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Morning Market Review for April 2, 2020

Corn rises on an anticipated truce between Russia and Saudi Arabia. (Comments are updated by 7:30 a.m. Central Time.)

A potential end to the oil price war boosts corn futures, wheat sinks on COVID-19 fears

  • Corn up 2-3 cents
  • Soybeans down 1-2 cents, soyoil up $0.12, soybean meal up $0.6
  • Wheat down 3-8 cents

*Prices as of 6:55 am CDT.

Corn: May futures prices fought to ease off 11-month lows this morning, gaining $0.03 to $3.3775 on news of peace talks in the energy sector between Russia and Saudi Arabia. Energy prices rose on the news. July futures rose $0.0275 to $3.415 on the news.

Spot bids for corn strengthened at river locations yesterday, driven by export demand from the U.S. Gulf. Basis weakened at several other locations in the Corn Belt in response to steady farmer sales in recent weeks amid so much economic uncertainty. Farmer sales remained slow yesterday as May futures prices recorded their fourth trading session of losses.

Corn basis and change

The Weekly Petroleum Status Report released by the Energy Information Agency yesterday reported ethanol output down a staggering 165,000 barrels per day to 840,000 barrels/day. It was the largest single week production decline since 2010, when the EIA first started reporting on ethanol production. Ethanol stocks rose to 25.7 million barrels, a new record high, on the energy demand shock due in large part to reduced consumption amid COVID-19 lockdown measures.

2019/20 corn export sales in today’s weekly export sales report released by USDA are expected to range between 27.6 million – 47.2 million bushels. Old crop sales in last week’s report enjoyed a nice boost from low prices, rising to 71.4 million bushels. 2020/21 export sales are estimated between 0 – 27.6 million bushels this week.

Soybeans: Soybean prices were relatively flat this morning, with May futures prices trading $0.005 lower to $8.62. May soyoil futures rose $0.12 to $26.17/lb in pre-market trade while May soymeal futures gained $0.6 to $315.5/ton.

Soybean basis was mixed at Midwestern elevators yesterday but strengthened at river processing facilities – a positive sign for export demand. A $0.23 drop in May futures prices yesterday discouraged farmers from booking new sales across the Midwest yesterday.

Soybean Basis Change

China is flying thousands of pigs into farms in the mainland in an attempt to restock their decimated swine herd, which dropped by 60% due to the African swine fever outbreak. France and the Netherlands have sent several chartered flights of hogs to China since January. The French shipment was valued at $1.6 million.

Old crop soybean export sales are expected to range between 13.8 million – 33.1 million bushels in today’s weekly export report. New crop sales are projected at 0 – 3.7 million bushels. China burst back onto the buying scene last week, boosting old crop sales past 33.2 million bushels. An uptick in cash demand at river locations suggest the boost in sales may continue, especially if delays in soybean shipments out of South America continue.


Wheat contracts price changes

Persistent coronavirus fears eroded value in the wheat complex this morning as technical sellers took advantage of recent gains in wheat futures prices. The dollar rose on similar fears, with the ICE Dollar Index edging 0.02% higher prior to the opening bell.

Cash bids for soft and hard red winter wheat weakened across the country yesterday. A Decatur, Indiana location slashed basis by $0.20 to trade even with May Chicago wheat futures prices. Cash prices remained steady throughout the Midwest.

Hard red winter wheat prices dropped $0.05 to $1.45 over May Kansas City wheat futures prices at a Texas rail facility that ships directly to Gulf ports after price rallies in March left exporters with enough inventory for export demand for the immediate future. Cash prices were unchanged elsewhere in the Southern Plains, though farmers were slow to book new sales after generating enough cash on earlier rallies in March.

Protein premiums for hard red winter cash wheat delivered to or through Kansas City by rail ticked %0.15 higher for contents of 11.6%-11.8% protein, as shown below:

wheat protein content, basis range, change

2019/20 wheat export sales are pegged at 3.7 million bushels – 18.4 million bushels in today’s weekly export sales report from USDA. 2020/21 export sales are projected to be even more robust, ranging between 5.5 million – 16.5 million bushels. Last week’s reported wheat export sales totaled 1.1 million bushels as low prices and increased export restrictions in the Black Sea made American wheat competitive as consumer demand for bread, flour, and pasta rises around the world due to COVID-19 lockdowns.

Weather: Snow is expected in the Northern Plains today. The same storm system will bring another round of rain showers to the Upper Mississippi River Valley today as well, according to NOAA's short-term forecast. The snow will turn to a band of rain, stretching across the entire Mississippi River Valley from tomorrow through Saturday, preventing farmers in the Midwest from progressing with fieldwork this week.

Financials: A Chinese commerce ministry official reportedly stated overnight that domestic grain stocks are plentiful enough to prevent local shortages amid reduced import activity. Grain stocks of corn, wheat, and rice were projected at 280 million tons, which is an average of 80 tons higher than expected demand.

The statement came as global restrictions due to COVID-19 have created bottlenecks at international port facilities, namely in South America. China also expects manufacturing demand to taper lower as more countries enforce lockdown provisions to halt the spread of the virus.

Coronavirus cases in the U.S. increased by 27,089 cases from yesterday to 216,722 cases as of this morning, according to the Johns Hopkins Coronavirus Resource Center. The rise in caseloads from yesterday has been the largest increase this week as we approach the anticipated mid-April peak. The death toll rose by over 1,000 lives from yesterday morning to 5,137 deaths.

Talks of a truce between Saudi Arabia and Russia to mitigate their oil price war provided a nice boost to global stocks and energy prices alike this morning. Moscow agreed to the talks as global energy demand has tanked and oil stocks are rising due to international movement restrictions to combat the spread of COVID-19.

Dow futures enjoyed a nice 357-point or 1.72% rally this morning to 21,097 points on the prospects. Energy futures were led by a $2.02/barrel or 9.95% rise in light crude oil futures, trading at $22.33/barrel at last glance. The benchmark Brent crude oil contract rose $2.37/barrel to $27.11.

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