- Midday Chicago values are mixed in better volume with short covering the feature in corn/soybeans with funds reducing some of their market risk in long wheat ahead of Thursday’s USDA April Crop report and the coming 3-day weekend. A mixed Chicago close is forecast following the midday trend. Traders do not want to chase strength or weakness until Midwest corn/soy seed is planted in abundance. Choppiness appears to be this week’s price trend.
- US equity values have soared as traders are hopeful that the EU apex in Covid-19 infections has passed. The US may have a couple of tough weeks ahead, but traders hope that some percentage of the US economy can get back to work during early May. The S&P has nearly reached 2,800 resistance, a 50% recovery of the recent decline. The 2-day S&P gain of over 10% in the world financial markets has produced a mentality of buying breaks in raw material markets. This is most evidenced in CME livestock which are limit up bid.
- Chicago brokers estimate that funds have bought 5,400 contracts of corn and 1,300 contracts of soybeans, while selling 1,200 contracts of wheat. In the products, funds have sold 1,400 contracts of soymeal and bought 1,800 soyoil.
- CME livestock futures are limit bid with extreme volatility persisting. There have been few trading days in the past 3 weeks when cattle/hogs/feeders did not have limit move. The industry is trying to unravel the bearish/bullish influence of a collapse of food service demand and its shift to the grocery sector. The grocery supply chain was not prepared to handle the sheer size of meat that is moving. We look for continued extreme CME meat market volatility as the industry adjusts to a dramatic shift in consumer demand and its impact on packer margins and the entire chain. And US packers must keep their deboning lines operating with human spacing of at least 6 feet.
- The US’s largest US ethanol producer, Poet, announced that they are idling 4 plants that consume 110 million bu of corn annually. The monthly grind reduction will be just over 9 million bu. We estimate that some 24% of US ethanol production is now offline with other plants slowing their daily run rates.
- With US unleaded gasoline consumption declining 47%, we estimate that the US corn ethanol industry must idle at least 35% of their plants to bring production and consumption into balance. Additional plant closures are expected in coming weeks that could torpedo the 2019/20 US corn ethanol grind by 350-450 million bu. USDA will likely be conservative in projecting a decline of 200-250 million bu of 2019/20 grind in Thursday’s WASDE report.
- WTI crude oil prices have slipped into the red at midday as doubt is being seeded that Russia/OPEC will be able to announce a meaningful pact to reduce the world crude oil surplus that is estimated at over 20 million barrels daily.
- A 10 million barrel cut would restore stability to world crude oil pricing between $20-32/barrel, but it would not produce a return US biofuel demand (or exports) that was lost with ethanol priced above unleaded gasoline. US biofuel demand only returns with a more normal lifestyle, which is a long way off without the arrival of a vaccine or therapeutic for Covid-19. Few are willing to risk air travel, or a hotel stay today into the summer season.
- The Midday GFS weather forecast is like the overnight run with near normal rain and a cooler temperature trend starting Friday. A few warm days will give way to 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 forecast is changeable, and our confidence is low. The midday solution is cooler/wetter into Apr 23.
- Until a large amount Midwest corn/soybean seed enters the soil, Chicago will be choppy. Wheat must hold last week’s low, the 50-day moving average at $4.68. Soybeans are range bound.