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Morning Market Review for March 27, 2020

KC wheat flirts with $5/bushel benchmark as wheat demand surges. (Comments are updated by 7:30 a.m. Central Time.)

Soybeans strengthen on soymeal demand, corn falls with energy prices

  • Corn down 1 cent
  • Soybeans up 4-5 cents, soyoil up $0.08, soybean meal up $3.7
  • Wheat up 5-13 cents

*Prices as of 7:00 am CDT.

Corn: Corn futures traded lower overnight, following weakness in the energy complex. May futures were down a penny to $3.4775 while July futures traded $0.0025 lower to $3.54.

Cash corn prices were mostly lower across the Corn Belt yesterday. A Cincinnati, Ohio elevator was a rare exception, strengthening $0.02 to $0.18 over May futures. Basis weakened notably at river terminals and ethanol plants and farmer sales were slow. Basis changes are shown below.

Corn basis and change

The Renewable Fuels Association (RFA) increased projected production cuts by 1 billion gallons yesterday. RFA now estimates over 3 billion gallons of ethanol will come out of production by early next week. On average, about 15 billion gallons of ethanol are blended with U.S. gasoline. Over 30 U.S. plants have shut down production and another 40 facilities have reduced output as domestic energy demand slows to a trickle.

Adding insult to injury, the Environmental Protection Agency (EPA) may delay a March 31 biofuel blending compliance deadline for refineries. EPA chief Andrew Wheeler told reporters yesterday the agency is considering leniency for the oil industry amid coronavirus-induced demand and supply shocks. A decision is expected later today.

Old crop corn export sales nearly doubled from the previous week for the week ending March 19, hitting a marketing-year high as international buyers took advantage of falling prices. Corn export sales topped 72.8 million bushels while new crop sales rose nearly half a million bushels to 3.6 million bushels. Export shipments dropped slightly but will likely be offset by this new round of buying in weeks to come. For more analysis, check out Farm Futures’ coverage of USDA’s weekly export sales report here.

Soybeans: Soybeans continued their rally overnight, fueled by strengthening soymeal demand and prices. May soybean futures were up $0.045 to $8.8475 in overnight trading while May soymeal futures gained $3.7 to $326.6/ton on strong domestic feed and international demand.

Edible oil imports into India have been delayed as ports scramble to acquire necessary documentation from the government to continue receiving shipments. The Indian government announced a three-week lockdown to contain the spread of COVID-19 on Tuesday. The supply chain bottleneck was not currently impacting soyoil prices in the U.S., as Chicago May futures rose $0.08 to $26.58/lb this morning, underpinned by strength in the soy complex.

Cash bids for soybeans were generally weaker across the Midwest yesterday. A Cedar Rapids, Iowa crushing facility bucked the trend, strengthening their spot offerings $0.05 to $0.05 under May futures prices. Farmer sales slowed after stronger sales earlier in the week. Basis changes are noted below.

Soybean Basis Change

U.S. soybean export sales picked up momentum through the week ending March 19 as old crop sales surpassed trade expectations and rose 10.5 million bushels from the previous week to 34.2 million bushels. Export shipments increased 4.5 million bushels to 22.3 million bushels as Chinese purchases came back online.

Several days after Brazilian dock workers called off a strike, an Argentine grain port worker labor union requested the government suspend exports to contain the coronavirus outbreak for two weeks. The request comes at the height of harvest season – the busiest time of year for Argentine ports as farmers move excess grains to port due in large part to lack of storage availability on their farm.

The looming Argentine export restrictions could open the door to easier access to the export market for the U.S. and Brazil. Brazilian soybean crushers stand to benefit the most from an uptick in soybean meal exports as their neighbor to the south – who is also the world’s largest soymeal exporter – could potentially go offline. Soymeal prices have soared in recent weeks as reduced DDG supplies shocked the market on lower ethanol demand and Chinese stocks have emerged from their COVID-19 outbreak at historically tight levels.

Wheat:

Wheat contracts price changes

Steady consumer demand and optimism over the congressional stimulus bill fueled gains in the wheat complex as the Kansas City contract broke past $5.00/bushel for the first time in 13 months. The ICE Dollar Index strengthened 0.12% overnight but gains in the dollar had limiting effects on increases in the wheat complex this morning.

Cash bids for soft red winter wheat were unchanged yesterday. Farmer sales slowed a day after a flurry of wheat movement as Chicago futures prices backed off two-month highs.

Hard red winter wheat prices in the Southern Plains remained steady yesterday. Mills had enough supplies on hand after farmers made sales earlier this week, slowing the flow of wheat through the region.

Protein premiums for hard red winter cash wheat delivered to or through Kansas City by rail fell for wheat containing 11.0%-12.0% protein, as shown below:

wheat protein content, basis range, change

Wheat is hot right now, Total Farm Marketing’s Naomi Blohm writes in the latest Ag Marketing IQ column. Indeed, as Taiwan picked up 3.7 million bushels of U.S. wheat overnight while COVID-19 fueled uncertainty continues to drive consumers to stockpile pasta, bread, and flour around the globe. Turkey also issued an international tender for 6.4 million bushels of wheat to be sourced from the Black Sea overnight.

Wheat export sales followed corn and soybean’s lead in yesterday’s export report as weekly export sales of 2019/20 wheat rose 16.7 million bushels from the previous week to 30.1 million bushels. Export shipments rose 11.81% higher and new crop export sales surged 12.2 million bushels higher than the same time a year ago to 13.5 million bushels.

The French spring wheat crop has benefited from dry weather, as planting progress soared to 72% this week compared to 40% last week. At least 63% of the French crop is in good to excellent condition. France is the European Union’s largest grain producer.

Weather: Widesread rain across the Corn Belt today continues to prevent farmers from progressing with spring fieldwork, according to NOAA's short-range forecast. Rainfall will continue across the Midwest through the weekend, with snow possible in the Western Plains on Saturday.

Financials: The ag supply chain is gearing up for planting season in the height of the COVID-19 pandemic. Suppliers are scrambling to bulk up on fertilizer, seed, and chemical supplies to ensure availability to farmers through planting season in the U.S. and Canada. But movement restrictions and supply shocks in response to the pandemic could limit the flow of supplies and grain as the ag labor force contracts, threatening to delay planting.

The U.S. has surged past China and Italy with the highest global caseload of COVID-19 as of this morning, totaling 85,996 cases as the national death toll rose to 1,300. British Prime Minister Boris Johnson was the latest victim of the virus after testing positive and showing mild symptoms.

Dow futures fell 593 points or 2.65% to 21,755 points as concerns about the virus flared back up, ending three straight days of recovery gains. The U.S. House of Representatives is scrambling to enough return representatives to the Hill to pass the $2 trillion stimulus package.

Energy markets were mixed this morning. Brent crude oil futures fell $0.37/barrel to $25.97/barrel overnight. Meanwhile, gasoline futures were up $0.0212/gallon to $0.565/gallon.

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