In observance of Good Friday, there will not be any opening or closing Market Commentary on March 29, 2024. 


Special Market Update

Grain Market Commentary

Monday, March 30, 2020

By The Andersons Risk Management Team

One of the biggest stories in these markets (aside from the break in equities) has been the complete collapse in energy prices. Unfortunately, this includes the price of corn. RBOB (gasoline futures) traded as low as 37c last week and crude oil futures actually posted a $19 handle as of this writing. The break in energy prices is the direct result of less demand for gasoline with people staying at home for now. Corn futures traded as low as $3.32 on the front end but have now settled into a range of $3.40 to $3.50. The only thing holding corn together today is that China finally bought some US corn, but the timing just happened to coincide with the Coronavirus pandemic. The big question moving forward is whether there is enough export demand to offset what we are losing in ethanol grind with plants shutting down because of negative margins. Private trade estimates are putting lost corn bushels as the result of ethanol plant closings at 600-700 million bushels annualized. Managed money continues to carry a modest short of 110k contracts, but they have room to sell more historically. There is no question that old crop corn ending stocks are growing even with some fresh Chinese export business.

Looking ahead, the next great debate will be exactly how many corn acres get into the ground this year. The Prospective Plantings and Quarterly Stocks report will be issued tomorrow, and the lean is more corn acres year on year. The average trade guess for corn acres sits at 94.1 million which would be up 4.4 million year on year but the producer survey was done before the big washout in corn prices. The market should discount a number that big tomorrow, but the debate will continue for the next 3 months until the final planted number comes out at the end of June. Meanwhile, the US has been wet again so far this year with a full moisture profile across the entire corn belt. The forecast today remains cool and damp for the next 2 weeks. As the calendar turns to April, more focus will be on US weather from day to day.

It's very hard to come up with a solid reason why corn prices would recover today but that does not mean it can’t happen. The stimulus package along with future packages could continue to weaken the US dollar which might be supportive to commodities in general. If we get some more flash sales from China, it could trigger some very brief short covering bounces. We also have an entire growing season to contend with and the funds are short. Make no mistake, we are not bullish even at these levels but that does not mean you cannot be prepared by getting orders in now take advantage of bouts of short covering from time to time.