 plus. The rally in crude caused a lift in commodities, but amid a gloomy economic outlook, a rally above $40/barrel would require the Russians/Saudi’s/US (Trump Admin) coordinated effort to rally oil prices. We note that the price of biodiesel is trading above the price of diesel while US ethanol producers are estimated to be losing close to $0.30/gallon. US ethanol industry consumes nearly 5.50 billion bu of corn for ethanol consumption. Research suggests that US discretionary blending and ethanol exports are limited with crude below $40/barrel.
- US farmers have slammed shut their barn doors while Russia is on holiday and Argentine farmers are striking for the next 4 days against higher export taxes. Brazilian farmers are willing to sell newly cut soybeans, but outside of funds, there is not a natural cash seller of corn, soybeans or wheat.
- US export inspections for the week ending Mar 5 were 32.6 million bu of corn, 21.0 million bu soybeans and 15.3 million bu of wheat. All were disappointing. China showed up exporting 5.13 million bu of US soybeans last week. The pace of US soybean exports are expected to dramatically slow through late spring.
- The price of the Russian Ruble and Brazilian Real have set historical lows. The Real reached 4.80:1 US$, a record low. Values for Brazilian corn and soybeans are near record highs in their local currency, which is spurring 2021 production with farmers able to lock down 81-85 Reals per bag for harvest next February. Huge farm profits and forward selling is pressuring Brazilian fob Feb prices which is offered 70 cents cheaper than the US Gulf for November.
- The midday GFS weather forecast is like the overnight run. Daily showers will continue across Northern Brazil while dryness persists across Argentina, Paraguay and S Brazil for another 2-4 days. Rain chances start to return to Central Argentina tomorrow and linger into the weekend. The 11-15 day forecast calls for improving rain chances for all of Central and Southern Brazil.
- Rumours abound that China may have secured 120-180,000 mt of US spring wheat. China is asking for offers on DDGs and sorghum, but no new sales can be confirmed. Demand destruction is the worry for Chicago grain/soy prices due to a slowing world economic outlook with US/world cases of Covid-19 on the rise. A test of support at long term support at $8.50 May beans and $3.50 May corn is forecast.