Morning Commentary

May corn down 6 ½ at $3.0775

May beans down 10 ¼ at $8.1625

The DOW is down

USD is stronger

Crude oil up $33.43 at -$4.50

Good morning,

Corn prices continue to struggle as the fallout in crude oil becomes historically dangerous. Demand worries associated with ethanol becomes more concerning. A few weeks back the trade was talking perhaps -300 million to -500 million bushel reduction in corn demand, now all of a sudden the trade is thinking we could see a much larger reduction in corn used for ethanol. The new-crop DEC20 contract posted fresh contract lows and will now be trying to hold support in the $3.30 to $3.35 range. The USDA showed U.S. planting is now 7% complete, ahead of last year’s pace, but slightly behind the 9% average. Iowa is 2% vs. 7% on average planted.

Soybean bulls remain on the ropes as meal trades to fresh contract lows. Similar to the corn story, bears continue to question overall demand. Restaurants being closed around the globe and miles driven in the taken weighs on soybean oil. Meat processing problems and the backup in livestock has feed demand in question for soybean meal. Massive global economic uncertainties surrounding corona and our overall relationship with China has exports being more heavily questioned. The USDA showed U.S. planting at 2% complete which was about as expected and slightly ahead of schedule.

Cattle markets are acting better in some lights but still concerning broadly. Cash markets are stable and although we did note some weaker trade early in the week, the late week trade was fully steady with the week prior at 105.00/CWT. Beef markets are higher as the production cuts are driving prices higher for now. Today’s afternoon beef cutout was 7.00-9.00/CWT higher for Choice and Select carcasses. Futures markets remain stable after an extended period of insane volatility. Furthermore, today’s action in equity and energy markets was enough to unsettle the boldest of traders and cattle managed to trade modestly lower. Moving forward the more optimistic data reflecting some regions recovering from COVID19 and thoughts of opening the economy to operate in a more normal fashion will help. Tension remains high and anxiety surrounding the unknown aspects of the future will keep risk priced in the market for now. Some of the factors that still concern the markets fundamentally are getting cattle into harvest facilities in a timely fashion and related maintaining operational packing plants. Additionally, wrapping our minds around what negative impact recessionary demand and extremely competitively priced alternative proteins are concerning. Technically, low liquidity and ominous charts give us very little to be excited about for the near term. Finally, the broad market setup that is still implicated by fear, panic, and uncertainty remains annoying to cattle and beef markets. What does this week bring? Cash markets should remain steady-ish on light volume although plants seem to be working in a positive direction in terms of kill pace. Beef prices are likely sharply higher as retailers and wholesalers fight for inventory. Slaughter could be slightly higher than last week and should continue to firm. As we have mentioned in previous writings, the cash and futures markets will move higher longer term. However, here and now is plagued with uncertainty and until that changes, we should expect more risk. Evaluate your risks, maintain some semblance of a plan and be clear-eyed when moving forward in that plan. Trey Warnock – Amarillo Brokerage Company

China expects to import more soybeans and pork this year following the novel coronavirus outbreak and African swine fever, which has decimated its pig herds. Soybean imports are forecast at 92.48 million metric tons this year, rising to 96.62 metric tons in 2025 and 99.52 million metric tons in 2029, an official from the agriculture ministry. Pork imports this year are seen rising to 2.8 million metric tons, a +32.7% increase from the previous year. Despite the expected surge in imports, China’s 2020 pork consumption is forecast to fall to 42.06 million metric tons, down -5.6% year-on-year, hit by high prices and a fall in consumer demand due to the coronavirus outbreak, according to the agriculture ministry. In line with the slowing consumption, China’s slaughtered pig herd this year will fall -7.8% year-on-year to 501.49 million heads. Pork output this year will also decline to 39.34 million metric tons from 2019, but will rebound to around 54 million metric tons in 2022. Meanwhile, China’s domestic soybean output is seen at 18.81 million metric tons in 2020, a +3.9% gain from the previous year, while crushing volumes were pegged at 85.98 million metric tons. Soybean consumption will increase steadily and continue to rely mainly on imports in the next 10 years, said a ministry official. China’s corn acreage and output are both set to increase in 2020, with production forecast to reach over 260 million metric tons this year, while annual rice output is expected to hold steady above 200 million metric tons per year in the next 10 years. (Source: Reuters)

Bob Krebs, president of JBS USA Pork says the company plans to shutter its Worthington, Minnesota facility this week as they’re finding the virus is much more widespread across the US and in their county.  He says the decision wasn’t made lightly and over the next two days the facility will wind down operations with a reduced staff to ensure existing product in the facility can be used to support the food supply. The company says it will advise its employees to follow Minnesota governor Tim Walz’s stay at home order until returning to work. JBS says employees will continue to receive pay during the plant closure. The JBS Greeley, Colorado beef production facility also remains closed, while the company’s beef production facility in Souderton, Pennsylvania reopened yesterday. JBS’s Worthington, Minnesota pork facility employs more than 2,000 people and processes around 20,000 hogs per day. (Source: Brownfield Ag)


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