- Chicago prices are mixed at midday with wheat being firmer, while the summer row crops, corn and soybeans sag. The volume of trade has been rather active with funds on the sell side from the opening bell. We look for a mixed close with the market having a heavy feel in corn, soymeal and soybean futures.
- Spreading has been the morning feature with aggressive selling of May-July corn. The May-July corn spread has pushed out to a 9 cent July premium as the longs bail on net long May positions. A sizeable 90,000 contracts of May corn futures were open as the start of today’s trading, sizeable with first notice day on Thursday. May corn longs are either exiting or rolling backwards. Soybean futures are weaker on the lack of China interest ahead of their coming weeklong holiday, while wheat futures bounce on the decline in US crop condition ratings. China needs to step forward and make US purchases in the next few days of US grain or soybeans. Each week that China is not making new large US grain or soybean purchases is more worrisome for their reaching their annual total of $36.5 billion.
- Chicago brokers estimate that funds have sold 2,200 contracts of wheat, 3,100 contracts of corn, and 3,400 contracts of soybeans. In soy products, funds are flat in soyoil while selling 2,900 contracts of soymeal.
- There are rumours that US President Trump will invoke the National Defence Act to increase in US meat processing capacity. This was requested by Senator Grassley (R-IA) late Monday. This act produced more ventilators with GM shifting away from traditional auto production. Unknown is how this act will help US meat processing without additional USDA inspectors or meat fabricators on the line. Some speculate that it could be used to go around unions that are demanding even greater spacing for their members in plant.
- It is calculated that sharply reduced weekly US cattle/hog and poultry kills with Covid-19 infected plants closed for deep cleaning and others are trying to run amid rising absenteeism of employees. Estimates show that just 65-67% of US pork and 72-75% cattle kill capacity is being utilised. Amid sharp falls in production, the US is facing a domestic meat shortage while farmers endure a massive oversupply of unsold animals that cannot be slaughtered with a growing number of hogs/poultry being euthanised. Some Plains feedlots have gone 3 weeks without a bid on market ready feed cattle. This is the biggest problem facing American agriculture today, and rising consumer meat prices with over 26.5 million unemployed shows the strains that the US packing industry is under. Some 400,000 cattle and as many as 1 million hogs will be pushed forward from April into May for processing.
- Forecasting CME meat futures is difficult amid the uncertainty surrounding packer processing capacity and what the Government is willing to do. There is about 2 weeks of meat in storage that can initially be utilised, but thereafter, it is all about forward fresh production.
- The forecast is drier across the Eastern Midwest and Gulf States. The next weather system is pushing across the Midwest producing 0.4-1.50″ of rain. Temperatures warm as the Western US High Pressure Ridge progresses eastward, but it then returns west in the 10-15 day period. There will be windows for Midwest row crop seeding and average progress is expected. Cool temperatures in the 10-15 day period will slow germination rates across the E Midwest.
- Demand destruction persists in corn while wheat bounces on diminished Plain’s yield potential. However, the midday CFS forecast has rain for the EU/Russia which will likely cap wheat rallies. We believe that Dec corn above $3.40 is overvalued with an estimated 45% of the US corn crop to be planted through May 3. The risk in corn is down as Midwest planting advances.