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Morning Market Review for April 9, 2020

Grain complex strengthens as traders adjust positions ahead of this morning’s reports. (Comments are updated by 7:30 a.m. Central Time.)

  •  
  • Corn up 1-2 cents
  • Soybeans up 1-2 cents, soyoil up $0.09, soybean meal unchanged
  • Wheat up 3-8 cents

*Prices as of 7:00 am CDT.

Please note: Grain markets will be closed tomorrow in observance of the Good Friday holiday. Daily newsletters from the Farm Futures team will not be published. From our family to yours, we hope you have a wonderful, safe, and healthy Easter with your loved ones!

Good morning! The USDA releases monthly WASDE reports today as well as weekly export reports. It will be the first WASDE report since the economic fallout from the coronavirus pandemic beginning in March. Below is a quick snapshot of what the markets are expecting from the reports this morning.

USDA Pre-Report Announcement: USDA announced Tuesday it would resurvey farmers in Michigan, Minnesota, South Dakota, and Wisconsin to estimate 2019 harvested production. The updates will be released in the May 2020 Crop Production Report. The agency also announced it would survey North Dakota growers on their harvest results and provide updated estimates at a later date.

U.S. 2019-20 Ending Stocks
 

  • Ending corn stocks will be adjusted higher after the collapse of ethanol demand in Mid-March after the onslaught of the oil price war between Saudi Arabia and Russia.
    • Higher than expected usage reported in the March 1, 2020 U.S. Quarterly Stocks report last week will likely be offset due to impacts from the COVID-19 pandemic.
    • Weak export sales will also a contributing factor to more bearish corn results today.
  • Soybean stocks are expected to remain tight at 430 million bushels.
    • An uptick in soymeal demand in March will likely be offset by reduced demand for soyoil amid restaurant closures due to the coronavirus pandemic.
    • Weak export demand has the potential to add bushels back to the U.S. stockpile.
  • U.S. wheat stocks are expected to remain steady despite an uptick in consumer demand for bread, pasta, and flour due to COVID-19-related consumer stockpiling and home cooking.

World 2019-20 Ending Stocks

  • The collapse of the U.S. ethanol industry will likely send global waves across the international corn market, boosting ending world stocks as well as domestic supplies.
  • China is beginning to show signs of recovery from the COVID-19 pandemic. Soybean supplies in China are tight right now as South American shipments struggle to leave port on time, contributing to a lower ending stock estimate.
    • Lowered estimates for South American production will further tighten stocks.
  • Global demand for wheat products surged in March as countries implemented lockdown measures to prevent the spread of COVID-19. Several countries in the Black Sea region instituted export quotas to ensure the stability in domestic food markets.
    • The May WASDE report will offer more insights into the global wheat production outlook as the crop begins to emerge from dormancy across the globe and Australia begins planting.

South American Corn And Soybean Production Trade Estimates

  • Dry weather in the South Brazilian state of Rio Grande do Sul was catastrophic to the region’s soybean crop and will likely result in a reduced production estimate for Brazilian soybeans.
  • Dry weather in Argentina will also result in a lower soybean production estimate.


Weekly U.S. Export Sales Report

  • Export inspections data for corn rose slightly to 50.1 million bushels according to Monday’s USDA report. We would expect today’s report to reflect a similar upwards shift.
  • Inspections for wheat and soybeans both declined in Monday’s report. An increase in new sales will be needed to offset sluggish international movement.

Corn: 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. High 2020/21 production potential for the U.S. crop continued to cap gains. May futures were up $0.0225 to $3.3225 in overnight trading. July futures prices rose $0.0225 to $3.3775.

Despite some continued weakening in the ethanol sector, corn basis improved at rail locations and river terminals yesterday. Basis was relatively unchanged elsewhere in the Corn Belt yesterday as farmers await results of today’s WASDE reports before further booking sales.

Corn basis and change

Soybeans: May soybean futures prices rose $0.0175 to $8.5625 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.

Soyoil futures were up $0.09/lb to $27.27 this morning. May soymeal futures were unchanged at $297.8/ton ahead of the opening bell.

Cash offerings for soybeans slightly strengthened at an Ohio elevator location yesterday. Basis was also mixed at river terminals that supply U.S. Gulf exports, though steady elsewhere in the Midwest as of Wednesday afternoon.

Soybean Basis Change

Wheat:

Wheat contracts price changes

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. But a cool weather forecast in the Plains this weekend could offset hefty global stocks.

A slightly weaker dollar underpinned wheat gains this morning as well. The ICE Dollar Index weakened 0.01% on optimism over containment of the COVID-19 spread in the U.S.

Soft and hard red winter wheat cash prices were unchanged yesterday. While farmers await results of today’s USDA reports ahead of booking new sales, they are growing increasingly concerned about a cold snap in the Southern Plains early next week that could damage the winter wheat crop.

Protein premiums for hard red winter cash wheat delivered to or through Kansas City by rail were unchanged yesterday, as shown below:

wheat protein content, basis range, change

Weather: Get your planters and Easter baskets ready! NOAA's short-range forecast is projecting clear weather for most of the Corn Belt through Sunday afternoon, allowing farmers a chance to make significant planting progress this weekend. A chance for storms is possible today in the Great Lakes region, but that activity should clear out by tonight.

Financials: The U.S. COVID-19 rose by 32,509 cases overnight to 432,438 cases this morning as the virus continues to spread rampantly across metro and rural areas around the U.S. According to the Johns Hopkins Coronavirus Resource Center, the death toll rose by 1,897 lives from yesterday to 14,808 deaths as of this morning. The virus’ peak is expected to inflict the most casualties on the U.S. population next week.

State-level unemployment claims data is expected to be released today. As the COVID-19 pandemic slugs on, jobless estimates are expected to rise to 5 million for the first week of April. While the projection is down slightly from last week’s figure of 6.6 million unemployment claims, the total applications for unemployment will likely total 15 million Americans. Jobless claims are expected to continue rising while lockdown measures are enforced.

Dow futures wobbled this morning as optimism for a reduction in COVID-19 spread battled with bearish unemployment projections. Dow futures were 68 points or 0.29% higher at last glance to 23,314 points.

Energy futures bounced up as traders caught wind that Russia may be considering deeper production cuts than expected at today’s meeting with OPEC later today. There is also potential the U.S. may cut output by four million barrels a day as storage nears capacity and production eases. Brent crude futures prices rose $1.56/barrel to $34.40 on the optimism.

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