AgriVisor Market Recap

Tuesday, April 07, 2020
Corn was the defined leader in today’s market as short covering finally developed in the complex after setting new contract lows for most months yesterday. This ends an 8-day decline in corn values as the US is now the cheapest source for corn in the global market. Soybeans were also on the positive side throughout the day as light buying surfaced in that complex as well. Wheat values were on the defense all day as the initial spring rating on the winter crop was well above trade expectations. 

Spring weather conditions are becoming more of a market influencer. While some regions of the Corn Belt will see scattered fieldwork and planting over the next few days, most regions believe it will be at least a week before they can get into fields. Some claim it will be closer to two weeks, and that is if no additional precipitation is received. Trade is also monitoring the cold temperatures being forecast for the central US as these will prevent soils from drying in a timely manner. These factors are all combining to add doubt in the high planting numbers being predicted, especially on corn. 

There is a difference in attitude this year that could easily impact acres as well. The longer it takes field conditions to become satisfactory to plant, the closer we will get to the prevent plant insurance date. Last year farmers planted corn long past this date wit some still putting crops in the ground in July. Hardly any farmers claim they will attempt that again this year if current conditions persist and will instead take their insurance payment. 

Corn exports remain strong and we have actually started to see a build in global demand in recent weeks. This has been brought on by US corn values dropping to the point where it is now the cheapest in the global market. Unfortunately, this is doing little to offset the losses we are seeing in the domestic market, especially for ethanol. More plants announced they would be idling operations today, and many that are still operational are running at a minimal level. The question in the market now is not if this will raise ending stocks, but rather how much greater it will be. 

The big question surrounding this situation is when we may see a reversal in the trend of plant closures. While a quick end to the decrease in energy product demand is hoped for, that is unlikely. Even with signs that some regions of the world are recovering from the Coronavirus, travel remains limited. It could be months for this to fully recover, and in some cases, possibly years. Unfortunately, some ethanol plants will likely remain closed indefinitely as a result. 

The market is seeing some signs of recovery from the Coronavirus on the global scale. This is especially in countries that have been fighting the virus for longer periods of time, mainly China. China has started to ramp up imports to replenish its domestic reserves. There are also signs that new cases in parts of the US have peaked, but that does not mean the worst is behind us. Hopes are this will start to bring back consumer demand though, which has been the greatest negative factor for commodities on a whole. 

The initial US winter wheat crop rating has been released and came out much higher than expected. A reported 62% of the winter crop is rated Good/Excellent, the highest level since 2010. When ratings stopped being released last fall the crop was rated 52% G/E, and typically we see a decline in conditions over the winter months. As a result, most analysts were expecting a crop rating closer to 47% G/E. Trade is closely monitoring cold temperatures that are forecast for the Plains, but it is unlikely these will cause much crop damage.