Can someone find a little good news for corn?

Published on: 10:43AM Apr 06, 2020

Grain and soy markets picked up this morning pretty well where they left off on Friday, with corn and beans under pressure and wheat poking higher again.  The strength in wheat appears to be coming from a couple of influences, but at the core are all related to coronavirus issues and concerns.  In Russia, travel restrictions are continuing to impede the movement of grain.  At the key Black Sea port of Novorossiisk, officials are not allowing drivers access into the harbor, backing up an estimated 4,500 MT of grain.  The fear is that if the drivers are infected, allowing them in could contaminate dock workers, so they must be issued a pass to enter.  The problem is that passes are slow to be awarded.  It sounds like a classic Catch-22 situation.  It was also reported that in Ukraine, wheat exports dropped significantly last month, sliding from 277,000 MT to 138,000.  Do keep in mind though, that does not mean they have been idle as overall grain exports increased from 845,000 MT to 1.02 MMT, coming primarily from an increase in corn.

In addition to problems moving wheat out of the Black Sea, it would appear that both Saudi Arabia and Egypt are gearing up to import more wheat in an effort to buff up supplies.  The state grain buyer for Saudi Arabia has asked investors outside of the kingdom to import 355,000 MT of wheat into the country as a means of ensuring food security.  In neighboring Egypt, the government is talking about plans to change terms for the way they buy wheat in an effort to make it easier to conduct business with that nation.  Being discussed is allowing offers to be made as Cost and Freight (C&F) instead of FOB, as this would enable suppliers more control over moving the product.  Just as key, there is also discussion of issuing "at sight" letters of credit, which would guarantee immediate payment when delivery is confirmed instead of deferred payments.

While it is nice to see the wheat market receive some encouraging news, corn is still struggling to find footing.  There were reports from Russia this morning that they and the Saudi's had reached some type of agreement to begin limiting the output of crude oil, but nothing official has been released as of yet. While not under significant pressure, crude oil softened on the news after two days of rally in anticipation of a deal.  We all certainly understand the devastation that has been wreaked upon the ethanol industry, but I cannot help but think that in some people's minds, there is a belief that there will be a one to one decrease in total corn usage as the production contracts.  I have already heard from a number of feedlots and feed manufacturers that with less availability of DDG's, they have already rebalanced ration for higher corn usage.  Of course, that is a much more difficult number to track and will realistically only show up on quarterly grain stocks estimates.

Markets will be closed for Good Friday this week, so we are dealing with only four days of trade.  Of course, on the morning of that fourth day, we will see the release of the April crop production and supply-demand reports.  Here are some pre-report trade estimates; Domestic corn ending stocks of 2.004 billion, compared with 1.892 last month.  Beans at 430 million versus 425 in March and what at 940 million, which would be unchanged.  Looking at South American production, the average estimate for Brazilian beans stands at 123.88 MMT, down from 126 last month and corn at 100.56 instead of 101.  For Argentina, the average bean estimate is 52.49 MMT versus 54 in March and corn at 49.6 compared with 50.  Finally, for world ending stocks, the trade is expecting a corn figure of 298.5 MMT up, 1.16, Beans at 101.1 MMT, down 1.34, and wheat at 287.37, up .23 MMT.