Commodity Markets: Needed Bulls Return – DTN

Wheat, corn, barley, grain market index. - Photo: Pavel Ignatov

Commodity markets finally pushed back Thursday after a week of brutal trading days with futures prices in grains, livestock and energy sectors all ending in the green.

Stocks and commodity markets rose despite continued negative headlines and economic concerns about the coronavirus, including a surge of unemployment claims over the past week. The Dow Jones Industrial Average moved up roughly 1% to end at 20,066 points after dipping below the 20,000 level Wednesday.

Bullish factors, which seemingly disappeared just days ago, showed up again, noted DTN Lead Analyst Todd Hultman. Higher crude oil and the threats of port closures in both Argentina and Brazil helped spark markets higher, Hultman said.

Leading the markets higher were soybean meal and soybeans, buoyed by logistical issues at South American ports. May soybeans closed up 17 3/4 cents to $8.43 1/4, fueled by Thursday’s higher soybean meal prices. May soybean meal closed up $10.80 to a new four-month high of $314.80, supported by several potentially bullish factors.

GRAINS

South American troubles helped grain commodities move higher. In Argentina, a plan to quarantine the crews of inbound vessels from the EU for 14 days, along with the rumored closure until April 2 of up to five ports in and around the major soybean export city of Rosario, sent buyers scurrying to seek replacements for short-term needs.

Indications that some soybean meal business could get shifted back to the U.S. encouraged funds to buy in recent soybean shorts. Also propping up soybean meal was the slowdown in DDG production and hard-to-find offers domestically as ethanol plants cut back hours or shuttled production as margins fell with the plunge in crude oil and gasoline.

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In Brazil, there was talk, with no confirmation, that dock workers could strike for 14 days. That sent the Brazilian soy basis up as much as 20 cents per bushel on Wednesday. Reuters reported Thursday agribusinesses wrote the federal government seeking assurance that measures to control the coronavirus would not shut down ports.

Reuters reported the letter was sparked by concerns port workers were threatening to halt work around at least some ports. Brazilian officials closed the country’s borders for at least 15 days, but Dow Jones reported that does not pertain to export goods.

The issues in Argentina and Brazil made U.S. soybeans much more competitive. Rumors that China may have bought two to three cargoes of U.S. soybeans from the PNW circulated on Thursday as well.

Wheat rose sharply in Chicago and Kansas City on Thursday. The May KC wheat closed up 19 cents at $4.65 1/2, the highest close in March, thanks to what looks like a revival of domestic demand and an effort to keep food supplies flowing. May Chicago wheat also was up 26 3/4 cents.

Coming off contract lows, corn contracts were also higher. May corn closed up 10 1/4 cents at $3.45 1/2 Thursday, helped by a strong rally in soybean meal and also by unexpected short-covering after traders jumped away from the recent bearish bandwagon.

LIVESTOCK

As livestock groups and now members of Congress have raised questions this week about the spread between live cattle and boxed beef, the live cattle contracts closed limit higher. April live cattle closed $3.00 higher at $95.10 per cwt while June live cattle ended $3.00 higher at $88.92 and August live cattle $3.00 higher at $89.65.

March feeders closed $4.50 higher at $117.07, April feeders closed $4.50 higher at $114.12 and May feeders closed $4.50 higher at $113.02.

April lean hogs closed $3.00 higher at $61.15, June lean hogs closed $1.85 higher at $69.15 and July lean hogs closed $2.10 higher at $72.45.

ETHANOL AND DDG

On Thursday, May crude oil traded up $4.97 to $25.32 a barrel, helping the May ethanol contract. Ethanol futures closed up 6.5 cents in the April contract at $1.017 and up 7 cents in the May contract at $1.042, coming off contract lows.

Not all markets showed some recovery Thursday. As ethanol plants begin to slow down due to cheap gasoline and lower cash ethanol prices, the corn basis has become a victim. Corn basis at ethanol plants has dropped as much as 20 cents or more at some plants this week, and many plant websites show no bids nearby.

The DTN national average basis has begun to show the weaker basis the past few days. And while corn basis has been riding high this crop year, that is coming to an end right now.

One bright spot related to ethanol plants for now is that DDG prices this week are showing gains of $10 per ton to as high as up $25 per ton. Some plants have no spot bids this week at certain locations, but now this market is on fire. While that’s good near term, it also means that DDG could price itself out of feed rations temporarily and feed corn could see some fresh demand.

As for export DDGS, those prices have been rising the past few weeks due to the container shortage resulting from the effects of the coronavirus on global shipping.

Editor’s note: DTN’s Todd Hultman, ShayLe Stewart, Dana Mantini, Mary Kennedy and Chris Clayton contributed to this report.

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