CBOT weekly outlook: Markets focused on virus, oil prices, stocks

MarketsFarm — From where Steve Georgy sits, commodity markets such as the Chicago Board of Trade (CBOT) are currently focused on only three things.

One is the COVID-19 coronavirus — specifically, how the global outbreak affects commodity markets, especially if it results in “the slowing down the movement of grain, the slowing down the movement of shipments of needed products,” said Georgy, president of Allendale Inc. at McHenry, Ill.

The second is a crude oil price war between Russia and Saudi Arabia, which erupted following the collapse of the production cutbacks agreed to by the OPEC+ alliance. So far, benchmark prices have dropped by 40 per cent.

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“It’s the teeter-totter for a lot of these markets,” Georgy said, and warned there could be tough times ahead for corn as ethanol won’t be able to compete with falling oil prices.

The third factor is the downfall of stock markets. A surge of money into the economy, such as a U.S. government stimulus package, “is going to stabilize our markets,” he said. However, such has yet to formally be announced by the Trump administration.

These three factors, especially the third, aren’t boding well for commodities, Georgy warned.

“Hopefully we will be getting into the idea of starting to divorce ourselves a little from the watching the financial industry and start looking at where we should be right now,” he said.

Although the U.S. Department of Agriculture (USDA) issued its supply and demand report on Tuesday the markets paid very little attention to it, Georgy said.

That’s partly because the department didn’t alter its forecasts for U.S. corn, soybeans and wheat. USDA did make a few changes to its global outlook, such as upping its projections for corn production in South Africa from 14.5 million tonnes to 16 million. Also, USDA increased its forecast for soybean production in Argentina and Brazil by one million tonnes each, to 54 million and 126 million respectively.

Come March 31 there will two USDA reports that could generate significant reactions in the markets. One will be the report on planting intentions in the U.S., and the second will be the U.S. grain stocks as of March 1.

— Glen Hallick reports for MarketsFarm from Winnipeg.

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