This Week In Commodities 3-6-20

Corn recovers from last week

May corn was 7-3/4 cents higher this week to close at 376. December corn was 4-1/2 cents higher closing the week at 381-1/2. US ethanol stocks jumped to a record high this week of 25 million barrels. Even with negative margins for a majority of the last 12 months, production this year is outpacing last year. The main by-product of ethanol production, DDG’s were included on a list of US products granted tariff exemptions to be imported by China. Some support may have come from news this week that China’s top research body has developed a vaccine for African swine fever. They indicated that the vaccine is currently the most promising one for commercial production and will provide an important way to prevent and control the disease.
Dryness concerns continue to grow in far southern Brazil. In the coastal state of Parana, second crop corn plantings were seen as 72% complete this week. Parana, which accounts for about 22% of Brazil’s second crop corn production has been dryer than normal for the last few weeks with no immediate relief in sight. Weather models are calling for little to no precipitation in the next two weeks in far southern Brazil.

 

Soybeans slightly lower this week

March soybeans closed the week at 891-1/4 down 1-1/2 cents on the week. November soybeans were 2-3/4 cents lower this week to close at 905-1/2. Mexico was the destination of choice for US soybeans during the week ending February 27. Our neighbor to the south bought 6 million bushels of beans, China bought a mere 0.2 million bushels while taking shipment on 4.9 million bushels. Soybean meal prices have made moves higher in the last two weeks rallying nearly 13 dollars per ton. With managed money funds continuing to hold a record short position in the meal market, a continued rally would likely spark short covering, which could add fuel to soybean meal prices. With increased export taxes likely coming in Argentina and a weaker US dollar as of late, US soy complex exports could find favor in China and around the globe.

Soybean harvest continues to push along in Brazil. Exportable supplies are growing by the day with harvest seen as 43% complete this week. During the month of March, Brazil may export up to 10 million tons of soybeans with 60% of the exports going to China. Concerns over full-season soybeans in Rio Grande do Sul are growing daily as the two-week forecast calls for continued dryness. Rio Grande do Sul makes up about 16% of Brazil’s soybean production. Dryness is also becoming an issue west of Brazil in Argentina; late crops of full-season corn and soybeans could be susceptible to yield reductions if recent dryness persists. Over 50% of Argentina’s soybeans are filling pods currently with only 7% of the crop seen as mature last week.

 

Chicago wheat continues lower

May Chicago wheat was 9-1/4 cents lower this week to close at 515-3/4. May Kansas City wheat was 7 cents lower this week to close at 446-1/4. Spring wheat closed this week at 522-1/4 down 5-1/4 cents this week. The wheat market continues its slide lower since peaking in January 2020. Chicago wheat is now nearly 80 cent per bushel off of its recent high. China granted tariff exemptions for some importers to buy US wheat on Friday. Also, some support for US commodities as a whole came this week as the dollar broke below trendline and moving averages it has managed to hold above since early 2018. This week’s move opens up the dollar to move substantially lower in the coming weeks. This should make US exports as a whole more competitive on the world market.

 

Class III and Class IV Trade Lower

Overall sentiment in all markets was negative today as crude traded almost 8% lower and equity markets erased the majority of any progress they made early in the week. Class IV products in the spot market traded lower today with butter losing 2.5 cents to finish the week at $1.855/lb. Despite trading lower today, butter was able to finish the week 13 cents higher than it started. Non-fat powder traded 1 cent lower on the day but finished the week up 5 cents at $1.115/lb. Whey was up 0.75 cents on 6 loads traded to settle at $0.3475/lb. Cheese was the dullest market today finishing unchanged at $1.6138/lb on the block/barrel average.

Class III markets were down marginally today as outside pressure pushed prices lower. Class IV traded 10 to 20 cents lower on the back of lower powder and butter prices today. This week was a lot of treading water for the dairy markets as the Class III 2020 average settled today at the same exact price it did a week ago. The one outside market that continues to do the dairy markets a favor is the dollar index, losing almost 400 basis points in the last 10 days and is close to the lowest levels of 2019.

 

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Carol Tillmann

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