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Morning Market Review for April 6, 2020

Wheat rebound continues with force. (Comments are updated by 7:30 a.m. Central Time.)

Corn trades lower with energy, acres; Soybeans weighed down by South American crop

  • Corn down 2-3 cents
  • Soybeans down 3-6 cents, soyoil down $0.08, soybean meal down $2.7
  • Wheat up 7-12 cents
  • *Prices as of 7:00 am CDT.

A note from the editors: Losses in the ethanol sector could swing more corn acreage into soybeans ahead of 2020 planting. Farm Futures is tracking the impacts of ethanol declines on corn planting and could use your help. Click here to share information about ethanol plants in your area to help fellow readers see how the recent ethanol collapse is affecting the entire farming community.

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Corn: Corn prices traded lower this morning as high expected planting acreage and the estimation of 3.5 billion gallons of annual ethanol production coming offline across 25% of the nation’s biofuel facilities weighed heavily on markets this morning. May futures lost $0.03 to $3.2775 while July futures traded $0.0275 lower to $3.34.

Cash offerings for corn continued lower to end last week. Basis especially weakened at river terminals and two key rail facilities that supply to ports at the U.S. Gulf, indicating decreasing export demand. The lone exception was on the Mississippi River at Davenport, Iowa where basis strengthened $0.02 to $0.07 below May futures.

Corn basis and change

The CFTC released their weekly Commitment of Traders report on Friday. Speculative traders showed little love for corn in that time period, trimming 21,968 short positions and 13,750 long positions as May futures prices traded sideways through the week ending March 31. Money managers remain net sellers of corn by 100,332 short positions.

USDA-NASS starts releasing weekly Crop Progress reports today. While planting in the Midwest remains on hold due to wet weather, sowing progress in Texas will likely remain slightly ahead of schedule based on previous crop reports.

Soybeans: May soybean futures fell $0.0525 to $8.49 as a strong South American soybean harvest weighed heavily on prices. May soyoil futures followed suit, dropping $0.08/lb to $26.35.

Delays at Argentine ports are beginning to clear as municipalities clear the way for newly harvested Argentine soybeans to export markets. The news contributed to a $2.7/ton-drop to $300.5 for May soybean meal futures in Chicago this morning.

Spot bids for soybeans were mostly unchanged around the Midwest last Friday. Minor strengthening took place on the Mississippi River at Savanna, Illinois where basis ticked up $0.01 to $0.06 below May futures prices. A Cincinnati, Ohio elevator gained $0.02 to $0.21 over the May contract. Farmers did not show any signs of enthusiasm to book new sales as futures prices recorded their third day of losses by the end of the week.

Soybean Basis Change

Speculators trimmed 17,092 short positions from soybean options and futures in the week ending March 31, according to CFTC’s Commitment of Traders report. Hedge fund managers’ net position reversed last week as the money managers’ new net long position strengthened to 23,230 contracts after sideways futures price trading. Speculators eased off bearish sentiments in soybean meal as well, trimming 5,666 short positions from the previous week. The speculative long position strengthened to 49,619 contracts.

Chinese demand has bought back into the Brazilian soybean market in a big way. Early estimates project over 462.9 million bushels of soybeans were shipped out of Brazil in March, about 35% more than March 2019. Known Chinese demand of Brazilian soy grew 73.5 million bushels to 286.6 million bushels of the March total. Another 51.4 million bushels are expected to end up in China, though the current buyer is unknown.

If it all ends up in China, the world’s second-largest economy will have purchased 72% - nearly three quarters – of Brazil’s March 2020 soybean shipments thanks in large part to a weak Brazilian real. In contrast, March 2020 soybean exports from the U.S. to China are down 7.3 million bushels compared to March 2019.

Wheat:

Wheat contracts price changes

Wheat prices ticked up this morning on a continued technical bounce from last week as well as on news that Russia may be running into supply chain bottlenecks due to COVID-19 movement restrictions. At least 165,000 bushels of grain were held up outside a key port facility in the Black Sea on Friday as local officials enforced a new inspection regime to prevent the spread of coronavirus.

Gains were capped by a strong dollar amid global economic uncertainty. The ICE Dollar Index traded 0.10% higher this morning.

After a busy week that found cash wheat prices mixed around the Midwest and Southern Plains, spot offerings for soft and hard winter wheat were unchanged to close out last week. Wheat movement in the country was slow as many farmers took advantage of earlier price rallies in March. Snowfall across the Plains raised concerns about a sudden shock to the winter wheat crop’s health, but quality impacts will be unknown until later in the growth stage.

Protein premiums for hard red winter cash wheat delivered to or through Kansas City by rail moderated $0.07 lower for protein contents of 11.2% and 11.4%, as shown below:

wheat protein content, basis range, change

Moderate gains after significant price swings in the Chicago wheat market led speculators to add 14,964 long positions to Chicago soft red winter wheat contracts for the week ending March 31. Money managers strengthened their net long position to 35,971 contracts. Speculators reversed their short position on Kansas City wheat for the previous week, adding 3,984 long positions to become net buyers of hard red winter wheat by 2,447 contracts.

Wheat exports out of Ukraine in the last week of March fell by nearly 50% from the previous week to 5.1 million bushels after the Ukrainian government limited international movement of wheat. The government’s export restrictions came in response to growing domestic unease about the food supply amid an increase in consumer bread, pasta, and flour consumption due to COVID-19 movement restrictions.

Weather: Scattered chances of rain will persist throughout the Upper Mississippi River Valley today. Rainfall totals are expected to max out at three-quarters of an inch in Northern Illinois and Indiana, according to NOAA's 24-hour precipitation monitor. More rain is in store for the water-logged Corn Belt through the first half of this week.

Financials: The U.S. COVID-19 caseload surged up 92,360 cases from Friday morning to 337,933 cases as the U.S. begins to steel itself against the expected peak of virus activity due next week. According to the Johns Hopkins Coronavirus Resource Center, the death toll rose by 3,595 lives to 9,653 deaths this morning. The CDC recommended Americans wear cloth masks in public as of Friday. British Prime Minister Boris Johnson was hospitalized Monday morning because of the virus, 10 days after announcing he tested positive for the virus.

Dow futures rallied this morning on hopes that lockdown measures were helping to slow the spread of COVID-19 after New York reported its first decline in deaths on Sunday. Over a quarter of the U.S. economy has shut down since the virus began spreading, though investors shouldn’t count on being out of the woods just yet. Dow futures were up 773 points or 3.69% to 21,730 points ahead of the opening bell.

Saudi Arabia and Russia delayed an expected meeting today in which markets expected the two countries would come to an agreement to lower oil production. Saudi Arabia increased their oil output and began offering steep oil price discounts in March in an effort to claw back market share from a booming Russian energy sector.

Brent crude oil prices were down $0.88/barrel of 2.458% to $33.23 on the news. Diesel prices followed, down $0.006/gallon to $1.0886.

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