Midday Comments: 4/21/2020

Wheat jumped to double-digit gains on Monday as signs that both Russia & Ukraine exports would soon reach wheat export totals that would trigger a halt in further shipments until new-crop supplies become available.  With 2020 US wheat acreage hovering at the lowest levels ever, traders prices in expectations for improved short-term export sales & tightening supplies.  Corn & soybeans headed in the opposite direction, taking their cues from a historic move in crude oil. Corn futures sagged to new contract lows & soybeans took aim at the lows set in mid-March as fears of over-supply & under-demand were amplified by another subpar weekly export inspections report. Fueled initially by rumors that Saudi Arabian oil was headed to the US, the Tuesday-expiring May 2020 West Texas Intermediate crude oil futures contract plummeted throughout Monday’s session.  May WTI crude oil first traded from $18 to $10 to $5 before hitting 1c per barrel shortly after 1 pm.  But it didn’t stop there.  The thinly traded May WTI crude oil futures then went below zero & traded as low as minus $40.32/barrel, eventually settling $55.90 lower at minus $37.63/barrel!!! With US storage facilities nearly full & global oil demand slashed by response to the coronavirus, the owner of a May crude oil contract had to PAY someone to take oil on Monday.  In 46 years of following markets daily, I had never considered the possibility of a negative price quote, much less witnessed one. June WTI crude oil was also lower on Monday, settling down $4.60 to $20.43/barrel.  At Monday’s close, May corn futures plunged 8c, Dec. corn dropped 6.5c, May & Nov. beans each declined 6c, May soymeal lost $2.60/ton, May soyoil tumbled 0.31c/lb., May soft red winter wheat soared 15.25c higher, & July SRW wheat surged up 13.75c. The sight of a negative quote for crude oil is a sobering, scary thought for anyone who owns any commodity futures contracts. 
 
Grains traded on both sides of unchanged early in Monday night’s electronic session, but corn & beans added to Monday’s losses as global equity markets responded to renewed turmoil in the crude oil market.  Although the May WTI crude oil contract rallied back above $0 by the 7 pm reopen of the grain markets, weakness in deferred contract months eventually weighed on grains, too.  USDA Weekly Crop Progress data for the week ended April 19 offered little support to prices as forecasts for clear weather across the Corn Belt sustained expectations for a timely planting season.  USDA reported that corn was 7% planted as of Sunday, up 4% for the week but 2% behind the 2015-2019 5-year average pace.  Soybeans were reported at 2% seeded, 1% above the 5-year average.  Wheat prices fared better than corn or soybeans, but they also faded from early session highs despite more positive crop progress news.  Spring wheat was only 7% sowed, up 2% for the week, but 11% behind average.  Although winter wheat progress was only 1% behind average at 14% headed, USDA reported winter wheat conditions slid to 57% good-excellent as last week’s cold snap hurt Kansas, Nebraska & South Dakota crops & dry weather reduced Oklahoma & Texas wheat prospects.  At the 7:45 am pause in electronic trading, May corn futures were down 6.5c, Dec. corn was 5.25c lower, May beans were down 10.25c, Nov. beans were 7.25c lower, May soymeal was down $2.40/ton, May soyoil was 0.70c/lb. lower, May soft red winter wheat was 1c higher, & July SRW wheat was up 3/4c.
 
Outside markets were a negative influence this morning.  Ahead of the 8:30 am reopen of the regular trading session, May WTI crude oil was still priced at minus $2.84/barrel, June WTI was down nearly $6 below $15/barrel, May gasoline futures were down about 12c to below 55c/gallon, & US equity index futures were down about 2%. Copper, gold & interest rates were also lower, the US dollar index was higher, adding to bearish sentiment  Traders who were convinced last week that the US & global economy would achieve a quick rebound in activity are rethinking those assumptions this week. Early reports from China indicate that consumer spending failed to rebound dramatically when social distancing restrictions were halted.  That suggests consumers in western economies may prove to be very cautious as restrictions are loosened, too. Livestock futures face their own set of challenges.  Citing disease outbreaks, another 20,000 head per day slaughter facility in Minnesota was closed indefinitely on Monday & a Canadian beef kill facility was also idled.  Only 370,000 hogs & 90,000 head of cattle were processed on Monday, far below the 490,000+ & 115,000+ head, respectively, that were likely available for slaughter.  The global economy is geared for full usage. The viral demand shock will likely create lingering uncertainty longer than equity traders expected last week.
 
