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Morning Market Review for March 31, 2020

USDA Prospective Plantings & Grain Stocks Preview. (Comments are updated by 7:30 a.m. Central Time.)

Grains fall as traders adjust positions ahead of this morning’s reports

  • Corn down 1 cent
  • Soybeans down 3-4 cents, soyoil down $0.09, soybean meal down $0.6
  • Wheat down 3-4 cents

*Prices as of 7:05 am CDT.

Good morning! March certainly came in like a lion and may go out the same way, depending on today’s annual Prospective Plantings and quarterly Grain Stocks reports released by USDA at 11am CDT. Here is a quick preview of what you can expect from today’s reports.

U.S. Prospective Plantings

Farmers are eagerly awaiting USDA’s projections on corn acreage. Average trade estimates predict the planted corn acreage to total 94.328 million acres, up slightly from USDA’s February 2020 forecast and about 4.6 million acres higher than 2019 sowings.

A Farm Futures survey conducted in March found farmers are planning on more corn acreage than last year amid turbulent market conditions. While our survey estimates ran on the higher end of trade projections, low input prices and increased economic volatility could entice farmers into corn acreage this year.

Soybean acreage is expected to increase in 2020 from last year’s 76.1 million planted acres. Average trade estimates at 84.865 million acres are slightly lower than USDA’s February 2020 forecast of 85 million acres. Farm Future’s estimate came in on the low end of the trade range at 82.7 million acres to account for higher corn acreage.

But soybeans have not been exempted from volatile market conditions this year. A collapse in corn basis due to drastic ethanol production cuts has buying interest in soybeans over the past week. In fact, over the last seven trading sessions, the benchmark Nov20 soybean – Dec20 corn price spread has favored soybean acreage five of the seven sessions. The soybean-corn ratio was trading at 2.44 last evening, as indicated in the chart below. Prices over 2.4 favor soybeans and under 2.4 signals preference to corn acreage.

Nov Soybean Dec Corn Spread

Wheat acreage is expected to continue to fall to it’s second lowest planting acreage since 1919 amid high global stocks. Increased export restrictions from Russia amid the COVID-19 pandemic could help U.S. wheat to compete on the global market.

Barley, spring wheat, and durum estimates are expected to gain minor ground in the 2020 acreage battle. Cotton acres are projected lower after the collapse in global manufacturing following global shutdowns to contain the coronavirus pandemic.

The acreage projections have potential to rattle markets. But it is important to keep in mind that USDA’s estimates today are only reports of what farmers want to happen, not necessarily what will happen. Today’s reports are not likely to hold a significant amount of weight against the rapid market swings that have thus far characterized Spring 2020.

U.S. Quarterly Stocks

U.S. corn stocks dropped to their lowest level since 2015 in the December 1, 2019 quarterly grain stocks report. Analyst expectations of 8.125 billion bushels as of March 1, 2020 would be in line with historical trends and would follow December 2019’s trend of a four-year low.

The average analyst estimate would likely account for an uptick in feed usage, though it would likely not factor in the recent collapse of the ethanol industry. Lower futures prices for the May contract this morning suggest the market thinks the drop from December stocks may be lower than anticipated.

Despite tightness in global stocks, the December 2019 quarter soybean stocks were the second highest in history. Analysts are projecting today’s March 1, 2020 soybean figure to come in at 2.241 billion bushels. Soybean crush levels have risen to record highs this year which will likely offset slower export numbers.

Soybean stocks have the most potential to influence planting acreages as well. If the March 1, 2020 soybean figure comes in lower than expected, new crop soybeans may gain favor over 2020/21 corn acreage, especially considering the recent uptick in demand for soymeal. Higher levels of soybeans will likely send the soybean-corn price ratio below the critical 2.4 level it has hovered above the past week, shifting acreage favorability to corn.

U.S. wheat stocks as of March 1, 2020 are predicted to total 1.432 billion bushels. That estimate would be consistent with December 2019 stocks as the lowest March figure in four years. Usage rates will not include the recent spike in demand for wheat products following consumer stockpiling due to COVID-19 pandemic-induced panic buying.

