Weekly Market Recap April 24, 2020

Corn Emergence 2

**Please note, we are now following the July futures for cash corn and beans**

July corn lost 3 1/2 Friday, finishing at $3.23, down 6 1/4 for the week, while December corn lost 2 Friday, and ended at $3.36 3/4, down 6 3/4 this week. 

July soybean futures were down 7 at the close today, ending at $8.32 1/4, down 10 on the week, and November beans lost 6 1/2 closing at $8.41 1/2, down 9 1/2 from last week. 

This week, the main feature continues to be the energy sector. We’ve all heard the words “historical” and “unprecedented” many times this week with regard to crude oil. It all started on Monday with the expiring May futures contract on West Texas Intermediate trading below zero. Reading many comments from people that have been trading commodities for a long time, very few, if any, realized that this was even possible. Basically, the issue revolved around an entity that was long this particular futures month, and had no ability to take delivery of the physical commodity. Also, since the official storage facilities were also full, they couldn’t store it either. So, they had to buy their way out of their contracts. By trading negative numbers, they were, in effect, paying someone to take their obligation off their hands. 

The rest of the week was a continuation of the roller coaster ride that crude has been on for a while now. As the May contract expired Tuesday afternoon, all eyes shifted to the June contract. On Tuesday, that contract hit a low of $6.50 per barrel, before closing that day at $11.57. Wednesday, Thursday and Friday were all positive and at the time of this writing, it was trading around $17 per barrel. That is still an awfully low number, especially when you consider that just 2 months ago, it was trading around $55 per barrel.

Here are some more specific issues for corn and beans 

For corn, it is tough to be on the bull side of the fence, but one boost to the market late in the week was a newswire report about China wanting to increase their reserve stocks of corn, soybeans and cotton. 

The only other potentially bullish item for corn is the rebound in crude oil, up about $10 from the low. But, $17 per barrel is still a historically low number.

Corn export shipments this week came in at 26.9 million bushels, well below the lower end of expectations that ranged from 33.5 to 51.2 million bu. Not only was this the lowest export shipment in 11 weeks, but it also fell behind the “needed” pace of around 40 million bu. per week to meet USDA’s projections.

This was yet another weekly report with reduced ethanol production, down to 166 million gallons last week. To give you a comparison, last year’s production for the same week was 308 million gallons. This works out to a difference of about 49 million bushels for one week. We also heard an announcement Thursday of two very large ADM plants in Cedar Rapids, IA and Columbus, NE curtailing their “dry mill” operations for up to 4 months.

Ethanol stocks were also up again last week by 9 million gallons to 1.163 billion gallons. While this is still an increase, it is the smallest one in four weeks. Overall, ethanol stocks are now nearly 208 million gallons larger than the same time last year. 

US soybean export inspections were at the top end of market expectations last week, at 19.8 million bushels. This is also up almost 2.5 million bu. from the previous week.

We did have some market news this week about an old crop sale of 10 mil bu. to China. So, while sales remain low, they are still happening.

We also continue to lag the 26 million bu. per week number needed to meet the USDA’s projection. However, cumulative export inspections are up more than 6% from last year’s 1.14 billion bu., now sitting at 1.209 billion.

Soymeal exports are also promising for the soy market, surging to a 6-wk high and the 2nd largest of the year last week. This is due in part to several months of lower than expected Argentinian meal exports from weak crush margins and light farmer selling. 

As of last Sunday, planting progress is ahead of last year, and weather forecast remains favorable across much of the Corn Belt. Corn planting was 7% complete nationally vs. 5% last year and the 5-year average of 9%. Iowa was 4% complete, vs. 1% last year and the average of 2%. 

The next WASDE report will be released Tuesday, May 12th. By that time, we’ll have a much better feel for planting progress and a feel for any switched acres. 

Tom’s Take:

As mentioned earlier, it’s been an interesting week, with historic, unprecedented events. That got me to thinking about the year of 2020. What a year! And we’re not even 4 full months into it yet. Think of the things we’ve all had to learn, like the proper way to wash our hands and social distancing. Who would have thought four months ago how quickly our own individual worlds would change in such a short time. I remember when I was young and I saw the word “quarantine” in a book. I had to ask my mom or a teacher what that meant – I thought “what a strange concept”, without any concern that perhaps one day I’d see an entire world in quarantine of some sort or other. Talk about historic times. 

Another thought I had was a saying that I have kept in my desk for quite a while. “You can’t fax a handshake, you can’t e-mail a pat on the back. Somethings are just better in person.” I’ve thought of that from time to time the past month or so. I guess we’re going to continue to have to settle for alternate ways to interact with people outside of our immediate family for now. 

One last thought. Based on the information we are seeing and hearing, it sounds like much of the State of Iowa, at least in the Landus footprint is getting planted in a big way. Most reports are saying that the ground has rarely worked this well. This is the best news I’ve heard in a long time. Monday’s planting progress report is being anxiously awaited by many. 

We all know that farmers needed some dirt therapy, and it’s good to know that for the most part, things are going very well. But, I wouldn’t be me, if I didn’t point out the concerns that this raises for Harvest. Assuming we don’t see a lot of replanting, and we have decent, normal weather the balance of the year, it’s hard to get overly excited for prices to rebound a lot between now and then, especially w/o significant increases to demand. Just keep an eye on prices, push a pencil when you get some time, and make some plans for marketing your New Crop bushels sooner, rather than later. 

I know that all of us at Landus are anxious to be able to re-connect with you again. We look forward to that time when we can look you in the eye again and give you that pat on the back you deserve for all the hard work you’re doing now and throughout this year and every year. Thanks for all that you do. 

This week’s Bull Bear Banter podcast can be found here: https://landuscooperativeexperience.podbean.com/