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Markets closed today for Good Friday, with Thursday's session an opportunity for technical buying.

Compiled by staff

April 10, 2020

4 Min Read

Missed some market news this week? Here's a quick recap.

Ag Marketing IQ

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. 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.

What has your father told you or shown you that has stuck? There are many that come to mind for all of us. Agriculture has become what it is today by generations watching, learning, and improving upon what those before them have done. The future of farming is quite literally dependent upon the past. It is important for us to step away from our daily tasks and reflect on our current operations. Take a look at three things: where you’ve been, where you’re at, and where you’re going.

The American farmer will find a way to produce and harvest a 2020 crop in the face of extraordinary obstacles. Farmers’ production skills increase every year and this year will not be an exception. If the ability to produce were the only component of profitability, agriculture would be flush with available assets. Unfortunately, profitability is also based on marketing and too often marketing is left to chance. Expecting upside and not respecting downside is dangerous. It is difficult to predict when or if risk will happen. As students of the market, we learn that price prediction is impossible, but managing price risk is something that all of us can control.

“Who knows?” is the most honest answer these days for anyone trying to assess anything, much less the fundamentals of supply and demand in a world under house arrest. That may limit both USDA’s desire and ability to make major changes. Corn looks to absorb the brunt of the fallout, reflecting futures trading near three-and-a-half-year lows.

Soybeans may have a completely different type of backdrop than corn, wheat, livestock and ethanol markets. Be careful trying to lump all agricultural markets into the same pile of despair. Soybean price action has shown signs of immunity to much of the bearish aura in place since February and March.

Over the past few weeks, grain prices have overall been grinding lower. Absolutely this is due to the effects of COVID-19, uncertain demand potential here in the U.S. and around the world. Many producers likely made cash sales or implemented various put option strategies to defensively provide lower price protection in recent weeks. Looking forward, unless the USDA throws us a surprise in the April WASDE report, it seems likely that grain futures prices may continue to grind lower in the days and weeks ahead.

The ethanol industry was one of the greatest wealth-creators for farmers that I have seen in my generation. It created over 5 billion bushels of demand within the space of a decade.  Now, that demand is being quickly dismantled.

USDA reports

Corn continues to dominate grain export inspections for the week ending April 2, topping all trade estimates and firming fractionally above the prior week’s tally. But soybeans and wheat underperformed, moving lower still from last week’s already lackluster results.

USDA’s latest weekly export report showed another round of lackluster soybean and wheat sales for the week ending April 2, but the news wasn’t all bearish. Corn sales spiked 41% above the prior four-week average to notch a new marketing-year high.

USDA added 200 million bushels to 2019/20 ending corn stocks in most its most recent World Agricultural Supply and Demand Estimates report. The April estimate was slightly higher than the average analyst estimate, but still within the anticipated trade range.

USDA reported a large export sale on Friday with China taking wheat and unknown destinations taking soybeans.

Market recaps

Corn prices gained strength this morning from a continued rebound in the energy sector as well as news that China will be increasing corn purchases from the U.S. during the 2019/20 marketing year. May soybean futures prices rose as traders adjusted their positions ahead of today’s reports. Though their domestic soy demand is recovering, China continues to purchase the cheaper South American crop currently being harvested. Wheat prices followed gains in the grain complex higher this morning, due in large part to trader adjustments ahead of today’s USDA reports. There is significant downside risk for wheat in today’s report based on the global supply forecast.

USDA’s World Agricultural Supply and Demand Estimates report gave more confirmation for what traders had already suspected – the COVID-19 pandemic has already created some moderate supply and demand ripples. With that assumption already baked in, grain markets were able to focus on other things, and Thursday’s session emerged as an opportunity for a round of technical buying for corn, soybeans and wheat.

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