Weekly Market Recap
3/13/2020 4:32:46 PM
The market was very volatile this week with the continued uncertainties surrounding COVID-19, caution is the main strategy. The US central bank added more than $198 billion to the financial system which is trying to stabilize the credit markets. More stimulus activity is likely as the world governments try to calm the markets. The CME trading floor will close after today for an unspecified amount of time due to the coronavirus. The Minneapolis Grain Exchange suspended open outcry options trading in the MGEX Exchange room at the close today. No reopen date was announced. WTI crude oil has been able to hold $30, the market has tried to firm up to the $33 level. This is providing support in the other commodities including the ag sector. With all the focus on the COVID-19 pandemic, little focus is being put on the very important March 31st planting intention and quarterly stock report. There still is plenty of uncertainty with what the government will plug in, but it is likely that any positioning will wait for another week, so the market sees what happens in the overall action. With the market uncertainty, ag commodities are seeing pressure making planting decisions difficult. With the bean-to-corn ratio remaining at the traditional equilibrium of 2.40, the market is not making a clear signal on what to plant. Monday is the deadlines for farmers to schedule and appoint with FSA offices to enroll in ARC or PLC programs.
The USDA made no changes to the corn balance sheet on the latest WASDE except to lower the average farm price from $3.85 to $3.80. Struggles in the ethanol industry continue as the drop in crude prices and reduced fuel demand are hitting ethanol producers hard. Ethanol production has been strong this year, the trade will watch this to see if a reduction in corn to ethanol comes about. Ethanol production decreased by 35,000 bpd this week to 1,044,000 bpd. Ethanol inventories decreased by 0.7 mil-lion to 24.3 million barrels. Net ethanol margins were 3 cents lower this week and are at 12 cents negative. Corn export sales were excellent, coming in above expectations. This is the 2nd best sales total of the year. Japan was a massive buyer of 750,000 tons.
The USDA made no changes to the wheat balance sheet on the latest WASDE report this week. Wheat export sales were decent, near the middle of expectations at 452,300 tons. Zero durum sales for the 3rd straight week.
More rain coming for Argentina which should alleviate crop stress. Brazil should get some relief next week, but then dry conditions return. Soybean estimates for Argentina are beginning to creep lower, as seen in BAGE and Rosario Exchange estimates. BAGE went from a soy crop of 54.5 to 52 mmt and Rosario went from a crop of 55 to 51.5 mmt. Reports show that the Brazilian farmer has sold soybeans at a historic pace. There’s concern they will turn into hoarders to offset inflation amid the looming global recession. Reuters reported today that Brazil is 62.8% harvested as their pace picks up due to drier weather in several states.
Soybean export sales were really weak, missing the low end of expectations this week. This is the lowest sales of the year. There were cancellations to China of 90,000 tons. Sales were below the 1 million ton mark for the 12th straight week. The USDA left the soybean balance sheet in the same spot as last month. They upped seed use by 3 million bushels while dropping the residual by 3 million. Monday’s NOPA February Crush report is expected to show the soybean crust at 164.956 million bushels. This would be a record for the month of February. Soyoil stocks were expected to be 2.037 billion pounds.
Cash cattle traded at $110 this week in Texas and Kansas. The meltdown in futures prices have helped to shoot up packer margins. Margins went from $115 last week to $135 this week.
Saudi Arabia is reportedly selling crude to Europe for as low as $25 per barrel, and are specifically targeting big refiners of Russian oil, according to a report from Reuters. Saudi Aramco told these major refiners that they would supply all requested additional volume in April as well. Russia’s main blend has been offered around $30 per barrel in comparison. A Reuters survey of traders and analysts is predicting that oil prices are set to hold near current lows in the coming months as demand continues to collapse in response to the spread of the coronavirus. Analysts in the poll cut their forecasts for Brent crude to $42 per barrel this year, versus the consensus of $60.63 in the February poll. The current national average price of retail gasoline is current $2.303, which is down 2.2 cents from yesterday, according to data from AAA. Prices have fallen more than 10 cents since last week at this time. There are a number of gas stations in the Twin Cities with prices under $2/gallon.