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Traders brace for historically large crops

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As we move forward with planting and see the first official USDA new crop balance sheet next month, I suspect rallies will be sold and good news in the next two weeks will be hard to come by. However, there are things lurking beneath the surface, such as recent export strength and what we internally at AgMarket.Net expect, which is very strong feed usage as DDG values have surged.

World markets and global economies are on a fast track. The decisions by the Fed and the U.S. Congress to pump several trillions into the economy are a very big deal. It remains very possible, maybe probable, that price lows established early this year (as in now) could prove to be significant. As fast a track that so many of these macro historic inputs are capable of producing, the potential for commodity prices to be significantly higher 12 months from now must be respected.

After plunging lower on Tuesday morning (following the crude oil collapse) the nearby May soybean contract hit a price low of $8.08-1/4, near that critical $8.00 support level. Soybean prices quickly found buying interest at those lower levels and finished the day in positive price territory. Should futures prices be able to hold that strength into Friday’s close, we may actually see a bullish weekly reversal on charts which would be a very strong technical signal that a seasonal low is indeed in place. If a seasonal low truly is forming, it is doing so impressively on little additional friendly fundamental news.

Does anybody remember that amazing trade deal we finalized on February 15th with China?  I only mention it because U.S. agriculture sacrificed a great deal the last two years to make it happen and we could really use China to start buying our commodities right about now.  Despite COVID-19 China did not quit buying; in fact they are buying quite a bit. They just are not buying from us.

USDA

Corn has dominated all grain export inspections in recent months and continued that trend for the week ending April 16, but its overall total was much less impressive after falling to nearly half of the prior week’s volume. Wheat export inspections also fell from a week ago, while soybeans took a modest step forward.

The latest USDA crop progress report, covering the week ending April 19, showed a little forward momentum for corn and soybean plantings as the weather turns agreeable in more and more fields. Corn progress reached 7%, which was in line with analyst expectations and up from 3% a week ago. This was the first week that USDA reported on soybean planting progress, with the agency showing 2% of the crop is now in the ground. USDA shows 7% of the spring wheat crop now planted. Planting pace remains ahead of last year’s tally of 4% but well behind the prior five-year average of 18%.

USDA’s newest export report showed soybeans and wheat sales headed in a positive direction, even though overall totals were still lackluster. Old crop corn sales were down nearly 50% from the prior four-week average, meantime, with cumulative totals for the 2019/20 marketing year still dismally behind last year’s pace.

Export sales were reported on three days this week. China bought 7.3 million bushels of soybeans on Wednesday, 10 million bushels on Thursday and 5 million bushels on Friday. Also on Friday, Mexico purchased 4.6 million bushels of soybeans and 23.2 million bushels of corn.

Outlooks

The soybean-corn acreage debate will be no less prevalent this year as the impacts of global volatility rock the surety of soybean markets. Here are a few key factors to consider for the soybean markets while chiseling away at spring fieldwork.

The COVID-19 onslaught is certainly doing no favors to corn growers preparing for the 2020 planting season. Here are a few things to watch in corn markets over the next several weeks.

Podcast

Crude oil has taken a wild ride so far this week, dragging down everything from financial markets to grain prices as that market tanked. Corn has taken the hardest hit so far, with May futures trading higher on Wednesday but down significantly over the past six weeks on crumbling ethanol demand. But other grain prices are showing a little more optimism this week. Wheat, in particular, has some upside potential as Black Sea exports begin to dry up, and as lower-than-expected crop quality ratings for the U.S. crop surprised analysts on Monday.

Ethanol

The U.S. Energy Information Administration released its weekly Petroleum Inventory Status report today. Despite a 4.5% increase in weekly gasoline demand, ethanol production set yet another record lower week for output, falling a mere 294 million gallons per day to 23.6 billion gallons per day. Weekly ethanol output has dropped 45.6% since movement restrictions to combat the transmission of coronavirus went into place over a month ago.

Recaps

May corn futures were down $0.0175 this morning on mixed energy prices and economic uncertainty. USDA confirmed another round of soybean purchases from China yesterday as the world’s second-largest economy seeks to bulk up state reserves in the wake of the COVID-19 pandemic. Private exporters reported sales of 10.0 million bushels to be delivered in the current marketing year. The wheat complex fell prey to a round of technical selling despite increasing reports of deteriorating conditions of the European wheat crop amid dry weather.

USDA shared some positive news Friday morning in the form of large corn and soybean purchases from two of the biggest buyers of U.S. grain – Mexico and China. But traders largely ignored that news, instead bracing for what could be a historically large crops planted later this spring, combined with tumbling ethanol and feed demand. Wheat prices took the biggest step back on a round of technical selling as traders returned their focus on large global stocks and export sales that have remained relatively sluggish so far this spring.

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