March 31 is historically a volatile trade day, which would not be exceptional given the recent trading climate. Our team will be providing real-time coverage as the reports are released, so check out our website, www.farmfutures.com for more updates today.

Corn: Corn futures prices edged lower this morning, despite strength in the energy sector as traders made last minute position adjustments before this morning’s USDA reports. May futures fell $0.0075 to $3.405 this morning, while July futures lost $0.01 to $3.465 in the early morning trading session.

Cash prices for corn moved higher yesterday at several locations in the Corn Belt – a welcome reprieve to the last two weeks of falling basis. Supply chain logjams due to coronavirus restrictions in South America are increasing global demand for more readily available U.S. grain, as reflected in higher river prices yesterday.

Corn Basis Change

Rainfall in the Southern Plains has not halted corn planting in Texas. Some 50% of corn planting has been completed in Texas, well ahead of the five-year average of 41% complete for the state.

Surplus moisture in Illinois could slow down spring planting progress. Moisture levels in the Land of Lincoln are 56%, according to USDA’s weekly crop conditions report released last night.

Soybeans: Traders sold off soybeans this morning as they adjusted positions ahead of this morning’s reports. May soybean futures fell $0.0375 to $8.785. May soybean oil traded $0.09 lower to $26.78/lb. May soymeal futures fell prey to light profit-taking, losing $0.60 to $324.9/ton in the early morning session.

Cash soybean prices were mixed at a couple locations around the Midwest, but mostly steady yesterday. Many farmers are banking on today’s reports triggering a price rally, so new sales remained relatively slow according to merchandisers.

Soybean Basis Change

Wheat:

Wheat contracts price changes

Concerns over export restrictions in the Black Sea were ignored by the wheat complex this morning as traders adjusted short positions prior to this morning’s USDA reports. Consumer wheat demand will likely remain strong while at home food preparation surges amid COVID-19 lockdowns. The ICE Dollar Index did no favors to wheat this morning, rising 0.65% in overnight trading.

Cash bids for soft red winter wheat were unchanged yesterday. Sales have slowed following last week’s futures price rally.

Hard red winter wheat cash prices fell $0.08 to $1.50 over May Kansas City wheat futures at a Texas rail loading facility that feeds into Gulf ports. Basis prices were unchanged elsewhere in the Southern Plains. Farmer sales slowed ahead of today’s reports as many growers took advantage of earlier price rallies that allowed processors to bulk up wheat inventories.

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

wheat protein content, basis range, change

Winter wheat conditions in the Southern Plains continued to improve as a jet stream across the Southern U.S. continues to bring rain to areas plagued by dryness this past winter. About 50% of the wheat crop in Kansas was rated good to excellent this week, compared to 48% last week. Conditions in Texas improved as well, as 50% of the crop was in good to excellent condition, up from 49% a week prior.

Weather: The Corn Belt will enjoy clear weather today and tomorrow, but a system building in the northern Rockies could push rain into the Midwest by Thursday morning, according to NOAA's short-term forecast. Soils will have a chance to dry out over the next couple of days, but added rainfall will continue to saturate soils that are currently water-logged.

Financials: Coronavirus cases in the U.S. surged by over 20,000 from yesterday to 164,610 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll spiked by 500 lives to 3,170 deaths as the virus continues to build momentum ahead of the anticipated mid-April peak.

Dow futures traded slightly lower this morning as global stocks prepare to close out the worst quarter since 2008. However, Q2 of 2020 will likely start with no less volatility than Q1. News of economic recovery out of China helped ease investor anxiety, but Dow futures still fell 83 points or 0.37% to 22,0844 points amid economic uncertainty.

Energy prices posted a moderate recovery overnight, led by a 7.17% gain in April light crude oil futures. Light crude prices were up $1.44/barrel to $21.53. Brent crude oil prices rose $0.73/barrel to $23.49 and diesel futures gained $0.0291/gallon to $1.0485 in pre-market trading.

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