Morning Commentary

May corn down 1 at $3.4025

May beans down 4 ¾ at $8.775

The DOW is down

USD is stronger

Crude oil up $.86 at $20.95

Good morning,

US equities rebounded overnight amid reports the White House and congressional Democrats are discussing a fourth round of economic stimulus.  Bloomberg, citing sources familiar with the matter, said White House officials

have compiled lists of requests from government agencies totaling roughly $600 billion. The proposals include more state aid as well as financial assistance for mortgage markets and the travel industries. Suffering from the COVID pandemic, global equities are still poised to post their worst quarter since Q4 2008. Up 0.5%, the US dollar rose for the second consecutive day. Yet to take out the low from March 18th, the Brazilian real fell 1.8% Monday and settled at new all-time lows.

Corn bulls struggle to find upward momentum as crude oil falls to levels not seen in almost 20 years. Ethanol remains a huge unknown and overall demand for corn is clearly in question.  Bears are forecasting a more dire picture of $2.80 to $2.90 corn before the dust finally settles and the smoke clears.  The over/under on today’s U.S. planted corn acres seems to be 94 million vs. 89.7 million planted last year? Corn stocks over/under is thought to be around  8.125 billion? Bottom-line, the market will give these numbers only a glance, then get right back to headlines surrounding Crude Oil, Corona, and Chinese buying.

Soybean bulls are pointing to strong meal prices in China and at the same time crush facilities in Argentine struggling to get supply. Technically, bulls would like to see the MAY20 contract close back above $9.00 per bushel. Bulls would also like to see confirmation of China buying more U.S. supply. Today, the USDA  will be updating Quarterly Stocks and providing updated planted acreage estimates. The over/under on planted U.S. soybean acres is 85 million vs. 76.1 million planted last year? Bulls argue, there’s talk that we could see a slow start to planting in some large soybean areas so perhaps traders will question the big USDA acreage number. On the flip side, bears argue that producers have been keeping a close eye on the market as of late and are talking about soybeans perhaps offering a better opportunities for the current situation. Meaning perhaps shifting a few acres from other crops to more soybean acres. The over/under on Quarterly Stocks is around 2.25 billion bushels, which would be the first negative drop in over five years.

Cattle markets remain overwhelmingly volatile and lack much needed liquidity. We have noted some large volume days, however, intra-day liquidity and tick volume is quite low. In large part, the massive moves and volatility are as a result of these liquidity issues. Related, commercial trading/hedging is largely inactive and very little resting paper lies in the market at this point. This will change and improve in the near-term, but remains a challenge for execution and a trap for many speculators. Beef markets are barely off highs and do have risk of additional downside as the quick ship spot business eases off and the higher end middle meat demand feels the weight of unemployment. The slower economy will certainly change the way folks are consuming a product and what items they are choosing to purchase. The extent to which and the length of the impending recession will prove to be the determinant of how protein markets are impacted. Cash markets were sharply higher last week with the national average steer bringing 119.26/CWT compared to 109.66/CWT last week. This is one of the largest increases in the cash fed cattle market in history. We realize that the market fundamentals are a bit confusing at the moment. The news is often bad but portions of the macro markets are performing better and certainly, the fundamentals within the cattle/beef sector are much brighter than the futures markets. We can attribute some of this to the markets having a tremendous amount of bad news priced in and now some are looking into the forward news to find some optimism. As for cattle, certainly recession type beef demand is possibly priced in. Strong packing margins and possible government oversight has supported the cash prices. We would anticipate that this will all change and looking forward we could see higher futures and worse basis. Please remain calm to the extent that you can in these times. Make rock solid decisions for the good of you and your operation. Sound risk management and well executed strategies still do work. Trey Warnock – Amarillo Brokerage Company

The Federal Communications Commission is granting access to spectrum in nearly 30 states to help rural communities address broadband needs during the coronavirus pandemic. The FCC’s Special Temporary Authority allows 33 wireless internet service providers to use the lower 45 megahertz of spectrum in the 5.9 gigahertz band for 60 days. FCC Chairman Ajit Pai says rural Americans are facing an increased need for broadband as more workers, students, and families are home during the pandemic. He says the increased access will allow service providers to meet their customers’ needs. The special authority will help serve communities in Illinois, Indiana, Michigan, Minnesota, Missouri, Nebraska, Ohio, Wisconsin, and more. (Source: Brownfield Ag)  

Roughly 40% of the U.S. corn crop is refined into ethanol, but over the last two weeks, Covid-19 has joined a host of other disrupting factors to create what Geoff Cooper, president of the Renewable Fuels Association, calls “not just a perfect storm for ethanol, but a perfect tsunami.” Since the outbreak, ethanol prices have plunged to an all-time low of 88 cents a gallon. Just nine years ago, ethanol peaked at $2.91 a gallon. Facing negative margins, manufacturers have warned of more plant closures and reduced run rates. For thousands of corn farmers across the country who plant the nation’s No. 1 crop and rely on the ethanol market to sell much of it, the state of the industry is “disturbing as hell.” Today, nearly every gallon of gas sold in the United States contains at least 10-percent ethanol. Despite the legislative assurances or the Renewable Fuel Standard (RFS), the roughly $43 billion industry has lagged considerably since the second half of 2018. (Ag Insider)


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