- 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.