Special Market Update

CORN

Corn prices gapped lower to start the week amid macroeconomic panic set off by collapsing OPEC negotiations and ongoing concerns over the spreading of COVID-19 coronavirus. May corn (CK20) traded as low as $3.6625 but rebounded slightly to close at $3.7275. New crop December corn (CZ20) traded 5.25c lower, closing at $3.7625.

The main story to start the week was the clash amongst OPEC members as Saudi Arabia announced intentions to cut prices and raise production which is turn set panic of an impending price war between members. April Crude Oil traded as much as $14/barrel lower overnight, contributing to the heavy down day in grains. This as well as continuing concerns over the coronavirus led the stock market to collapse to its 5% overnight limit, limiting trading activity to levels at or above the market at that time. Upon the open, the DOW dropped to the 7% limit, halting trade for 15 minutes, when trade resumed the market stabilized slightly but remained sharply lower in what amounted to the worst day for the DOW/S&P in almost a decade.

Despite all the macro events pressuring the market, the overall fundamental picture for corn remains mostly unchanged. Corn exports remain behind pace, but there are ongoing rumblings that China is preparing to take import of U.S. Ag products, but time continues to go by with no solid commitments.  There is a USDA WASDE report out tomorrow at 11 am CST. Trade estimates expected the old crop balance sheet to remain more or less unchanged with the average estimate for ending stocks slightly lower. This report seems to be very minor in the scope of issues plaguing all world markets right now. The March 30^th acreage report and subsequent look at the 2020/21 U.S. balance sheet will have much larger implications with acreage increases being forecasted for both corn and beans. 94 million acres of corn is the number in everyone’s mind after the USDA Ag Outlook forum announced that estimate 2 weeks ago.

In technical action, corn prices held up quite well all things considered as the May contract again approached contract lows this morning but was able to rebound off the lows, and at the same time fill the gap created on the overnights. Support below the contract low of $3.6570 would be at $3.62 on the continuous front month chart, and below that in the low $3.50s range. To the upside, I see resistance being at $3.80-85 and beyond that $3.90 would be the next target.

SOYBEANS

Soybeans were no exception to the heavy selloff in all markets today as nearby May soybeans (SK20) traded as low as $8.67, but rebounded a touch to close down 21.25c at $8.70. New crop November beans (SX20) closed at $8.8625, down 19.25c.

The same macro stories drove the soybean market lower today, the ongoing coronavirus concerns are especially impactful to the soy market given it’s heavy reliance on China for export business. As far as the world market goes, South American harvest continues to plug along, nearing 50% completed. This pace is slightly behind year over year, but rains in the next 10 days are looking to keep crop stress at a minimum in many key growing areas, though the southern part of the country remains a drought concern. Another feature worth noting is the collapse of the Brazilian Real in relation to the U.S. dollar; this comes entering a period in which Brazilian exports seasonally should be ramping up, this combined with the potentially record large soybean crop and weak real does not exactly bode well for China buying U.S. soybeans. It remains to be seen however if/when this coronavirus epidemic subsides what the total impact will have been on China’s total import program.

In technical action, the May soybean contract traded to lows not seen since May of 2019. The next downside target would be the contract lows set back in that time of $8.54. Any move to the upside would be met with resistance in the low $8.80s and beyond that at $8.90.