Risk off was the word of the day for the commodities and entire market complex on Wednesday. Equities started the selling in the overnight trade following comments from President Trump in a news press conference that the Covid-19 pandemic may take lives in the six digit range. Mortality rates of the disease have increased since last week. Money flow shifted to safe havens like the US Dollar and treasuries. The US Dollar index which measures the dollar against a basket of other currencies started to put pressure on it’s nearby resistance of 100.00. At the time of this writing the Dollar Index was 0.51 higher at 99.60.
When commodities opened from the overnight session the risk off feeling continued with wheat and soybeans leading the way lower. Corn saw it’s heavies selling in the new crop December contract settling 10 1/4 lower. The may contract held it’s low from yesterday at 333 trying to possibly set up a double bottom from the technical side. Looking fundamentally there are some bullish factors for soybeans and wheat. Soybeans being that tomorrow’s export numbers could be strong with Chinese meal demand currently high and South America still facing logistical issues for exports. Wheat also has story shaping up with Russia being dry at a critical growth stage and limiting exports in the near term futures. Unfortunately on Wednesday these were all overlooked as macro market fears and selling gripped the entire complex. John Payne with Daniels Ag Marketing is still closely watching the emerging currencies like the Russian Ruble and Brazilian Real as he feels both those countries the most likely to experience financial hardship or even collapse given the current environment. You can hear his full comments below. As for corn the demand picture is still ugly as the energies see multi decade lows and there is even some put option volume on crude oil at 3 and 4 dollars. Ethanol data below shows that with plants idling down production is quickly dropping and stocks are quickly building.
According to EIA data showed ethanol production dropped sharply down 16.4%, or 165,000 barrels per day (b/d), to 840,000 b/d, the lowest level in six and a half years. The weekly decline was the largest since the EIA began reporting ethanol production statistics in 2010.
Ethanol stocks rose 6.5% to a record 25.7 million barrels, eclipsing the previous high set four weeks prior. Inventories shifted higher across all regions except the Midwest (PADD 2). A majority of the stocks build took place in the Gulf Coast (PADD 3), where inventories grew by roughly one-quarter.
USDA placed quarterly stocks of US grains lower than many analysts estimates. Then on the acres cotton and corn both took quite a few acres. Full report below
Corn stocks in all positions on March 1, 2020 totaled 7.95 billion bushels, down 8 percent from March 1, 2019. Of the total stocks, 4.45 billion bushels were stored on farms, down 13 percent from a year earlier. Off-farm stocks, at 3.50 billion bushels, are up slightly from a year ago. The December 2019 – February 2020 indicated disappearance is 3.45 billion bushels, compared with 3.32 billion bushels during the same period last year. Soybeans stored in all positions on March 1, 2020 totaled 2.25 billion bushels, down 17 percent from March 1, 2019. Soybean stocks stored on farms are estimated at 1.01 billion bushels, down 20 percent from a year ago. Off-farm stocks, at 1.24 billion bushels, are down 15 percent from last March. Indicated disappearance for the December 2019 – February 2020 quarter totaled 1.00 billion bushels, down 1 percent from the same period a year earlier. All wheat stored in all positions on March 1, 2020 totaled 1.41 billion bushels, down 11 percent from a year ago. On-farm stocks are estimated at 339 million bushels, down 8 percent from last March. Off-farm stocks, at 1.07 billion bushels, are down 12 percent from a year ago. The December 2019 – February 2020 indicated disappearance is 428 million bushels, 3 percent above the same period a year earlier.
Corn planted area for all purposes in 2020 is estimated at 97.0 million acres, up 8 percent or 7.29 million acres from last year. Compared with last year, planted acreage is expected to be up or unchanged in 38 of the 48 estimating States. Soybean planted area for 2020 is estimated at 83.5 million acres, up 10 percent from last year. Compared with last year, planted acreage is expected to be up or unchanged in 22 of the 29 estimating States. All wheat planted area for 2020 is estimated at 44.7 million acres, down 1 percent from 2019. This represents the lowest all wheat planted area since records began in 1919. The 2020 winter wheat planted area, at 30.8 million acres, is down 1 percent from last year and down slightly from the previous estimate. Of this total, about 21.7 million acres are Hard Red Winter, 5.69 million acres are Soft Red Winter, and 3.42 million acres are White Winter. Area expected to be planted to
other spring wheat for 2020 is estimated at 12.6 million acres, down 1 percent from 2019. Of this total, about 11.9 million acres are Hard Red Spring wheat. Durum planted area for 2020 is expected to total 1.29 million acres, down 4 percent from the previous year. All cotton planted area for 2020 is estimated at 13.7 million acres, down less than 1 percent from last year. Upland area is estimated at 13.5 million acres, down less than 1 percent from 2019. American Pima area is estimated at 228,000 acres, down 1 percent from 2019
|QUARTERLY STOCKS (million bushels)|
|ACREAGE (million acres)||USDA||USDA|
Russia’s two week forecast is still showing more dry weather as their wheat crop moves into the joint stage.
