Midday Comments: 4/30/2020

Corn & beans extended overnight gains at the open of Wednesday’s regular session, but each peaked within first 5 minutes.  Corn & soybeans futures had rallied along with crude oil on Tuesday night after data from the American Petroleum Institute suggested crude oil & gasoline inventories increased less than traders had expected.  Grains got an additional boost shortly late in the overnight trading session on a report from drug company Gilead Sciences that indicated National Institutes of Health trials on 1,063 hospitalized patients for its anti-inflammatory drug, remdesivir, had reduced COVID-19 hospital stays by an average of four days & lowered the death rate from 11% of severely ill patients to 8%.  Wednesday morning’s EIA Petroleum Status data more or less confirmed Tuesday afternoon private industry reports that showed US oil output barely declined in the week ended April 24, & that commercially-owned crude oil stocks jumped 8.991 million barrels (MB).  The EIA report also indicated that gasoline inventories declined 3.769 MB (-1.43%) from the previous week’s record level, that distillate stockpiles jumped 5.092 MB (+3.72%) & that total commercially-owned petroleum supplies rose 10.409 MB (+0.76%) to a record-high 1,377.5103 MB.  EIA ethanol data was a mixed bag.  For the third consecutive week, ethanol production was record-low, down 7.644 mil.gal. (-4.62%) to just 157.878 mil.gal.  But ethanol stockpiles declined 57.204 mil.gal. (-4.92%) to a 4-week-low 1,105.734 mil.gal.  That suggested that fuel usage had finally bottomed & that better-than-average seasonal improvement could be seen as more states open for business. When corn & beans each failed to retest their opening highs following the EIA data, March corn sagged new contract lows of $3.0025—the lowest continuation price tick since Sept. 2009. Inability to penetrate $3.00 thereafter encouraged short-covering that brought corn & beans off their mid-morning lows.  Wheat remained under pressure throughout Wednesday’s session, but it also recovered from its midmorning trough. Expectations for improved rainfall across previously dry Europe & Black Sea winter wheat regions pressured that commodity by keeping wheat production prospects more than adequate.  At Wednesday’s close, May corn futures gained 1.75c, Dec. corn rallied 3.5c, May beans jumped 5.75c, Nov. beans rose 5.25c, May soymeal was up $1.40/ton, May soyoil was up 0.11c/lb., May soft red winter wheat dropped 7.25c, & July SRW wheat plunged 9.5c lower.
 
Soybeans were higher, corn was mixed & wheat was lower on Wednesday night as month-end short-covering & weekly export sales that were at the top end of trade expectations underpinned prices. Additional gains in crude oil & weakness in global equity markets suggested that investors were booking profits ahead on the last trading day of April.  Since commodities have been the “short” hedge for many trading fund “long” equity positions, selling equities to lock in profits also has encouraged buying back commodity sales.  Traders also were relieved that deliveries on May grain futures were relatively light to none: corn (223), soyoil (1,466), soymeal (22), HRW wheat (9) & soybeans (0) & SRW wheat (0).  European/Black Sea rain prospects again weighed on wheat even though the London-based International Grains Council lowered its 2020/21 global wheat production forecast by 5 mmt & total world grain output to 2,218 mmt.  That was offset by a 11 mmt reduction in global grain demand to 2,181 mmt, the result of lower corn crush for ethanol.  The IGC also increased 2019/20 global grain supply by 1 mmt to 2,176 mmt as lower corn output was offset by increased wheat & barley production.  At the 7:45 am pause in electronic trading, May corn futures were up 3/4c, Dec. corn was down 1/4c, May beans were up 7c, Nov. beans were 4c higher, May soymeal was up $0.60/ton, May soyoil was 0.32c/lb. higher, May soft red winter wheat was down 3.75c, & July SRW wheat was 5.25c lower.
 
Thursday morning’s USDA Weekly Export Sales for the week ended April 23
reported corn sales (53.411 mb of old- & 13.346 mb of new-crop) that exceeded pre-report trade expectations that ranged 19.7-57.1 mb. Both old- & new-crop corn sales were each at 3-week highs with 2019/20 sales 3.5-times higher than the weekly pace needed to reach USDA’s current export forecast. Cumulative corn sales now stand at 1,446.6 mb.  While that still the slowest sales total since 2015/16 at week #34 of the marketing year, sales have reached 83.9% of USDA’s 1,725 mb projection—slightly ahead of the 5- & 24-year percentages for this time of year.  Grain sorghum sales were also a 3-week-high 12.047 mb, nearly all headed to China.  Cumulative milo commitments now total 139.4 mb—75.3% of USDA’s 185 mb export forecast.  Old-crop soybean sales surged to a 19-week-high 39.621 mb with 60% of those sales made to China. Prior to the trade war, that was the typical sales percentage of US beans that went to the world’s largest bean importer. An additional 3.858 mb of 2020/21 beans were also sold.  Traders had forecast total weekly bean sales at 25.7-52.4 mb. Cumulative soybean sales now stand at 1,434.9 mb—still the least sales at week #34 since 2012/13.  Soymeal sales (163,600 mt of old- & 60.1 mt of 2020/21) were solidly within trade expectations of 100,000-275,000 mt) with old-crop sales above the 125,400 mt weekly sales average needed to reach USDA export projections.  Soyoil sales (29,800 mt, all old-crop) were at the top of trade forecasts that ranged 8.000-30,000 mt.  Cumulative soyoil have reached 91.5% of USDA’s 2019/20 forecast, well above the 71.8% 5-year sales average for late April.  Old-crop wheat sales (17.170 mb) were a 5-week high, & 5.699 mb of new-crop wheat was also sold.  Cumulative 2019/20 wheat commitments have reached 952.8 mb—96.7% of USDA’s 985 mb export forecast & solidly inline with 5- & 24-year sales percentages for market week #47.  Today’s robust weekly sales report shows buyers were actively adding inventory as US farm prices continued to dive last week. 
 
Led by gains in soybeans, traders continued to push grains higher on Thursday as they evened up positions on the last trading day of April. Short-covering in commodities was a contrast to selling in equities that were reversing at midday about half of the gains posted on Wednesday.  At 1:03 pm, May corn futures were up 6.25c, Dec. 2020 corn was 3.75c higher, May beans were up 16.25c, Nov. beans were 12c higher, May soymeal was up $5.40/ton, May soyoil was 0.25c/lb. higher, May soft red winter wheat was up 5.5c, & July SRW wheat was 4.75c. With old-crop contracts showing more strength than new-crop & commodities rallying against declining equities, Thursday’s price action looks more like money-flow profit-taking than any change in fundamentals.
 
In export news, USDA did not report any daily export sales on Thursday.  On Wednesday, the farm agency announced that 2.400 mb of 2019/20 & 1.600 mb of 2020/21 US soybeans were sold to Mexico. 
 
Locally, corn, soybean & wheat basis levels were steady on Wednesday.
 
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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.