Could it be that wheat has assumed the role (roll) of toilet paper? No, I am not inferring it be used for some type of hygiene and cleanliness purpose, but instead, there are places around the world that it has become the product to hoard as the coronavirus continues to spread throughout the globe. Like toilet paper, there would appear to be no shortage of this commodity as the most recent data from the USDA told us that global ending stocks this year will come through at a record 287 MMT. That said, at this time when global supply chains are being twisted in knots, and there could be questions as to if there will be workers at ports or mills to keep the supplies flowing, it would appear some are resorting to stockpiling available supplies. Here in the U.S., many stores report difficulties in keeping flour on the shelves and in France, the government has designated the food sector as a strategic priority in an effort to keep this grain moving into flour mills and pasta manufacturers as grocers in that country report sales of pasta and flour nearly three times greater than the same time a year ago. One cannot help but think that someday when this virus has run its course, there will be excessive amounts of products like flour that will eventually find their way into foodbanks, landfills or dumped on yards and gardens (are American really returning to baking?), but exactly when that day will come is anyone’s guess at this time. Covid-19 would still appear to be in semi-early stages in this nation, is really just beginning to expand in South American and to the best of my knowledge, has not really impact Eurasia, and primarily India with its 1.3 billion population (315 confirmed cases thus far). So, it would seem that we will be dealing with this situation for weeks, if not months to come and this will not be the last hoarding story we are likely to hear about. I do know one thing though, people do appear to be reawakening to those things that are truly necessities in life, and we can hope that will not be a lesson soon forgotten. By the way, meal futures in China traded limit higher to begin the week.
At least through the 17th of this month (the day after prices began to rally), managed money was still fond of the short side of the grain/soy markets. During the week leading up to then, they sold over 22,000 contracts of Chicago wheat, which moved them to the short side of futures, 31,400 plus contracts of corn, and another 4,170 contracts of beans. They were purchasers of meal though, which is the only market in which they hold a net long position of any size (16,000).
For a quick update on the financial world, equity markets began the week under pressure in response to the Senate weekend stalemate concerning a coronavirus economic stimulus package. While delays such as this can be unsettling to markets, does anyone actually believe they will not come to some type of package, and rather quickly at that? Be that as it may, the Federal Reserve decided to step in and fill the financial and psychological void this morning and has committed to unlimited asset purchases. That appears to have been enough to soothe the ravaged souls of equity traders for a while as indexes have turned higher for the day and the dollar sharply lower but who knows who long that will last.
