Market News- POET: Portland 04/03/20 2:47:30 PM
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|Weekly POET Grain Report|
April 2, 2020
- Crude oil is continuing the momentum from yesterday - trading up over 7% in early trade to $27/barrel. The OPEC+ crude oil exporter group saying overnight that they're debating cutting supply by 10MM bpd, but that a final figure on cuts depends on participation by all oil producers (including US producers). Trump is set to meet with US oil producers at the White House today so market will be watching any news headlines very closely coming out of that meeting.
- Census exports released yesterday showed that China booked 1.083B in US ag goods in February, putting 2020 purchases at $2.77B. There has been a lot of excitement in China showing up as buyers or Corn/Beans lately, but they've got a lot of work to do to get to the $40-$50B pace.
- Buenos Aires exchange in Argentina cut their soybean production estimate by 2.5MMT yesterday, now standing at 49.5MMT. This would be about 5MMT lower than last year's production, however the combined SA soybean production estimate with Brazil's record crop remains some 5MMT higher than last year.
- I've seen a lot of discussion of corn acres switching to beans after Tuesday's jaw-dropping 97MM acre corn intention. History would suggest that a large change is not likely. Going back to 1990, the largest drop in corn acres from March intentions to the June report is 3.3MM acres - and that was in 1995 when flooding was a factor. In fact, 18 of the 30 years since 1990 have actually seen corn acres increase from March to June. 4 years have seen acres down more than 1MM..but each of those years experienced abnormal flooding issues.
- May corn needs a close above yesterday's spike high of $3.43 to regain some bullish momentum, but massive reductions in ethanol corn grind continue to be a wet blanket on this market.
April 1, 2020
- With the Mar 1 stocks and planting intentions report now out of the way, the market has some work to do in the next few weeks to discourage corn acres while incentivizing bean acres. At 97MM corn acres, it would imply a 3B bushel carryout for next year….and that's assuming no ethanol demand destruction. Given our estimate of ethanol demand destruction, this number is likely closer to 3.5B bushels of 2020/2021 corn carryout….wow. I think one of the most interesting variables to watch is how feed/residual demand is adjusted. DDGS have been a very popular ingredient for feed rations, and with DDGS values skyrocketing due to lower supply (lower ethanol run rates), we should see quite a bit more whole corn being used for feed.
- As mentioned, beans need to find a spark for a rally to encourage acres away from corn. This is going to be an uphill battle and will need to come from an increase in demand. Managed money has now covered their bean short - so we don't have the component of a potential short-covering rally. Compounding the issue, bean exports are falling well short of hitting the USDA's estimate, and we're likely going to see a downward demand adjustment in the next WASDE report.
- Adding to the negative demand tone: China detected a new case of ASF in the Sichuan Province yesterday. While coronavirus headlines continue to dominate, China has reported several new cases of the deadly ASF disease in March.