Winter wheat conditions improved in Kansas with 50% of the crop considered good to excellent. That is up 2% from last week. 3% of the crop is now in the joint stage. In Oklahoma the winter wheat is rated at 70% good to excellent down 7% from last week. 44% of the crop is now at the joint stage up 17% from last week. Texas winter wheat crop is considered 56% good to excellent up 7% from last week. 28% of the crop is headed out up 1% from last week.
USDA released the latest grain export inspections on Monday. Corn came in at 1,269,074 MT up from last week’s 857,987 MT. Soybeans inspected totaled 413,957 MT vs 587,398 MT last week. All wheat classes totaled 363,881 MT vs 354,466 MT last week.
For a quick recap of last week’s trade watch the Trading Bits and Bytes video here:
VIDEO: Watch the latest adipose of Trading Bits and Bytes with special guest John Payne
All livestock futures closed limit lower. Live cattle were the only ones on expanded limits. All contracts will be on expanded limits for Thursday. Cutouts for beef and pork have dropped like a rock this week. The little cash trade that is occurring is cheaper than last week. So it appears that the increased demand curve we saw with the initial panic buying has come and gone. Not helping this whole situation is the Denver Posts report that JBS’s Greeley CO plant has more than 800 employees not reporting for work due to Covid-19 concerns. This could be the first major plant of the big 4 to cut production or idle and cause a back log in finished cattle. Carcass weights will be closely watched to see what happens.
The latest retail meat report from USDA shows that at the grocery store the 15 cut average for beef is $5.20/lb across the country. That is $0.12 cheaper than last week and $0.06 cheaper than last year. The 4 cut average for pork is at $3.47/lb up $0.10 from last week and $0.48 higher than a year ago. The 3 cut average for chicken across the country is at $1.84/lb up $0.26 from last week and $0.10 higher than a year ago.
At the time of this writing there was a light trade developing in parts of the South at $112, roughly $7 lower than last week’s weighted averages. A few deals are also being reported in parts of Nebraska at $112, these are set for delayed delivery (week of 4/20/20). Some asking price remain firm around $120 in the South, and $190 in the North. It is possible that significant trade volume may be delayed until Thursday or later.
The Fed Cattle Exchange Auction today listed a total of 4,696 head, consisting of 33 lots. A total of 832 head sold. 1-9 day delivery 2,079 head total, 662 head sold with a weighted average price of $113.00. 1-17 day delivery 2,617 head total, 170 head sold with a weighted average price of $112.06. The breakdown looks like this: Kansas had 13 lots, totaling 1,799 head, of which 318 head sold with at $113.00, 151 head sold at $113.00 but the offer was passed; Nebraska had nine lots totaling 1,211 head, of which 91 head sold at $111.25; Colorado had five lots totaling 695 head, of which none sold; Texas had four lots totaling 824 head, of which 344 head sold at $113.00, 480 head sold at $112.00 to $125.00, but the offer was passed; Oklahoma had two lots totaling 167 head, of which 79 head sold at $113.00.
Slaughter numbers Wednesday
119,000 hd today 122,000 hd wk ago hd 122,431 hd yr ago
485,000 hd today 497,000 hd wk ago 482,010 hd yr ago
Midday Carcass Value Wednesday
Choice dn 7.30 235.85
Select dn 2.06 226.90
C/S Spread 8.95
Carcass dn 1.95 63.09
Bellies dn 3.75 34.08
- Corn dn 6 – 10 1/4
- Soybeans dn 6 1/4 – 23 1/4
- Chicago Wht dn 13 – 18 1/2
- Kansas City Wht dn 13 3/4 -18
- Live Cattle dn 4.50
- Feeder Cattle dn 4.50
- Lean Hogs dn 3.00
- Class III Milk up 0.24 – 0.49
Pre-Opening Market Broker Commentary
Mark Gold, Top Third Ag Marketing, discusses overnight grains and what the trade may see today. Gold believes yesterday’s stocks number gives the first glimpse that the 2019 crop was far from what USDA predicted.
Jerry Stowell, Country Futures, looks at what may impact the livestock futures today. Stowell has a lot of information to cover from cash to falling cutout prices.
Mike Zuzolo, Global Commodity Analytics, takes a look at the midday trade. Zuzolo looks at how Macro market factors may be driving the commodities today.
John Payne, Daniels Ag Marketing, looks at the grain settlements. Payne is still closely watching the currency markets to try and decide how global grain competitors will move forward.
Jack Fenske, York Commodities, looks at the closing market numbers. Fenske believes grains may have put highs in last week. He also see’s some long term value in cattle at this level, but is cautious any position as the market is extremely volatile.