After the Bell: Funds Sell to Start New Quarter as Covid-19 Curbs Demand

Posted on Wed, 04/01/2020 - 14:45

Corn: Futures ended at session lows. May corn fell 6 cents to $3.34 3/4 and December plunged 10 1/4 cents to $3.47 1/4. Futures were pressured by fresh fund selling to start the new quarter, on rising fears economic conditions will deteriorate further. The Covid-19 and the ongoing oil price war between Russia/Saudi is battering the U.S. biofuel industry and shuttering more ethanol plants. Weekly ethanol production fell an unprecedented 17% to consume about 86 million bu. of corn, the smallest since September 2013. More depressing, ethanol stocks swelled to a record, which will be pressing up against storage capacity. U.S. gasoline consumption was down nearly 30% from a year ago as gasoline stocks were up 7.5 million barrels. Cash basis continued to weaken. December corn fell to a new contract low.  

Soybeans: May soybean futures closed down 23 1/4 cents at $8.62 3/4 today. May soybean meal futures were down $6.60 at $314.90 and May bean oil lost 96 points at 26.05 cents. The big speculative “fund” traders appear to be loading up on the short side of the grain futures to start the new trading month and second quarter.  At mid-week, the marketplace took a dimmer view of the Covid-19 situation and its ultimate impact on the global economy. Once again, grain trader focus is on a crippled global economy, and that’s fully bearish. Brazilian soybean exports in March are on track to hit a record 13.1 MMT, Lucas de Brito, an executive at the National Association of Cereal Exporters (Anec), told Reuters on Tuesday. That would break the previous monthly record of around 12 MMT.

Wheat: Wheat futures faced pressure for most of the day and the market settled low-range and just off session lows, with all three flavors posting losses between 13 and 18 ½ cents. Broad-based selling weighed heavily on the wheat complex today, despite any real fundamental reason for the decline. Fund liquidation to start the month and the quarter sent most commodity markets lower today. SRW wheat futures uncovered support at the 100-day moving average today, but followthrough selling after today’s low-range close could set the stage for another challenge of that level tomorrow. Yesterday, USDA said that planting intentions signaled U.S. wheat acreage would likely hit its lowest level in more than a century.  

Cotton: Cotton futures finished sharply lower to down the daily limit of 300 points today. Traders continue to hammer the cotton market amid the dire outlook from the Covid-19 pandemic. Cotton followed most other risk-based assets lower today as President Donald Trump on Tuesday warned of a “painful” couple weeks ahead as death tolls from the virus rise. Cotton traders fear textile mill consumption will be greatly reduced not only by the global economic hardship but also by increased demand for synthetic fibers once textile factors start actively producing again given the dive to 18-year lows in crude oil futures.  

Hogs: April and June lean hog futures prices closed down the daily trading limit of $3.00 today, at $49.20 and $57.325, respectively. The daily trading limit will rise to $4.50 on Thursday. The mood of the marketplace turned more somber at mid-week, following a grim assessment late Tuesday afternoon by President Trump regarding the Covid-19 outbreak. Over the next two weeks things are going to get “really bad,” he said. New York governor Mario Cuomo followed up Wednesday morning, saying the situation in New York continues to deteriorate rapidly. Few buyers are stepping in to participate on the long side of any commodity futures markets under these circumstances.

Cattle: Live and feeder cattle closed limit down. Cattle limits will remain expanded at $4.50 and feeders will expand to $6.75 on Thursday. June cattle fell $4.50 to $87.575 and May feeder cattle dropped $4.50 to $118.40. Futures tumbled on the expected retreat in beef prices and continued selling on fears an outbreak at a packing plant would lead to a sharp drop in packer demand for live supplies. Packers have purchased a large number of cattle the past three weeks, many with time, so nearby demand is light. Today’s Fed Cattle Exchange on-line auction reported 6 loads traded at $111.50 to $113, down from $119 to $120 last week. A few loads traded in Texas at $112. Unconfirmed rumors circulated this morning that some packers might put in place a cash floor at $110 for April. If confirmed, that would give the cash market some stability and provide a positive boost to the heavily discounted futures.