Morning Commentary

May corn up 1 ¼ at $3.36

May beans down 3 ¼ at $8.595

The DOW is up

USD is stronger

Crude oil up $1.98 at $22.29

Good morning,

Corn bears have taken some massive swings as of late. Not only is flat price down roughly -10% in the past 30-days and down roughly -15% in the past couple of months, but the basis in many locations has gotten completely hammered as ethanol collapses. Weekly ethanol production numbers fell by -17% and are back at levels not seen since the fall of 2013. At the same time, ethanol stocks pushed to a fresh record of +25.7 million. The coronavirus concerns are only complicating the matter as driving hours and overall gasoline demand has fallen off a cliff. In turn, bears have huge concerns about overall demand as the global economies seem to be in some type of economic quicksand. Bulls are pointing to a better than expected March 1 Quarterly Stocks report but it’s still one of the top-5 highest in the past several decades so it’s providing little nearby support. The trade is also worried about the massive estimated jump in U.S. planted corn acres. Obviously, most inside the trade see the USDAs 97 million acre estimate as overly optimistic now considering the current circumstance, but still, most are thinking we could see 92 to 94 million. Meaning, if we see mostly cooperative weather and near trend-line yields the bears can argue +3.0 billion in ending stocks and have a legit case.

Soybean bears are pointing to record high prices being paid to producers in Brazil as the strength of the U.S. dollar and the depreciation of the Brazilian real creating a perfect storm, i.e. good for the Brazilian farmer but extremely difficult for producers here at home. Adding fuel to the fire, data recently released shows Brazilian exports on track to hit a new record. There’s also talk circulating that movement of soybeans in Argentina has slightly improved as government leaders have eased restrictions in a few rural areas, meaning soybeans from the farms might be getting to the crush facilities a bit easier.

Ethanol production has seen the highest weekly decline on record as social distancing orders from COVID-19 slow travel. University of Illinois Ag economist Scott Irwin tells Brownfield points out that the U.S. Energy Information Administration report showed total U.S. gasoline consumption dropped by -25% in a two-week period. He says there is a lot of chatter about energy companies potentially taking ethanol out of the E10 gas blend to be more competitive at current price levels. But, Irwin says it is not 100% clear that E10 is noncompetitive yet and the Renewable Fuels Standard can come into play as a safety net. “Whatever gasoline that we use through the remainder of 2020, I still expect that it will all contain 10% ethanol.” (Source: Brownfield Ag)

China detected a new case of African swine fever in piglets transported to Sichuan from outside the province, the agriculture ministry said on Wednesday. The outbreak was found in a truck transporting 83 piglets to Leshan city, with one piglet dead, the Ministry of Agriculture and Rural Affairs said in a statement on its website. China reported several new cases of AFS in March, mostly from transportation of animals across provinces.. The ministry has asked local governments to conduct strict investigations into the transportation of animals and crack down on irregularities, such as the sale of pigs that have died from the disease. The agriculture ministry has launched a 60-day investigation into illegal transportation of hogs, starting April 1, it said in another statement. (Source: Reuters)

Dairy Farmers of America, the largest U.S. dairy cooperative, will acquire 44 of Dean Foods’ fluid and frozen assets for $433 million through the Dallas-based milk processor’s bankruptcy process. As part of the court-supervised sale, Dean also designated significant assets to Prairie Farms Dairy, including eight facilities and two distribution branches, along with other agreements. In its bid, DFA said it has engaged in “productive discussions” with the Justice Department about antitrust issues related to the transaction. DOJ told the co-op last week what conditions it would place on the deal, and DFA said it was “willing to resolve” the department’s concerns. DFA initially offered to buy most of Dean’s assets for $425 million — but the bankruptcy court in Houston declined to make the co-op the default bidder after several groups objected to the plan. Instead, potential buyers submitted bids to Dean Foods’ lawyers on Monday. If the deal is approved, the transactions are expected to close at the end of the month. (Source: Politico)


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