U.S. grains: Choppy markets settle lower as demand destruction persists

Corn, soybeans down slightly as traders square positions

CBOT July 2020 soybeans with 20-, 50- and 100-day moving averages. (Barchart)

Chicago | Reuters — U.S. corn and soybean futures fell slightly on Tuesday as traders squared positions at month-end.

A faster-than-average U.S. seeding pace in the U.S. Department of Agriculture’s (USDA) Monday crop conditions report pressured corn futures, while traders noted the condition of U.S. winter wheat was not as good as expected.

Demand for corn continues to be hammered by dried-up usage of ethanol as shelter-in-place orders keep drivers at home. Restrictions have also caused restaurants’ meat consumption to dive, dissipating the need for feedgrains like corn, soybeans and wheat.

“Is this a year that we’re testing the price of corn without ethanol in it? If that’s the case, I think below $3 is realistic,” said Dan Hussey, a senior market strategist for Zaner Group (all figures US$). “Spreads say it, the fundamentals say it, and technically on a chart, we might just go there.”

Export demand has also lagged as a strong U.S. dollar puts American grain at a disadvantage on the world market.

“There’s continued talk of the weakness in the Brazilian real, which makes us less competitive. The lack of exports to China have weighed on this market,” said Bill Lapp, an agriculture economist at Advanced Economic Solutions.

Chicago Board of Trade July corn settled down 1-1/4 cents at $3.12 a bushel. The most-active contract hovered just above last week’s 10-1/2-year low.

CBOT July soybeans settled down 4-1/2 cents at $8.32 a bushel while July wheat ended up 1-1/4 cents at $5.26 a bushel.

“All eyes are on the end of the month,” said Jeff French, an analyst with Top Third Ag Marketing. “Farmers are either having… to dump cash grain (contracts), or roll it into July.”

U.S. farmers planted 27 per cent of intended corn acres as of Sunday, the U.S. Department of Agriculture said late Monday, topping most analysts’ expectations and the five-year average of 20 per cent.

The strong early planting pace could mean better yields and more corn acres. French said with so much demand destruction, the market needs to see supply curbed in order to lift prices.

“It’s going to take something major, a massive production loss somewhere out there in the country, to get this corn going,” he said.

USDA said U.S. farmers planted eight per cent of intended soybean acreage by Sunday, matching estimates in the Reuters poll.

USDA rated 54 per cent of the U.S. winter wheat crop in good to excellent condition, a drop from 57 per cent the previous week. The agency said spring wheat was 14 per cent planted, lagging the five-year average of 29 per cent, and behind average analyst expectations at 18 per cent.

— Reporting for Reuters by Christopher Walljasper; additional reporting by Michael Hogan and Naveen Thukral.

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