Good morning. Corn futures are starting off the week slightly in the red, with the May contract down 3/4 cent to $3.43. The May contract is currently a dime off its recent low, thanks in large part to a 29.7 million-bushel sale of corn to the Chinese. We’ve been waiting a long time for that sale to come around, but its effect is being muted by the sharp cuts we’re likely going to be seeing in ethanol production.
There are multiple things to consider in the overall mix, with the impending shortage of DDGs causing a surge in soy meal prices being a notable one. The demand loss from the ethanol sector will outweigh the demand gain from Chinese buying, as we’re currently running well over
100 million bushels short of export projections.
Given the statewide restrictions now in place in California, there will be a huge draw-down in fuel usage, which is typically 58 million gallons of gasoline and 10 million gallons of diesel. Per day. The Andersons have announced that their ethanol plants will be idled on April 1st for at least two weeks. Their average grind per week is about 2.5 million bushels, which is not a huge hit to demand overall.
However, I highly suspect the shutdown will be longer than two weeks if we’re still in the midst of the coronavirus battle on April 15. And of course, they won’t be the only ones slowing down or shutting down.
With Europe getting hit hard with the virus, we’re seeing the biggest attack on worldwide demand in history.
Soybean futures have been on fire for the past several sessions and are currently 50 cents off their recent low from last Monday. It’s been mostly about soy meal, which is surging as DDG availability is expected to fall sharply. Some support is also coming from dry weather concerns in southern Brazil and Argentina, in addition to coronavirus issues in both countries. The Chinese have also added a small amount of soybeans to their recent buying spree, but export sales and shipments are running woefully short of the USDA marketing year projection. With crush capacity being limited, the gain in soy meal demand won’t come close to offsetting the loss in exports, but momentum could carry futures another 30-40 cents higher. If that happens, some new crop sales will have to be seriously considered. So far this morning we’re seeing the May contract up 14 cents to $8.76 1/2, with the November up 10 1/4 to $8.71.
Energy futures are suffering again this morning, as the hit to demand is off-the-charts ugly. I suspect we’re going to be seeing a notable cut in production in the coming weeks, but it won’t be near enough to offset the collapse in demand. Tankers are now being used as storage facilities, which is never a good sign. Gasoline futures are completely falling off a cliff to levels not seen since 1999 and that decline is likely not over. In early trading we’re seeing the nearby crude contract down 22 cents to $22.41, with gasoline down 7 cents to $.54 per gallon. Diesel futures are off a couple of cents to $.98, with ethanol steady at $1.00.