Market Perspectives – March 12, 2020

Chicago Board of Trade Market News

Outlook: May corn futures are 10 ¼ cents (2.7 percent) lower this week as agricultural commodities remain under pressure from continued selling in global markets. Rising concerns about the economic impact of the coronavirus COVID-19’s spread are keeping equity and energy markets highly volatile and in selloff ode. Governments and reserve banks around the world are stepping in with actions intended to support the economy, including the U.S. Federal Reserve’s 50 basis-point rate cut and similar moves by the Bank of England. On Thursday, the U.S. Central Bank injected $1.5 trillion into the repo market to add liquidity for Friday’s trading and boost the U.S. financial outlook.

The weekly Export Sales report featured improving corn export sales sales, with 1.471 MMT of net sales recorded last week, up 91 percent from the prior week. Corn exports reached 851,000 MT, down 4 percent from the prior week.  YTD bookings (exports plus unshipped sales) are 28.1 MMT, down 31 percent. Sorghum sales were large last week, with 260,000 MT of net sales and 13,200 MT of exports. YTD sorghum bookings are up 127 percent at 1.99 MMT.

Cash corn prices are largely steady with last week’s values, with stronger basis levels offsetting this week’s decline in futures prices. Basis levels are 4 cents under May futures on average across the U.S., steady with last week but well above last year’s levels of 67 cents under May futures. Barge CIF NOLA values are down 2 percent while FOB NOLA offers are equally lower at $174.00/MT.

Sorghum prices remain firm with the recent uptick in export sales to China supporting values. Merchandisers report good demand for sorghum, especially for shuttle trains. FOB NOLA basis offers are up 10 cents/bushel this week at 130 over May corn futures.

One potentially bullish factor that is developing is increasing heat and dryness across Southern Brazil and Argentina. Currently, the weather has been more relevant to the soybean crops but could impact Brazil’s second-crop corn planting that will start in a few weeks. The drought is becoming notable enough that the Buenos Aires Grain Exchange cut its forecast for Argentina’s current soybean crop by 2 MMT.

From a technical standpoint, May corn futures touched the bottom end of their current trading range ($3.65-$3.86) and narrowly posted a new contract low ($3.65) on Thursday. The market is not oversold technically, with the relative strength index at 42. Last week’s CFTC report showed managed money funds having pared back their short position in corn, and industry sources suggest that short covering has persisted this week. With funds paring back shorts and commercial pricing activity aggressive on breaks, May corn is likely to continue to find support at the bottom end of the trading range.