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Morning Market Review for March 30, 2020

Wheat rises on looming Russian export quota. (Comments are updated by 7:30 a.m. Central Time.)

Soybeans strengthen amid logistic concerns in South America, corn falls with energy prices

  • Corn down 1 cent
  • Soybeans up 6-8 cents, soyoil up $0.32, soybean meal up $2.2
  • Wheat up 4-6 cents
  • *Prices as of 6:50 am CDT.

Corn: Corn futures were slightly lower this morning, following energy prices lower. May and July futures both lost $0.005 overnight to start the day at $3.455 and $3.5125, respectively.

Corn basis ended last week lower across the Midwest. Facilities monitored by Farm Futures lost an average of $0.07 in basis last week. Despite strong export sales in last Thursday’s weekly export report, river terminals softened basis as demand for corn continues to dry up. Below is a list of week ending price movements from across the Corn Belt.

Corn basis and change

CFTC issued their weekly Commitment of Traders report on Friday. Over the week ending March 24, speculators trimmed 19,263 long positions to grow their net short position to 108,549 contracts, taking a somewhat bearish stance as May futures began to bounce back from March 18 lows.

Soybeans: The soy complex was buoyed by strength in demand for soyoil and soymeal this morning. May futures rose $0.065 to $8.9175 on the sentiment. Soyoil prices followed a rally Malaysian palm oil prices this morning, gaining $0.32 to $27.67/lb. May soymeal futures were up $2.2 to $321.8/ton in the pre-trading session as Chinese and feed demand continued to underpin strength to the feedstuff.

Cash soybean offerings also ended the week lower. An uptick in farmer sales early in the week on higher futures prices and increased processing demand leveled off by Friday as farmer sales slowed. Late week price changes are listed below.

Soybean Basis Change

Brazilian truck stops will remain open after the Brazilian Agriculture Ministry also declared gas stations and highway diners essential for the flow of grain amid COVID-19 pandemic shutdowns. The amended restrictions will allow grain to continue moving to export markets as on-farm storage is at capacity and Chinese demand is strong.

Argentine soy crushing plants are operating on soybean inventories slashed by over a half as local restrictions on movement due to the COVID-19 pandemic prevent trucks from replenishing factories’ stocks. The Argentine government allowed grain flow to continue but locally enforced rules to contain the virus have led to tighter restrictions on grain trucks, causing bottlenecks in the soybean supply chain during soybean and corn harvest season.

China continues to battle with African swine fever after a herd of 200 piglets was found to be carrying the disease as they were being illegally transported to Inner Mongolia. China has struggled to eradicate the disease, which erased over 45% of China’s swine herd and eliminated soybean demand for feed beginning in 2018.

The weekly Commitment of Traders report found speculators slightly more optimistic on soybeans than last week as May futures prices recovered. Managed money trimmed 29,094 short positions to end the week of March 18-24 as net sellers of soy, but only by 2,444 contracts. Speculators continued to be net sellers of soyoil for a second straight week by 746 positions.

Hedge fund managers found favor in soybean meal, boosted by tight Chinese inventory and strong feed demand amid DDG production cuts. Money managers trimmed 20,363 long positions and strengthened their net long position on soymeal by 39,099 contracts.


Wheat contracts price changes

Concerns over potential export restrictions in Russia boosted prices in the U.S. wheat complex this morning. A rising dollar amid increased economic volatility likely offered a cap for gains as the ICE Dollar Index rose 0.58% this morning.

Cash bids for soft red winter wheat weakened on Friday. A Chicago-area elevator dropped basis $0.15 to $0.05 over May futures for the Chicago SRW contract. A river facility in Toledo, Ohio also weakened basis $0.10 to $0.10 below May futures prices. The weakening was a response to farmer sales earlier in the week that allowed processors to bulk up inventories as demand for baked goods increases amid the COVID-19 pandemic.

Hard red winter wheat prices fell $0.02 at a Texas rail loading facility that feeds into Gulf ports. Spot bids at the facility ended the week at $1.58 over May Kansas City wheat futures prices. Basis prices were unchanged elsewhere in the Southern Plains. Farmers were eager to book harvest pricing, but less eager to make sales on the spot market as many farmers have finished selling their old crop.

Protein premiums for hard red winter cash wheat delivered to or through Kansas City by rail fell for all protein contents on Friday, as shown below:

wheat protein content, basis range, change

The Russian government continued to weigh the possibility of imposing a 257.2 million-bushel quota on wheat exports to protect their domestic food supply amid the COVID-19 pandemic. Agricultural consultancy SovEcon expects the government to pass the measure and reported other measures being taken to slow exports.

Strong consumer demand amid coronavirus-induced panic buying led speculators to take a slightly optimistic tone in last week’s Commitment of Traders report. Speculative traders timed 21,422 short positions on Chicago wheat and 12,761 shorts on Kansas City wheat. Money managers’ net long on Chicago wheat grew to 17,670 positions while their net short position on Kansas City wheat tightened to 5,356 contracts.

Weather: Following a soggy weekend, most areas of the Corn Belt will attempt to dodge pockets of rain early this week. Midwestern farmers may get a chance this week to progress with spring fieldwork but growers in the Southern Plains will likely need to wait a couple days as soils dry out from the inch of rain forecasted today and tomorrow by NOAA’s 24-hour precipitation monitor.

Financials: Warmer weather is around the corner which usually means a surplus of cheap, delicious produce at grocery stores. But U.S. consumers may face higher prices and scarcities of seasonal food products amid a migrant worker shortage.

The U.S. stopped processing H-2A visas during the COVID-19 pandemic, preventing 243,000 migrant workers, primarily from Mexico, from working in the produce fields in California and Florida as their peak harvest season begins. U.S. produce farmers are grappling with the possibilities of losing an entire crop. A list of foodstuffs and their origins are listed below.

Florida California Foodstuff Origins

Updated data from the Johns Hopkins Coronavirus Resource Center found the U.S. coronavirus caseload at 143,055 cases, surpassing Italy’s total of 97,689 cases. About 2,513 Americans have already succumbed to the virus as President Trump announced yesterday that social distancing measures would remain in place until April 30.

Dow futures were mixed this morning, trading 3 points or 0.01% lower to 21,434 points at last glance. Futures teetered between the red and green this morning as economic uncertainty surrounding the coronavirus continued to rattle markets.

Energy prices dropped to 18-year lows overnight as millions of Americans remain homebound amid the COVID-19 pandemic. Brent crude prices fell $2.10/barrel to $22.83/barrel. Gasoline futures dropped $0.0666/gallon to $0.5071/gallon.

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