- Midday Chicago grain values are sharply lower with corn, soybean and wheat futures pressured by fund selling and the fear of further economic/demand destruction. Covid-19 and the ongoing oilfield spat between Russia/Saudi is battering the US biofuel industry and shuttering more US ethanol plants. May corn futures are back testing $3.30 support (17-year lows) with May soybeans likely to test $8.45-8.55 with wheat in tow. Funds hold their largest net long position in wheat, which is where the biggest liquidation is occurring this morning.
- We look for a lower Chicago close with the US biofuel industry struggling amid deeply negative production margins. The recessionary aspect of the decline in the CRB/CCI index is all tied to a lack of visibility for many US ag companies. Amid all the uncertainty (including worker attendance), they are choosing to limit any forward hedge programs which is reducing resting orders.
- Chicago brokers estimate that funds have sold 9,300 contracts of soybeans, 4,800 contracts of wheat, and 4,200 contracts of corn. In the processed products, funds have sold 3,200 contracts of soymeal and 2,900 contracts of soyoil.
- Weekly US ethanol production, stocks and usage data from EIA reflected the struggles of the industry. US weekly ethanol production fell an unprecedented 17% to consume 85.5 million bu of corn. And at the same time, US ethanol stocks swelled to a record which bemoans the storage difficulties that producers are enduring. US gasoline consumption was down nearly 30% (year on year) while US crude oil stocks rose 13.8 million barrels and gasoline stocks were up 7.5 million.
- The weekly report reflected what stay-at-home orders means for US energy consumption and why some 32-38% of the US ethanol industry is needed to close to balance with current gasoline consumption. Further cuts in US corn ethanol demand estimates are ahead, which is pressuring Chicago corn.
- We keep asking US exporters if the Chicago break has produced any fresh interest from China for US corn/soybeans for late summer or Autumn. So far, the response has been no, but there is the potential that China could book another 1.5-2.5 million mt of US corn that would produce a short covering bounce. China likely sees the decline in US livestock values as the new opportunity.
- The midday GFS weather forecast is wetter across the Gulf States/S Delta and drier across the “fat” areas of the Midwest. Temperatures will warm beyond the weekend with the 50′s, 60′s and 7O’s. We are sure that some will try some early corn seeding across the S Midwest following the Easter Holiday. The extended range forecast produces a drier forecast for the E Midwest into April 15.
- It is a new month/quarter, but the theme of “risk off” has not changed. No one understands how long the Covid-19 Stay-at-Home orders will persist. The fear is that demand is being lost as household activities are curtailed. Russia could make a grain quota decision Wednesday (Putin) while another 5-7% of the US ethanol industry is preparing to close. We remain non-bullish, almost bearish.