Many markets failed to hold their ground for the week ending 3/31 as nearby corn lost 6 ½ cents, meal lost $10.7 a short ton and Chicago wheat lost 7 cents. The beans end up gaining 3/4 of a cent while Kansas City wheat managed to gain 2¼ cents. Uncertainty surrounding crude oil, coronavirus, and China trade continue to dominate headlines.
Crude oil fell to its lowest level in nearly 20 years on COVID-19-related demand destruction and continued fallout from the Saudi-Russia oil price war before bouncing back late in the week on hopes of a deal to reduce production could be announced next week.
Corn hit hard
Corn has been hit extremely hard as the oversupply of crude combined with demand destruction for fuel has put the ethanol industry in a bad spot economically and that has spilled over into producers’ balance sheets as approximately a third of the U.S. corn crop is used to produce ethanol.
Glimmers of hope
We are seeing some glimmers of hope on the demand side of the table as managed money reduced shorts and added to longs across many commodities. In the corn market, the commitment of traders report showed that both Managed Money and Commercials were buyers in the last reporting period. Managed money purchased net 12,300 contracts, decreasing their net short to 99,925. Commercials continued their pattern of buying, purchasing 20,055 contracts and bringing their net short to 143,993. Managed money were net purchasers of soybeans and meal, purchasing 27,621 contracts and 9,396 contracts, respectively. Managed money was a net buyer in both Chicago and Kansas City, buying 16,613 and 8,215 contracts. Managed money is now long 36,756 SRW contracts and 2,292 HRW contracts.
In fact, when we look across the ten major ag markets, funds bought 75,000 contracts shifting their net position to long for the first time in nine weeks. What this shows us is that we are at levels of value and if we can hold levels we should see more buying step up to the plate.
Taking a 30,000-foot view on the commodity complex the Goldman Sacks Commodity index is trading at levels that we have provided support in other times of commodity weakness.