Corn extended its overnight losses, soybeans sagged to new contract lows & wheat turned lower by midmorning as the sell-off in crude oil spilled over into the rest of the global price environment. May corn futures declined to equal the $3.01 weekly chart low set in 2015/16 & bounced back to mid-range losses.  May soybean futures ripped to double-digit losses as low as $8.0825 before also rebounded to mid-range losses.  Wheat faded as much as 7c lower before recovering at midmorning.  At 10:30 am, May corn futures were down 7.25c, Dec. 2020 corn was 7c lower, May beans were down 9.5c, Nov. beans were 8.5c lower, May soymeal was down $0.60/ton, May soyoil was 1.01c/lb. lower, May soft red winter wheat was down 2.5c, & July SRW wheat was 2.75c weaker. Government promises for a “check for everyone” are stymied by the reality that usage must improve to prevent short-term supply burdens.
 
In export news, USDA did not report any daily export sales on either Monday or Tuesday. Taiwanese flour mills will seek 8.083 mb of US milling wheat on Thursday. 
 
Monday’s USDA Weekly Grain Export Inspections data was generally disappointing with corn inspections the slowest in 11 weeks, & total grain shipments the worst since Christmas week. Corn inspections declined to 26.922 mb in the week ended April 16—down 41.9% from the previous week’s upwardly revised 46.317 mb (+5.772 mb), 26.434 mb below last year’s same-week results & far below the 42.0 mb inspections pace needed thru the end of August to reach USDA’s 1,725 mb export forecast.  Mexico (9.700 mb) & Colombia (6.499 mb) dominated the list of 9 nations that shipped at least 0.451 mb of US corn last week.  Cumulative corn inspections total 834.7 mb—475.8 mb below 2018/19 & still the slowest shipment rate at week #33 since 2012/13.  Grain sorghum inspections eased to 7.120 mb last week with China (5.276 mb), Ethiopia (1.800 mb) & Mexico (0.043 mb) the destinations.  Cumulative milo inspections have reached 85.2 mb, up 39.3 mb (+86%) from last year’s lowest-since-2011/12 pace. 
 
Soybean export inspections improved last week to 19.835 mb.  That was up from the previous week’s upwardly revised 17.425 mb (+1.183 mb) & 5.650 mb higher than last year’s same-week shipments, but still well below the 27.1 mb inspections rate needed weekly thru Aug. 31 to reach USDA’s downwardly revised 1,775 mb export projection for 2019/20.  China (2.685 mb), Taiwan (2.614 mb), Indonesia (2.476 mb), Spain (2.348 mb), Egypt (2.142 mb), Bangladesh (2.048 mb), Mexico (1.942 mb) & Japan (1.799 mb) took the bulk of last week’s business.  Cumulative soybean inspections have reached 1,209.2 mb, up 69.1 mb (+6.1%) from last year but still the second-slowest pace since 2011/12 at week #33 of the marketing year. 
 
Wheat inspections dipped last week to 17.267 mb, down 28.8% from the previous week’s upwardly adjusted 24.265 mb (+1.899 mb) & 13.220 mb below last year’s same-week inspections.  In the 6 remaining weeks of the 2019/20 wheat marketing year, wheat inspections need to average 27.1 mb weekly to reach USDA’s 985 mb export forecast.  Mexico (3.316 mb), Japan (2.531 mb), the Philippines (2.092 mb), Taiwan (1.927 mb) & South Korea (1.884 mb) took the lion’s share of last week’s wheat shipments.  Cumulative wheat inspections now total 807.0 mb—up 44.0 mb (+5.8%) from last year & the best pace since 2016/17 at week #46. 
 
Locally, corn basis was a penny higher, soybean basis was steady & wheat basis surged 15c higher on Monday, recovering much of the basis loss it suffered last week.  
 
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"Closing Comments" are written by David Marshall, First Choice Commodities LLC, Nashville, IL.  To learn more about his farm marketing advisory or commodity brokerage services, contact him at dmarshall@firstchoicecommodities.com or call (618) 327-4370 (voice/fax) or (618) 314-0918 (cell). This commentary is not intended for specific trading strategies. We strive to insure this information is reliable, but we cannot guarantee its accuracy or completeness.  Commodity trading involves risks. You should fully understand those risks before trading.