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Highlights from latest supply and demand report

Investment money expected to enter the commodity markets as soon as confidence stabilizes.

Bill Biedermann, Hedging strategist

April 11, 2020

4 Min Read
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A little hope was provided to grain farmers this week with corn closing up 1 ¼, soybeans up 9 1/4 cents and wheat up 8 1/4 cents.

Traders started the week out with the understanding that coronavirus infection and death rates were leveling off in New York, France, Italy and Spain. This provided traders with a potential timeline and hopes that the United States could return to work soon. More discussions of further legislative aid, clarification on the payroll protection program and further commitments of liquidity from the Federal Reserve bank and other central banks all provided support to equity markets which also lent support to grain traders. POET's announcement that it was shutting down three plants and delaying the opening of a fourth, limited gains.

On Thursday, USDA released the updated the supply and demand report. USDA reduced corn for ethanol use 375 million bushels and offset some of that demand destruction with an increase in feed use of 150 million. AgMarket.Net expects a further reduction in ethanol will be necessary. Some estimates suggest an additional 500 million bushels could be lost if driving does not resume soon. Offsetting some of this loss would be a further increase in feed use by as much as 300 million bushels as well as potential exports to China. USDA left exports unchanged, however China did buy 504K tons of new crop corn this week.  World ending stocks were revised up 5.8 MMT as a result of the decline in ethanol usage. All corn numbers were close to trade expectations and the report was considered neutral.

USDA raised U.S. soybean carryover by 55 million bushels to 480 million bushels. USDA reduced exports by 50 million bushels and increase crush by 20 million bushels resulting in a total usage decline. World soybean stocks fell 2 MMT as a result of Brazil and Argentina crop reductions.  U.S. soy stocks exceeded trade expectations, however, the reduction in world stocks offset the negative tone and resulted in a mostly neutral report.

Wheat stocks rose by 30 million bushels to 970 as a result of reduced demand. This was considered slightly negative to the wheat market since most analysts are watching world exporters delay or hoard inventories from the marketplace putting more emphasis on U.S. sales. After attempting to sell off following the report, wheat futures caught a bid and then ended up closing on the highs for the week.

Cattle and hog futures ended up on a negative close Thursday as traders debate logistical problems being touted by packers who cannot sell product, while consumers are complaining that there is no product on the shelf. April cattle going into delivery are at record discounts to cash. Convergence should occur in the final trading days of April futures.

The macro picture continues to build a strong foundation for investment money to enter the commodity markets as soon as confidence stabilizes. We expect Retail CPI and Consumer Confidence reports should provide the catalyst investors need to start buying. We will update all supply, demand and fund position charts in our Weekly Video released on Monday.

Reach Bill Biedermann at 815-404-1917 or [email protected]

The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. AgMarket.Net is the Farm Division of John Stewart and Associates (JSA) based out of St Joe, MO and all futures and options trades are cleared through ADMIS in Chicago IL. This material has been prepared by an agent of JSA or a third party and is, or is in the nature of, a solicitation. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading infromation and advice is based on information taken from 3rd party sources that are believed to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. The services provided by JSA may not be available in all jurisdictions. It is possible that the country in which you are a resident prohibits us from opening and maintaining an account for you. 

The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 

About the Author

Bill Biedermann

Hedging strategist, AgMarket.Net

Bill is a well-known speaker, presenter and commodities advisor. In addition to trading commodities for 40 years he has testified before Congressional hearings, CFTC hearings, served for the U.S. State Department AID and co-founded one of the largest IB Brokerage and Agricultural Economic Research firms in the U.S. Bill graduated from Illinois State University with majors in Agricultural Production, Ag Economics and Ag Education and farmed from 1973-1988.

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