Weekly Market Recap March 6, 2020

Corn Emerging 360X240

Today, May corn futures lost 5 3/4, to finish at $3.76, but they did gain 7 3/4 for the week. December corn futures were down 2 1/4 today, ending at $3.81 1/2, gaining 4 1/2 this week.

May soybean futures ended at $8.91 1/4, down 5 3/4 today and losing 1 1/2 since last Friday. November soybeans were off 3, at $9.05 1/2, losing 2 3/4 for the week. 

The main driver this week continues to be uncertain. But, mostly uncertainty about the effects of Covid-19 and how much more it will spread. While no one has the answers to any of the questions about this virus, most traders have taken a “risk-off” approach, whether that is equities or commodities. We will need to start seeing some concrete evidence of the disease slowing before traders are comfortable with jumping back into their respective markets in a big way. 

Some of the items positively impacting corn this week are: 

  • Corn export inspections for last week showed 35.3 million bushels, right in the middle of expectations, and very close to the previous week's number of 35.9 million. We still need to increase the pace in order to hit the USDA yearly number, and there is starting to be some hope that we’ll see China begin to import some corn, even though there are no confirmed sales to this point. 
  • The weekly EIA report for last week showed ethanol production increased to a little more than 317 million gallons. This is the 3rd highest weekly total this crop year. So far this year, ethanol production is up more than 5% and continues to be on pace to hit the USDA’s yearly estimate.
  • The U.S. Dollar has been under a lot of pressure lately and hit a 7 week low on Thursday.

Some of the negative impacts are:

  • We continue to lag the pace we’ll need to get to the USDA’s projection on corn exports. Cumulative exports are 556 million bushels, but that is 45% less than last year at this time, while the USDA is forecasting a 16% decline. We need to start averaging closer to 40 million bushels per week, vs. the 32.3 million we averaged from this point forward last year. 
  • The relatively low price of crude oil. While it’s a good thing whenever we fill our vehicles, it makes it harder for ethanol plants to be economical to operate. OPEC continues to try to cut production, but they are not getting the buy-in they need from Russia. The latest news on Thursday showed that OPEC members had agreed to a 1.5 million barrel per day cut, with 1 million of that coming from OPEC members and the other 1/2 million to come from non-OPEC nations. So far, there is no agreement with these Non-OPEC countries, mainly Russia. Meanwhile, demand for crude continues to fall due to Covid-19. 

For soybeans, here are some positively impacts: 

  • Soybean export inspections showed 24.6 million bushels exported last week, which was within market expectations. Cumulative exports of 1.086 billion bushels, continue to run more than 13% of last year. We’ll need to average a little more than 25 million per week to hit the USDA estimate. Last year, we averaged almost 28 million from this time to the end of the marketing year. 
  • The Chinese government has granted tariff exemptions for U.S. Soybean imports. These exemptions last for 12 months and can be applied for by any Chinese soy crusher. There used to be a quota, but it appears that there are none this year. So, that could increase the use of U.S. soybeans 

Negative factors include: 

  • Argentina’s soybean crop is now forecast to hit 54.1 million mt., according to the USDA attaché. This is up from 53 million in their December estimate. 
  • The Brazilian REAL continues to weaken relative to the U.S. Dollar. Earlier this week, we heard that even with the drop in value on the board, the extremely weak REAL is making it feel like the Brazilian farmer is selling $14 soybeans. And, they are selling in a BIG way. They are also pricing next year’s crop, with some estimates showing a 25-35% margin for growing soybeans in Brazil.

Upcoming Events:

  • USDA will issue a WASDE report on Tuesday the 10th. This is normally viewed as a “minor” report. 
  • The next “major” report will be on March 31st when we see the “prospective planting” report as well as the “quarterly stocks” report. 
  • Daylight Savings Time starts this weekend. Be sure to set your clocks ahead one hour before Sunday morning. 
  • On Monday, March 9th, Matt Carstens will begin his tenure as the new CEO for Landus Cooperative. 

Our weekly podcast can be accessed here: https://landuscooperativeexperience.podbean.com