The following marketing analysis is for the week ending May 1.
CORN — Another ugly Monday for corn with seed going quickly into the ground and a vacuum of any fresh friendly news. Nearby corn set a new contract low at $3.00.25 per bushel. Nearby corn has not traded below the $3.00 level since 2009. It may just be a matter of when, not if, we push through that support with expectations carryout numbers will increase on the weaker feed and corn for ethanol demand. This is not to say there couldn’t be a few bright spots along the way. If China includes corn and/or ethanol in their Phase 1 purchases, more corn acres than expected switch to soybeans, weather negatively impacts growing conditions, or feed and ethanol demand rebound quicker than currently anticipated, we could hold current levels to trade sideways.
The Phase 1 trade deal with China may be in question. The White House is considering how best to respond to China’s handling of the coronavirus. Possible tariffs are being considered at a time when China issued an additional 1.5 million metric tons of low tariff corn import quotas. They have issued a total of 6.3 mmt quotas. These quotas may be used for any origin.
Weekly ethanol production fell 26,000 barrels per day to 537,000 bpd — another record low since the industry’s infancy. An encouraging sign, however, was the first decline in ethanol stocks since March 20. Stocks fell 1.35 million barrels to 26.3 million barrels. Margins improved 6 cents/gallon to breakeven levels. The University of Illinois projects corn use for ethanol will drop to 4.75 billion bushels, down 300 million bushels from the current U.S. Department of Agriculture outlook. Gasoline demand improved for the third week in a row, up 10 percent week-on-week. The demand level is still 37 percent below last year.
Weekly export sales were better than anticipated at 53.4 million bushels. This brings total commitments to only 20 percent behind last year at 1.45 billion bushels. Mexico was the biggest buyer. The USDA is forecasting total exports for the year at 1.725 billion bushels, a decline of 16.5 percent from last year. We need 12.3 million bushels of sales per week to hit their outlook. New crop sales were 13.3 million bushels. Total new crop commitments are 107 million bushels vs. 88.3 million bushels last year at this time.
U.S. corn planting was 27 percent complete as of April 26, well ahead of the 20 percent average. Minnesota had 40 percent of its corn in the ground by that date, with Illinois at 37 percent complete and Iowa at 39 percent complete. U.S. corn planting is estimated to be 45 percent complete by May 3. U.S. soybean planting was 8 percent complete as of April 26 compared to the 4 percent average. Soybean planting is expected to advance to 20 percent complete by May 3. Due to dryness in Brazil, their safrinha corn crop is being stressed and production estimates are declining. A well-respected private consultant lowered the forecast 1 mmt to 97 mmt, with a bias it could fall lower.
Outlook: The May World Agricultural Supply and Demand Estimates report will be released May 12 and will include the first supply/demand sheets for the 2020-21 crop year. Early forecasts suggest the carryout will surge to over 3 billion bushels next year. Negative fundamentals will limit any upside without fresh bullish inputs. Weather forecasts are conducive to rapid planting progress and threatened sanctions against China are a shadow over business.
July corn fell 4.5 cents this week to settle at $3.18.5 per bushel while the December contract was unchanged on the week at $3.36.75 per bushel. On a weekly basis, July corn has closed unchanged or lower in each of the last five weeks.
SOYBEANS — A third weaker Monday in a row for soybeans put them on the defensive until late in the week when rumors of Chinese interest provided a double-digit boost. Trade chatter about possible purchases of U.S. soybeans in the 300,000-500,000 range lifted prices to their high for the week. However, reality didn’t provide for any follow-through when sales of 264,000 were announced to China, split equally between old and new crop. This does coincide with talk that sales were for the August/September time frame. JCI from China reported Chinese crushers were 90 percent covered for June, 60 percent for July, and were looking for August and September bushels.
The record weakness in the Brazilian real has pushed Brazilian farmers to sell in excess of 80 percent of this year’s crop. How far will they dig into this year’s production before selling stops or they run out of bushels?
Despite the lack of follow-through, soybeans did close higher for the week. But just when we think it may be safe to go back into the water, threats of retaliatory tariffs toward China for the way they handled the coronavirus were suggested by President Trump. Soybeans would likely be the biggest loser if fresh tariffs are put in place and the Phase 1 trade agreement disintegrates.
The order for U.S. meat packers to keep plants open may be easier said than done. Workers may be reluctant to return unless they feel adequate protections are in place. If facilities begin to ramp up, it could provide support for feed demand.
The March National Agricultural Statistics Service crush was 192.2 million bushels. This is an all-time record and exceeded the trade projection of 191.5 million bushels. Soyoil stocks were 2.328 billion pounds, slightly lower than anticipated.
Weekly export sales were in line with expectations at 39.6 million bushels. Total commitments of 1.43 billion bushels are 13 percent behind last year. We need to average 18.9 million bushels of sales per week to reach the USDA’s 1.775-billion-bushel export outlook. China has bought 13.3 mmt of U.S. soybeans in this marketing year with 892,000 of unshipped sales.
Outlook: If the Phase 1 trade deal with China is put in jeopardy, soybeans may be the first casualty. Good weather may change ideas about corn acres being switched to soybeans. Improved feed demand as meat packers gear up production may also lend mild support. Consolidating trade may be expected ahead of the monthly WASDE report on May 12.
July soybeans rallied a dime this week to close at $8.49.5 and November soybeans were 13.5 cents higher at $8.55 per bushel.
Nystrom’s Notes: Contract changes for the week as of the close on May 1: Chicago July wheat was down 14 cents at $5.16.5, Kansas City was just a quarter-cent lower at $4.83, and Minneapolis was 6.5 cents lower at $5.06.75 per bushel. Crude oil rallied $2.84 to close at $19.78 per barrel, up 16.7 percent for the week. New daily price limits went into effect May 1. The daily limit for Chicago and Kansas City wheat limits increased from 35 cents to 40 cents per bushel.